Implications for African Countries of a Carbon Border Adjustment Mechanism in the EU

The integration of climate objectives into trade policy marks a lasting shift in the governance of the global economy. A prominent example is the Carbon Border Adjustment Mechanism (CBAM), which reflects the growing tendency of major economies to align competitiveness with decarbonization goals. This report provides a combined economic and legal assessment of the CBAM’s implications for African economies, pointing to moderate aggregate impacts alongside potentially significant structural effects on trade patterns, industrial development, and market access.

Economic modelling suggests that the Carbon Border Adjustment Mechanism (CBAM) will not generate severe macroeconomic disruption across Africa, even under relatively high carbon price assumptions. While most projections indicate modest GDP effects, African economies are likely to bear a comparatively higher adjustment burden, reflecting their trade exposure to the EU and the carbon intensity of key export sectors. Aluminium, iron, and steel appear particularly vulnerable to export declines, although some trade diversion toward alternative markets may partially offset aggregate losses.

The long-term implications will depend heavily on the scope of the CBAM and on African countries’ capacity to measure embedded carbon. Limited monitoring infrastructure and the absence of carbon markets across much of the continent risk exposing producers to higher default emissions values, underscoring the strategic importance of developing domestic carbon accounting systems. The absence of a formal exemption for least developed countries (LDCs) further heightens these concerns, particularly given the uncertainty surrounding financial and technical support.

From a legal perspective, the CBAM raises complex questions under the World Trade Organization (WTO) framework, particularly the General Agreement on Tariffs and Trade (GATT). Its compatibility may hinge on whether it is interpreted as an internal regulation or a border measure, with potential challenges relating to national treatment, tariff bindings, quantitative restrictions, and most-favoured-nation (MFN) obligations. While environmental exceptions could ultimately justify the mechanism, demonstrating that it does not result in arbitrary or unjustifiable discrimination may prove legally demanding.

The report also highlights the potential role of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) in facilitating access to environmentally sound technologies that would help African producers decarbonize and preserve competitiveness. At the same time, unresolved questions surrounding climate finance point to a growing intersection between trade law and global climate governance.

Ultimately, the CBAM illustrates how climate instruments adopted by major economies can reshape global trade patterns. For African countries, proactive engagement in trade, technology, and climate finance negotiations, combined with investments in domestic regulatory capacity, will be essential to ensure that decarbonization efforts support, rather than constrain, long-term development.