Carbon Border Adjustment Mechanism to Impact African Exports to EU from January 2026
The Carbon Border Adjustment Mechanism (CBAM), set to take effect on January 1, 2026, will raise import costs for African products entering the European Union, potentially reducing Africa's GDP by up to 0.91%, or $25 billion compared to 2021 levels. The aluminum sector is expected to be the most affected, with export reductions of 13.9%, while iron and steel may see declines of 8.2%. CBAM aims to create a fairer competitive landscape by imposing taxes based on the carbon intensity of imports, which will vary by country, impacting nations differently based on their energy sources.
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The Carbon Border Adjustment Mechanism (CBAM) will significantly increase the import costs of African products into the European Union, effective January 1, 2026. A 2023 study by the African Climate Foundation and the London School of Economics examined six scenarios for CBAM, predicting GDP reductions for Africa of up to 0.91%, equating to a $25 billion decline compared to 2021 levels.
The aluminum sector faces the greatest exposure, with potential export reductions of 13.9%, followed by iron and steel at 8.2%. The CBAM aims to level the playing field for European and non-European companies by addressing competitive disadvantages stemming from existing EU carbon pricing mechanisms.
From January 2026, importers of cement, iron, steel, aluminum, fertilizers, electricity, or hydrogen will incur CBAM taxes based on the carbon intensity of their goods, which varies by country. Countries like Mozambique may face minimal increases due to renewable energy use, while South Africa may see substantial costs due to coal dependency.
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