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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.