The COP28 climate talks in Dubai recently witnessed a significant discourse regarding the upcoming Carbon Border Adjustment Mechanism (CBAM). African Development Bank (AfDB) President, Akinwumi Adesina, expressed concerns over the European Union's CBAM, set to be implemented in 2026. The CBAM aims to tax imports, including cement, iron, steel, aluminium, and fertilisers, from countries with less stringent carbon emissions regulations.
Africa's Dependence on Fossil Fuels
Adesina highlighted that African countries are increasingly leaning on fossil fuels to bolster energy production and support industrialisation. This need to serve their growing populations and aim to export higher-value manufactured goods has made Africa heavily reliant on fossil fuels. Despite a surge in renewable energy investment, Adesina argued that the imposition of the CBAM would pressure Africa to return to exporting more raw materials. This could potentially result in the continent losing $25 billion annually.
Call for an Exemption
Adesina advocated for an exemption for Africa from the CBAM, emphasizing the continent's use of natural gas alongside renewable energy for stability and industrial growth. Highlighting Africa's sustainable trade and energy mix, he underscored the challenges faced by Africa in global trade. He also voiced concerns over the implications of the CBAM on Africa's energy stability and industrialisation.
Support from IMF and Other Nations
Furthermore, Adesina expressed hope that the International Monetary Fund (IMF) would approve a plan for wealthy nations to redirect their Special Drawing Rights (SDRs) through multilateral development banks, including the AfDB. Japan and France have already announced their support for this rechanneling. The AfDB is also preparing to issue its first hybrid capital note, a financial instrument to leverage the SDRs. However, its launch has been delayed due to market volatility.