As the world engages with the pressing challenges of climate change, the European Union (EU) has taken a big step and introduced the Carbon Border Adjustment Mechanism (CBAM).
The CBAM is a policy within the broader framework of the European Green Deal (EGD). It acts as a carbon border tax on embedded Greenhouse Gas (GHG) emissions of carbon-intensive products imported into the EU.
The primary objective of the CBAM is to ensure that imported goods face a carbon price equivalent to that of domestically produced items. This aims to prevent carbon leakage, which occurs when companies shift carbon-intensive production to countries with less strict climate policies.
How does the CBAM impact South African exports?
South Africa has a substantial carbon challenge as its reliance on coal for electricity places it among the world’s top carbon emitters.
According to the Trade and Industrial Policy Strategies (TIPS) and based on data from 2022.
“$2.8 billion (approximately R52.4 billion) worth of South African exports are at risk, with this number set to increase as the CBAM covers more and more products.”
Sectors such as cement, iron, steel, aluminium, chemicals, polymers, and plastics find themselves particularly exposed, with projections that all South African export domains will come under CBAM regulations by 2030.
What can South African exporters do?
If it isn’t already, reducing scope 2 emissions should be a top priority for business. By embracing the use of renewable energy, your business will be able to significantly reduce emissions.
As an exporter, businesses that use renewable energy will need to prove it with an International Renewable Energy Certificate (I-REC) as part of their compliance with the CBAM.
Looking for information on how to procure a certified green energy supply for your business?