South Africa is contemplating lodging a formal complaint with the World Trade Organization (WTO) against the European Union’s proposed carbon border adjustment mechanism (CBAM), which Trade Minister Ebrahim Patel criticized as a “protectionist” measure on Wednesday.
The CBAM, set to impose charges on imports of carbon-intensive goods such as steel and cement from 2026, has faced significant backlash from several developing nations and industries, including China’s steel sector. The mechanism aims to charge importers based on the carbon content of their goods, mirroring the carbon costs paid by EU domestic industries to prevent “carbon leakage” – where industries might relocate to avoid strict EU carbon regulations.
“We believe that the best outcome is always to reach an agreement through engagement and negotiation, and our door remains open for a settlement with the European Union on this matter,” Patel told Reuters. “Failing that, we would be obliged to take the next step and lodge a formal complaint at the WTO, but discussions are still ongoing to find an amicable solution.”
A spokesperson for the European Commission defended the border levy, asserting that it complies with WTO rules and provides for deductions for any carbon prices paid abroad. “EU domestic industry pays a carbon price. We need to ensure that importers pay an equivalent price based on the carbon content of their goods to prevent carbon leakage and help reduce greenhouse gas emissions,” the spokesperson explained.
Despite these assurances, countries like South Africa argue that the CBAM unfairly penalizes developing nations that lack the substantial investments needed to lower their industries’ CO2 emissions. “Instead of recognizing differential levels of development, it imposes a one-size-fits-all approach on firms worldwide,” Patel stated.
The potential economic impact on South Africa could be significant, with the EU being its largest trading partner. An April report from the South African Reserve Bank projected that the current version of CBAM could result in a 4% reduction in total exports to the EU by 2030, translating to a 0.02% reduction in GDP compared to a scenario without CBAM.
South Africa raised concerns regarding trade-related measures on climate change at the WTO in February, emphasizing the need for a balanced approach that considers the developmental disparities among nations.
As the trial phase of the world’s first carbon border levy continues, the resolution of this issue through negotiation or potential WTO intervention remains critical for South Africa’s economic interests and the broader discourse on equitable climate action.
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