Ghana’s exports to the European Union (EU) is likely to be affected by the carbon border adjustment mechanism (CBAM) of the EU due to the relative importance of the country’s exports captured by the CBAM.
Although a net exporter of agricultural produce to the EU, Ghana numbers among a host of developing countries to be affected, and in its nascent stages of its introduction the country should join in the call for its reconsideration.
Ghana’s position in the Global supply chain of carbon-emitting products is of the status of commodity dependence- crude oil, timber, managanese, among others which underlie the products captured by the EU’s carbon border adjustment mechanism (CBAM).
Therefore, Ghana’s exports in these commodities would reduce as countries whose products are directly affected and who are major importers of these commodities aforementioned from Ghana will also reduce their imports of the commodities from Ghana.
Ghana’s carbon dioxide (CO2) emissions per capita stood at 0.56 tonnes, an equivalent of 16.8 million tonnnes as of 2019 while energy-related global emissions as of 2021 stands at 33.1 billion metric tonnes.
Taking this into consideration, it is worthy to note that the CBAM’s effect would vary significantly by country depending on their export structure and carbon production intensity.
Based on an UNCTAD report “the most affected economies include the African fuel-exporting countries such as Cameroon, Egypt, and Nigeria. Other African economies such as the Congo, Ghana, Morocco and Zimbabwe would also be affected due to the relative importance of their exports affected by the CBAM.”
Effect of the CBAM on Ghana
Furthermore, the CBAM targets the exports of goods in carbon-intensive sectors including cement, steel, aluminium, oil refinery, paper, glass, chemical and fertilizers. The CBAM is expected to introduce new CO2 emissions-cutting measures transitionally in 2023 and finalize them before 2026. Also, it is anticipated that the CBAM would reduce part of the carbon leakage produced by the different climate change ambitions between the EU and other countries.
With the condition that there are varying degrees of the effect of the CBAM, exports by developing countries across the targeted carbon-intensive sectors would be reduced by 1.4 per cent. This would be the case if the CBAM is implemented with a price of $44 per tonne of embedded CO2 emissions, and by 2.4 per cent if it’s implemented with an $88 per tonne price, a recent report by UNCTAD shows.
However, without this framework, the report notes that developing economies would gain US$1 billion. Besides, the report highlights that the CBAM would be effective in reducing carbon leakages, but limited with regards to its value in mitigating climate change- only 0.1 per cent of global C02 emissions can be cut from use of the CBAM.
Moreover, the CBAM does not highlight how it can support decarbonization in countries like Ghana and other developing economies that would be affected. This is very important since Ghana and others lack carbon-efficient technologies to transition to lower carbon emissions rapidly.
There is therefore the need to review the CBAM in order to spell out which developing countries can be exempted and also provide a pathway to indicating how decarbonization can be achieved in developing economies that will be affected.
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