The President of the African Development Bank (ADB) Group Dr Akinwumi Adesina has reiterated his warning that the introduction of a carbon border tax by the European Union could push Africa back into exporting raw commodities, and undermine its industrialisation gains.
- •The European Union (EU) recently launched the initial phase of a Europe-wide carbon tax on imported goods as part of its climate change reduction measures.
- •Adesina said this could penalize African countries.
- •“Just trade is what we need, but give us just trade for a just energy transition,” Adesina added. “Africa should not be penalised.”
“African companies that are making cement, steel, aluminium, fertilizers and trying to export to Europe are going to be charged a border tax of 80 euros per tonne. That is very expensive, and all that is going to do is that countries in Africa that already suffer from tariff escalation when they add value to what they produce, now you are forcing them down the value chain,” Adesina said during a panel session at the Doha Forum titled “Decoding the Debt Dilemma—Unveiling Multilateral Solutions.”
“Africa is going to lose $25 billion annually,” Adesina said. “Africa deserves a carve-out on that [taxation] because we are financing Africa’s transition. You cannot industrialise just by renewables; you need a balanced energy mix that allows you to use your natural gas to be able to industrialise.”
- •He described natural gas as an essential resource for Africa that should not be restricted in foreign trade.
- •He noted that by introducing general punitive measures that also affect developing countries, developed countries are “shifting the goal post” in the differentiated responsibility within the Paris Agreement.
- •The ADB argues that this shift is happening by forcing developing countries to attain net-zero carbon emissions much earlier than stipulated.
“Moving to a society which is decarbonised takes time,” Børge Brende, President of the World Economic Forum said, “We have to find bridges between coal as the most extreme form of fossil fuel through natural gas. We have to move at a speed which makes sense, is cost-effective, and there is a price to be paid.”
Qatar’s Minister of Finance Ali bin Ahmed Al Kuwari said targets set by climate change experts had at times been “too ambitious, too aggressive, and had not properly taken into consideration transition periods. Qatar, on the other hand, has established a reputation as a responsible supplier of energy to the world, the minister said.
The Debt in the Room
Adesina said Africa’s total 2022 external debt, estimated at $1.1 trillion and set to rise to $1.3 trillion by the end of 2023, was troubling.
- •Twenty-five countries in Africa are in or at high risk of debt distress.
- •A proposal developed by the African Development Bank and the Inter-American Development Bank to channel SDRs to multilateral institutions, would enable the banks to leverage funds by a factor of four.
- •‘If the African Development Bank got $20 billion, that would automatically become $80 billion. The MDBs are leveraging machines,’ Adesina said.
Minister Al Kuwari said Qatar had successfully brought down its debt from 72% of GDP in 2020 to below 40% in 2022 through fiscal policy.
Brende said global debt was huge. ‘We haven’t seen this level of debt since the Napoleonic wars…even the world’s largest economy, the United States, is paying $1 trillion to service its debt.
“The US will be able to manage, but a lot of countries are in a lot of trouble,” Brende said.