The European Green Deal (EGD) is a set of policy initiatives by the European Union (EU) with the overarching aim of making Europe the first continent to reach climate neutrality by 2050. The purpose of this study is to analyse the implications of the EGD on African trade. The objectives include understanding the EGD in the African context, and analysing affected African traded commodities and the implications that stem from its introduction. The methodology included a desk review, document analysis, and conducting extensive data analysis using an exposure and vulnerability methodology.

Thes study has five parts.The first part provides an overview of the European Green Deal, and the second part highlights how Africa trades with the EU. The third part highlights the implications for African trade. The remaining two parts examine international responses – what other countries are doing to respond to the EGD and their implications for Africa; and suggested policy responses the African continent can pursue to limit its exposure and vulnerability to any negative trade effects of the EGD.

This Working Paper offers an overview of how governments in the Global South are responding to the EU CBAM, in contrast to responses from developed nations. It examines the background and essential measures of CBAM in relation to the reactions of major transnational groupings and the effects of CBAM on primary trading partners. Furthermore, it aims to analyse the differences in responses and approaches to the EU CBAM from African countries, BRICS (Brazil, Russia, India, China and South Africa) nations, and developing countries such as the United States (US), Japan, the United Kingdom (UK)
and Canada.

CBAM is a key policy tool that forms part of the European Green Deal (EGD) to reduce net GHG emissions across Europe and abroad. Within this context, CBAM can be defined as a carbon border tax on embedded GHG emissions of carbon-intensive products imported into the EU. The main intent is to equalise the price of carbon between EU products and imports, by ensuring importers face similar conditions to EU manufacturers, and that the European climate objectives are not undermined by carbon leakage. In its current form, cement, aluminium, fertilisers, electric energy production, hydrogen, iron and steel, as well as some precursors (input materials, i.e. iron ore) and a limited number of downstream products are targeted. Other products are set to be added after the transitional period. These products remain highly exposed in terms of international climate change policies. In South Africa, a total of US$2.8 billion (about R52.4 billion) of South African exports (based on 2022 data) are at risk in the short term, with this number set to increase as the CBAM covers more and more products. The iron and steel (including iron ore) and aluminium industries are particularly at jeopardy, in the short term.

This paper provides an augmented analyses of the Policy Brief by Monaisa and Maimele  (2023), entitled The European Union’s Carbon Border Adjustment Mechanism and implications for South African exports. It updates analysis post the adoption of CBAM on 10 May 2023, reflecting on the vulnerability of the South African economy.

 .

The United States of America (USA) is South Africa’s second largest single trade partner after China, having imported US$13 billion (about R192 billion) worth of goods in 2021. South Africa’s top five exports to the USA are platinum, motor vehicles, miscellaneous chemical products (some chemicals are used to create monomers and polymers for plastics), ferro-alloys, and unwrought aluminum. The USA, since the Biden administration, has adopted a sound approach to climate change and reducing  greenhouse gas (GHG) emissions. Due to climate change policies in the USA, South African exports, such as chemicals and vehicles, face potential risks due to their carbon intensive nature and the move to e-mobility.

This brief is based on a comprehensive review of the United States of America’s climate change policy framework in relation to industries, as well as a review of South Africa’s climate and trade risks. It forms part of a research project for the Department of Trade, Industry and Competition examining the vulnerability of South African trade to evolving climate change legislation. The research comprises a main report on The global climate change regime and its impacts on South Africa's trade and competitiveness: A data note on South Africa's exports; case studies on various sectors; detailed briefs that explore South Africa’s trade risks with different countries; and key data in Excel format.

The reports, other country briefs and excel sheets are available at Climate change and trade risks.

This working paper unpacks the impacts of a transition away from coal on affected communities in South Africa. It takes a multi-layered approach highlighting the economic, social, and environmental impacts coal has had to date and the implications of a transition on communities. Sections 2, 3 and 4 discuss the economic, socio-economic and environmental impacts of coal-related activities and their closure on communities. Section 5 concludes with policy implications.

This paper argues that South Africa needs to mainstream climate change into its National Development Plan (and Sustainable Development Goals), by advancing i) climate resilient development  through several pathways, including; ii) South Africa’s Nationally Determined Contribution commitment to a low-carbon economy; iii) renewable energy and transition to a low-carbon economy; iv) climate change adaptation and resilience; and v) financing a  just transition to renewable energy. The paper also discusses the impact of the European Union’s Carbon Border Adjustment Mechanism on South Africa’s competitiveness and climate resilient developmet and looks at the impact of climate change in Africa. It concludes with some policy recommendations on what can South Africa, BRICS and other developing countries can do to support their strategies towards climate resilient development in a way that is socially just and fair.

A just transition finance roadmap aims to articulate a new end vision for the financial ecosystem which perfectly aligns lending and investment actions to idealised government environmental and social policies which support a net zero economy. Once a final vision is articulated, the roadmap provides routes and  signposts to arrive at such a destination. This first iteration of a just transition finance roadmap for South Africa, is an initial attempt to understand the nature of the challenge of just transition finance in South Africa, what a system level change to the financial eco system could look like and an action agenda for the next four years to begin moving towards such a vision.

This policy brief aims to clarify the currently used metrics, what value they have, what they miss, and their policy implications. It begins by unpacking the technical definitions of various metrics used in the South African context, considering the implications associated with each metric. Additional concerns regarding methodologies and assumptions, and data sources are also elaborated. Having clarified these metrics, figures reported by key actors are systematically presented. Finally, this brief reflects on what the reported figures do and do not say, and policy suggestions.

This policy brief is part of the Making Sense of Employment in South Africa's Just Energy Transition project. TIPS and the WWF South Africa, with the support of GIZ, are implementing an initiative to support policymaking for South Africa's just transition. This focuses on employment and the relevant challenges and opportunities in the country's just energy transition.

Related research

Research Report: Exploring alternative options for coal truckers in a biomass supply chain

Research Report: The just transition for the refining and logistics sectors of the South African liquid fuels industry value chain

The Carbon Border Adjustment Mechanism (CBAM) is a headline policy initiative of the European Green Deal. One of the drivers of the CBAM is that carbon emissions should have a price, and the CBAM is intended to “align the carbon price on imports with that applicable within the EU”. This policy brief provides an initial assessment of the CBAM and its implications for the global economy and South Africa-EU trade. South Africa’s trade with the EU will be greatly affected by the CBAM and other EU climate regulations. The South African government and exporters to the EU need to put in place measures and mechanisms to ensure trade resilience in a low-carbon global economy. These measures must have the just transition at their core to ensure that South Africa’s move to a low-emissions economy is inclusive, just and equitable, and protects communities and workers so they are not adversely affected.

The brief was funded by the Department of Trade, Industry and Competition. It draws on a report by TIPS, Tralac and Trade Advisory on The European Green Deal: Context, challenges and opportunities for South African SMEs operating in the green economy, funded by the European Union and the German Federal Ministry for the Environment, Nature Conservation, and Nuclear Safety (BMU).

Other Policy Briefs

Sustainable complexity: Managing export regulations in the European Green Deal

This policy brief is an initial assessment of the European Green Deal, examining what is currently known about the risks it creates for South African exporters. It provides a summary of what regulatory changes are expected in the EGD, what risks these changes pose for South African firms, and what can be done to begin preparing for these changes.

The brief was funded by the Department of Trade, Industry and Competition. It draws on a report by TIPS, Tralac and Trade Advisory on The European Green Deal: Context, challenges and opportunities for South African SMEs operating in the green economy, funded by the European Union and the German Federal Ministry for the Environment, Nature Conservation, and Nuclear Safety (BMU).

Other Policy Briefs

European Green Deal: The Carbon Border Adjustment Mechanism and implications for South African and European Union trade 

This working paper begins the process of framing a just transition narrative in the context of the South African financial system. It provides a brief overview of the current financial system in South Africa focusing on the structural fit of the finance system to the real economy, specifically in relation to small start-up companies, new entrepreneurial activities and new (often untested) technology roll-outs which characterise climate action and social inclusion transition activity. It looks at current local thinking about the system-level demands of a sustainable transition of the financial sector at a high and conceptual level. It then presents a framework and approach to understanding the financing needs of a just transition in South Africa. 

As the reality of a coal transition and coal power decommissioning draw nearer, South Africa’s just transition plan is both urgent and glaringly absent. There is a pressing need to manage the impacts of the transition on workers and local economic development, particularly in coal-dependent regions and affected communities. A credible fact base is required, from which to make appropriate and broadly supported decisions. In this conceptual clearing, several specific political consensuses must be brokered to enable policy design and implementation as well as investment for a green and just transition. This policy brief speaks to the current policy vacuum, proposing steps to address it. First, it considers the implications of the coal transition for employment in South Africa, with reference to national policy and available research. It then seeks to characterise the key issues, points of contestation, and the current just transition/ employment policy vacuum. Finally, recommendations for the facilitation of shared understanding and consensus-building are outlined.

Dowload Policy Brief or read online

Opportunities to develop the lithium-ion battery value chain in South Africa

The world of mobility is rapidly changing. The market for electric vehicle (EVs), in all their forms, is growing exponentially. Combined with technological disruptions in the energy space, the rise of EVs puts battery technologies at the core of sustainable development. Multiple technologies and chemistries, with their respective advantages and shortcomings, are competing in a market currently dominated by lithium-ion batteries (LIBs). Both South Africa’s government and industry have indicated their intention to position the local value chain as a key player in the mobility of the future. This is critical to ensure a just transition to e-mobility which would notably preserve, if not increase, job creation. Indeed, South Africa hosts a vibrant automotive manufacturing value chain. Like in the rest of the world, the domestic industry, however, produces internal combustion engine vehicles and components.

This research project explores the opportunities for South Africa to have a role in the LIB value chain. The main report and policy brief were prepared by TIPS on behalf of the Low Carbon Transport - South Africa (LCT-SA) Project. The project was initiated and funded by the United Nations Industrial Development Organisation (UNIDO). The TIPS team are: Gaylor Montmasson-Clair, Lesego Moshikaro and Lerato Monaisa. It was overseen by a Steering Committee comprised of Ashanti Mogosetsi (UNIDO), Marie Blanche Ting (UNIDO), Gerhard Fourie (Department of Trade, Industry and Competition – the dtic), Hiten Parmar (uYilo), Jenitha Badul (Department of Environment, Forestry and Fisheries – DEFF), Shahkira Parker (DEFF), Bopang Khutsoane (Department of Transport – DoT), Marleen Goudkamp (DoT), Minnesh Bipath (South African National Energy Development Institute – SANEDI), and Tebogo Snyer (SANEDI). Phillip Ninela (the dtic), Umeesha Naidoo (the dtic), and Mandisa Nkosi (UNIDO) acted as an internal technical task team.

Download Main Report or read report online

Download Policy Brief or read policy brief online

Media

Press release: Lithium-ion batteries offer an electrifying opportunity for South Africa

The world of mobility is rapidly changing. The market for electric vehicle (EVs), in all their forms, is growing exponentially. Combined with technological disruptions in the energy space, the rise of EVs puts battery technologies at the core of sustainable development. Multiple technologies and chemistries, with their respective advantages and shortcomings, are competing in a market currently dominated by lithium-ion batteries (LIBs).

Both South Africa’s government and industry have indicated their intention to position the local value chain as a key player in the mobility of the future. This is critical to ensure a just transition to e-mobility which would notably preserve, if not increase, job creation. Indeed, South Africa hosts a vibrant automotive manufacturing value chain. Like in the rest of the world, the domestic industry, however, produces internal combustion engine vehicles and components. This policy brief explores the opportunities for South Africa to have a role in the LIB value chain.

Background

This project comprises a main report and policy brief prepared by TIPS on behalf of the Low Carbon Transport - South Africa (LCT-SA) Project. The project was initiated and funded by the United Nations Industrial Development Organisation (UNIDO). The TIPS team are: Gaylor Montmasson-Clair, Lesego Moshikaro and Lerato Monaisa. It was overseen by a Steering Committee comprised of Ashanti Mogosetsi (UNIDO), Marie Blanche Ting (UNIDO), Gerhard Fourie (Department of Trade, Industry and Competition – the dtic), Hiten Parmar (uYilo), Jenitha Badul (Department of Environment, Forestry and Fisheries – DEFF), Shahkira Parker (DEFF), Bopang Khutsoane (Department of Transport – DoT), Marleen Goudkamp (DoT), Minnesh Bipath (South African National Energy Development Institute – SANEDI), and Tebogo Snyer (SANEDI). Phillip Ninela (the dtic), Umeesha Naidoo (the dtic), and Mandisa Nkosi (UNIDO) acted as an internal technical task team.

See Main Research Report: Opportunities to develop the lithium-ion battery value chain in South Africa.

The world of mobility is rapidly changing. The market for electric vehicle (EVs), in all their forms, is growing exponentially. Combined with technological disruptions in the energy space, the rise of EVs puts battery technologies at the core of sustainable development. Multiple technologies and chemistries, with their respective advantages and shortcomings, are competing in a market currently dominated by lithium-ion batteries (LIBs).

Both South Africa’s government and industry have indicated their intention to position the local value chain as a key player in the mobility of the future. This is critical to ensure a just transition to e-mobility which would notably preserve, if not increase, job creation. Indeed, South Africa hosts a vibrant automotive manufacturing value chain. Like in the rest of the world, the domestic industry, however, produces internal combustion engine vehicles and components. This research report explores the opportunities for South Africa to have a role in the LIB value chain.

Background

This project comprises a main report and policy brief were prepared by TIPS on behalf of the Low Carbon Transport - South Africa (LCT-SA) Project. The project was initiated and funded by the United Nations Industrial Development Organisation (UNIDO). The TIPS team are: Gaylor Montmasson-Clair, Lesego Moshikaro and Lerato Monaisa. It was overseen by a Steering Committee comprised of Ashanti Mogosetsi (UNIDO), Marie Blanche Ting (UNIDO), Gerhard Fourie (Department of Trade, Industry and Competition – the dtic), Hiten Parmar (uYilo), Jenitha Badul (Department of Environment, Forestry and Fisheries – DEFF), Shahkira Parker (DEFF), Bopang Khutsoane (Department of Transport – DoT), Marleen Goudkamp (DoT), Minnesh Bipath (South African National Energy Development Institute – SANEDI), and Tebogo Snyer (SANEDI). Phillip Ninela (the dtic), Umeesha Naidoo (the dtic), and Mandisa Nkosi (UNIDO) acted as an internal technical task team.

See Policy Brief: Opportunities to develop the lithium-ion battery value chain in South Africa.

This case study focuses specifically on the emerging export opportunities for South Africa in the development of green hydrogen. This refers to hydrogen that is produced through the process of electrolysis that is combined with a renewable energy source of power. While green hydrogen development has gone through a number of historical waves of interest, the current momentum is being driven globally, with a number of countries developing hydrogen roadmaps and strategies to capitalise domestically and in the global marketplace.

It is part of a research project for the Department of Trade, Industry and Competition examines the vulnerability of South African trade to evolving climate change legislation. It aims to shed light on the trade-related risks faced by South Africa as a result of the global transition to a low-carbon economy. From a trade and industrial perspective, this transition has implications on the composition and dynamics of entire value chains. This concerns what inputs are accessed, the processes that underlie production, what goods and services are produced, as well as what happens to these products post-consumption. The research is available in a number of related documents.  A main report on The global climate change regime and its impacts on South Africa's trade and competitiveness: case studies on various sectors; detailed briefs that explore South Africa’s trade risks with different countries; and key data in Excel format. 

These reports are available here: Climate change and trade risk.

 ..

Presentations

Nick Robins, Professor in Practice – Sustainable Finance, Grantham Research Institute, London School of Economics: Just Transition Welcome and Introduction

Media

ESI Africa 20 January 2021: How to finance the just energy transition in South Africa and India

Engineering News 19 January 2021 Terrence Creamer: Project launched to define role of finance in South Africa and India's 'just transitions'

Ensuring the transition to net zero and resilient economies is just and inclusive has never been more important as climate action builds momentum and the urgent need for a green and just recovery from COVID-19 arises.

South Africa and India, two of the largest coal-dependent emerging economies, are beginning to explore how to ensure no one is left behind in the transition, particularly in coal-dependent regions, and the most vulnerable can access emerging opportunities including new quality jobs in net zero sectors.

It is clear that financial institutions have a critical role to play in helping achieve a just transition in both countries - more practical guidance is now needed to signal where financing is needed and how it can be enabled by specific policy, market and regulatory mechanisms.

The Just Transition Finance Roadmaps in South Africa and India project will build on existing local processes and encourage tangible action, particularly on the road to COP26. The following partners are involved: Trade & Industrial Policy Strategies, National Business Initiative, Observer Research Foundation, LSE Grantham Research Institute on Climate Change and the Environment, and Harvard Kennedy School’s Initiative for Responsible Investment, with support from the National Institute of Public Finance and Policy.
 
This project has been catalysed with funding from CDC Group.

Agenda

14.30-14.40 Welcome and Project Launch: Nick Robins, Professor in Practice – Sustainable Finance, Grantham Research Institute, London School of Economics

14.40-14.50 Fireside chat: Nick O’Donohoe, Chief Executive Officer, CDC Group in conversation with Nick Robins

14.50-14.55 Opening remarks: What is the role of finance in enabling a just transition in South Africa? Joanne Yawitch, Chief Executive Officer, National Business Initiative

14.55-15.00 Opening remarks: What is the role of finance in enabling a just transition in India? Rathin Roy, Managing Director - Research and Policy, Overseas Development Institute

15.00-15.35 Panel discussion

Moderator: David Wood, Director of the Initiative for Responsible Investment , Harvard Kennedy School

• Amal-Lee Amin, Climate Change Director, CDC Group
• Rudi Dicks, Board member, Trade & Industrial Policy Strategies
• Royston Braganza, Chief Executive Officer, Grameen Capital India

15.35-15.55 Q&A session

15.55-16.00 Closing remarks: Suranjali Tandon, Assistant Professor, National Institute of Public Finance and Policy

Exports to China have fluctuated between 9% and 12% of South Africa’s exports between 2010 and 2020. South Africa’s main exports to China comprise metal products. China is the largest emitter of greenhouse gas (GHG), for both production and consumption. This stems mainly from coal-based electricity generation and mining. While both China’s domestic and foreign policies depict a leniency towards coal-fired power generation, the country is a leading global investor in renewable energy production both domestically and abroad. At the centre of China’s climate change regulation is the issuance and monitoring of energy efficiency standards, particularly for cars.

This brief is based on a comprehensive review of China’s climate change policy framework in relation to industries, as well as a review of South Africa’s climate and trade risks. It forms part of a research project for the Department of Trade, Industry and Competition examining the vulnerability of South African trade to evolving climate change legislation. The research comprises a main report on The global climate change regime and its impacts on South Africa's trade and competitiveness: A data note on South Africa's exports; case studies on various sectors; detailed briefs that explore South Africa’s trade risks with different countries; and key data in Excel format.

The reports, other country briefs and excel sheets are available at Climate change and trade risks.

South Africa’s top exports to India are coal, manganese, chemical wood pulp, platinum and spark-ignition engines. India is a key export partner of South Africa, accounting for 5% of exports over the 2010 to 2019 period. India’s transition towards increased consumption of domestic thermal coal and reduced thermal coal imports, combined with investments into additional renewable energy capacity, place South African coal exports at significant risk. India is a significant importer of South African coal, accounting for 53% of South African coal exports in 2019.

This brief is based on a comprehensive review of India’s climate change policy framework in relation to industries, as well as a review of South Africa’s climate and trade risks. It forms part of a research project for the Department of Trade, Industry and Competition examining the vulnerability of South African trade to evolving climate change legislation. The research comprises a main report on The global climate change regime and its impacts on South Africa's trade and competitiveness: A data note on South Africa's exports; case studies on various sectors; detailed briefs that explore South Africa’s trade risks with different countries; and key data in Excel format.

The reports, other country briefs and excel sheets are available at Climate change and trade risks.

Exports to Japan accounted for 5% of South Africa’s exports between 2010 and 2019. Production processes in Japan have been characterised by high fossil fuel use, especially following the Fukushima nuclear accident which saw nuclear power being substituted by fossil fuels. Japan’s climate change mitigation is centered on carbon capture technologies, increasing energy efficiency, and the introduction of new technologies such as hydrogen. In 2016, Japan also enforced a carbon tax on oil, gas and coal imports, and on consumption. This has, however, been inconsequential to its trading relations with South Africa.

This brief is based on a comprehensive review of Japan’s climate change policy framework in relation to industries, as well as a review of South Africa’s climate and trade risks. It forms part of a research project for the Department of Trade, Industry and Competition examining the vulnerability of South African trade to evolving climate change legislation. The research comprises a main report on The global climate change regime and its impacts on South Africa's trade and competitiveness: A data note on South Africa's exports; case studies on various sectors; detailed briefs that explore South Africa’s trade risks with different countries; and key data in Excel format.

The reports, other country briefs and excel sheets are available at Climate change and trade risks.