Bracing for Impact: What the EU’s New Carbon Tax Could Mean for South Africa’s Exports

Green deal or trade trap?

South Africa’s biggest exporters might soon find themselves caught between a rock and a hard place or rather, between carbon emissions and the European Union’s new climate weapon: the Carbon Border Adjustment Mechanism, or CBAM.

Set to launch on 1 January 2026, this carbon-linked tariff is the EU’s latest strategy to cut global emissions by hitting one of the world’s most powerful pressure points: international trade. The aim? To prevent what Brussels calls “carbon leakage” when companies move polluting industries to countries with looser climate laws.

But for South African industries like steel, aluminium, cement, hydrogen, fertilisers, and electricity, CBAM could feel less like climate justice and more like economic punishment.

South Africa’s export pain point

Europe is a top export destination for many of South Africa’s heavy industries. If CBAM kicks in as planned, local producers will have to pay a carbon penalty to access the EU market, essentially a tax based on the carbon footprint of their goods.

And with Eskom’s coal-heavy energy mix powering much of South Africa’s manufacturing, exporters may find themselves footing an enormous bill. That could make South African goods less competitive, even if they’re produced more cheaply than European alternatives.

Local industries uneasy, but cautious

So far, South African industry bodies are watching the developments carefully but aren’t saying much — at least not yet. When asked to comment, Nuraan Alli of the Steel and Engineering Industries Federation of Southern Africa (SEIFSA) said they were still assessing the implications and not ready to make a public statement.

It’s a sentiment echoed across the board. As one energy policy expert put it: “We’re in a climate fight with a blunt tool and no helmet.”

Not all bad news?

There may be a silver lining, at least for smaller players. The EU recently proposed a 50-tonne annual exemption threshold, which means small and medium enterprises (SMEs) that export modest volumes of affected goods might escape the red tape altogether.

The European Commission has also hinted at streamlining the reporting process and offering support to exporters, especially from countries with less aggressive climate regimes. Still, these ideas remain proposals and are yet to be formally adopted.

The Western Cape effect

In local policy circles, there’s growing concern about regional disparities. The Western Cape, with its greener energy initiatives, may have an advantage in avoiding CBAM penalties compared to provinces still reliant on fossil fuels.

This raises a key question: Could CBAM drive a split in South Africa’s industrial competitiveness, based not on skills or cost, but on carbon?

History, politics and double standards

The EU’s push for CBAM comes against a backdrop of rising tensions between the Global North and Global South over climate responsibility. South Africa, like many African nations, has pointed out that it didn’t cause the climate crisis. Its emissions are a fraction of Europe’s historical output.

Some critics argue that CBAM risks becoming a green trade barrier, favouring rich nations who can afford clean energy transitions while punishing developing economies still trying to grow.

In the words of one Pretoria-based analyst: “It’s easy to set carbon rules when your factories have had 200 years to industrialise and your electricity isn’t coming from coal.”

What’s next for SA?

For now, exporters, trade negotiators and government departments are in wait-and-see mode. The final proposal from the European Commission is due by the end of 2025, just weeks before the tax comes into force.

But waiting may be a risky strategy. Industry insiders say South Africa needs to act now: decarbonise manufacturing, upgrade emissions reporting tools, and negotiate for better treatment under CBAM, before the cost of inaction becomes unaffordable.

The EU’s carbon border tax is more than a climate policy it’s a test of global trade fairness. For South Africa, the CBAM could either be a wake-up call or a knockout punch. What happens next depends on how quickly we respond and whether we get a seat at the table before the rules are locked in.

{Source: IOL}

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