South Africa taking on one of its largest trading partners

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South Africa has told the UK that its plans to impose a carbon tax on imported goods will deepen global inequality and hamper Africa’s ability to adapt to climate change.

The criticism of the measure, which the UK plans to introduce by 2027, comes as developing economies such as South Africa accuse industrialized nations of shifting the obligation to combat global warming to poorer countries.

The European Union began levying its own so-called Carbon Border Adjustment Mechanism last year.

The tax, which penalizes imports based on the amount of climate-warming carbon generated in their production, may also breach World Trade Organization rules, South Africa said in a submission sent to the UK Treasury last month.

South Africa’s reliance on coal to generate most of its electricity from coal renders it particularly vulnerable to the measure.

“CBAM is punitive and forecloses possibilities for industrial development to meet real socio-economic needs,” South Africa’s Department of Trade, Industry and Competition said in the submission seen by Bloomberg.

“The UK should consider cooperative mechanisms rather than punitive mechanisms in incentivising third countries to adopt greener technologies.”

The UK Treasury declined to comment, while South Africa’s DTIC didn’t respond to a query. South Africa’s central bank warned in May that carbon taxes risk curbing trade and the nation’s economic output if they’re widely imposed on exports.

The UK said it’s necessary to ensure that goods that cause excessive emissions aren’t being imported into the UK without penalty from jurisdictions with more lax anti-emissions measures, a phenomenon known as carbon leakage. The goods affected include aluminum, cement, ceramics, fertilizer, glass, iron and steel.

“Carbon leakage can undermine efforts to reduce global emissions and curtail private investment in decarbonization – compromising efforts to limit global warming,” the UK Treasury said.

Still, South Africa said the measure will be imposed in too short a time frame for its exporters to adapt and its reporting conditions are onerous to comply with.

The DTIC said it punishes countries that have contributed little to the historical greenhouse gas emissions that are pushing up global temperatures.

South Africa called for an exemption or less punitive charges for African nations, and said the measures by the UK are protectionist and may raise “WTO compliance issues.”

The complaint by South Africa, which is being considered by the UK Treasury along with other submissions, echoes a letter to the EU last year in which South Africa said $1.5 billion of its annual exports would be threatened.

source:https://dailyinvestor.com/world/57955/south-africa-taking-on-one-of-its-largest-trading-partners/

Natalie