In a recent panel session at the Doha Forum, the President of the African Development Bank (ADB) Group, Dr. Akinwumi Adesina, reiterated concerns over the potential adverse effects of the European Union’s (EU) carbon border tax on Africa’s industrialization efforts. The EU’s move, part of its comprehensive climate change reduction measures, has raised alarms about the possible repercussions for African economies.
The EU’s carbon border tax, launched as an initial phase of Europe-wide measures, has the potential to revert Africa to exporting raw commodities, undermining the progress made in industrialization, warned Adesina. He emphasized the need for fair trade and urged for a just energy transition that does not penalize African nations.
Adesina expressed apprehension that the proposed border tax of 80 euros per tonne on products such as cement, steel, aluminum, and fertilizers could impose significant financial burdens on African companies. He estimated an annual loss of $25 billion for the continent, stressing the importance of exempting Africa from such taxation due to its role in financing the continent’s transition.
The ADB President argued for the essential role of natural gas in Africa’s industrialization, advocating against restricting its trade. He criticized the imposition of general punitive measures on developing countries, stating that it alters the differentiated responsibility framework within the Paris Agreement.
The discussion also touched upon the debt challenges faced by African nations. Adesina highlighted Africa’s total external debt, projected to rise from $1.1 trillion in 2022 to $1.3 trillion by the end of 2023. Notably, twenty-five African countries are in or at high risk of debt distress.
Addressing the debt issue, Adesina presented a proposal developed by the ADB and the Inter-American Development Bank. The proposal suggests channeling Special Drawing Rights (SDRs) to multilateral institutions, allowing them to leverage funds by a factor of four. Adesina explained that if the ADB were to receive $20 billion, it could automatically leverage it to $80 billion.
The panel also featured insights from Qatar’s Minister of Finance, Ali bin Ahmed Al Kuwari, who emphasized responsible energy supply and criticized overly ambitious climate change targets. Additionally, Børge Brende, President of the World Economic Forum, acknowledged the global debt crisis, comparing it to levels not seen since the Napoleonic wars. Brende pointed out that even the United States, the world’s largest economy, is paying a staggering $1 trillion to service its debt, raising concerns about the challenges faced by numerous countries worldwide.
By: Delino Gayweh
Serrari Financial Analyst
17th December, 2023
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