Urgent Plea: AfDB Chief Opposes EU Carbon Tax, Citing $25 Billion Impact

Urgent Plea: AfDB Chief Opposes EU Carbon Tax, Citing $25 Billion Impact


News Summary:

  • The AfDB President advocates African exemption from the EU’s proposed carbon tax, foreseeing a hefty $25 billion yearly impact on the continent under the Carbon Border Adjustment Mechanism (CBAM).
  • Africa’s reliance on fossil fuels for energy and industrialization accentuated the plea for exemption grounded in the continent’s unique energy dynamics and need for stability amidst increased renewable energy investments.
  • I hope for the IMF’s approval for re-channelling Special Drawing Rights (SDRs) and support from influential nations like Japan and France in a bid to fortify Africa’s financial resilience.

At COP28, the President of the African Development Bank strongly advocated for the exemption of African nations from the European Union’s proposed carbon tax.

In candid discussions with Reuters, he emphasised the staggering potential cost to the continent, estimating it at a staggering $25 billion per year if the EU implements the Carbon Border Adjustment Mechanism (CBAM) in 2026.

This policy would levy taxes on imports of pivotal commodities like cement, iron, steel, aluminium, and fertilisers originating from countries with less stringent carbon emissions regulations.

His stance was rooted in Africa’s reliance on fossil fuels to drive energy production, meet escalating population demands, and facilitate increased manufacturing for the exportation of higher-value goods.

Despite strides in renewable energy investments, the continent remains dependent on traditional energy sources.

In a heartfelt appeal, he underscored the gravity of a $25 billion annual loss, stressing that such a financial burden is unsustainable for Africa.

Moreover, he highlighted Africa’s strategic use of natural gas in conjunction with renewable energy sources, asserting that this dual approach provides the much-needed stability crucial for the continent’s industrialisation efforts.

He passionately championed Africa’s justification for a carve-out from the proposed tax, citing its unique energy context and developmental needs.

Beyond the realm of carbon taxes, the President expressed hope for forthcoming approval by the International Monetary Fund (IMF) executive board.

This plan involves five affluent nations rerouting their Special Drawing Rights (SDRs) through multilateral development banks, including the African Development Bank.

He described SDRs as crucial foreign exchange reserves held at the IMF, backed by an array of global currencies.

In recent developments, Japan and France have publicly pledged their support for this re-channeling initiative. France went a step further, affirming its commitment to contribute to a “liquidity support arrangement” acting as a safety net.

This narrative resonates deeply within the AfDB and across African nations, reflecting the intricate balance between developmental aspirations and global economic policies.

The plea for exemption from the EU’s proposed carbon tax stems from a genuine concern for Africa’s economic stability, given its ongoing reliance on fossil fuels amidst burgeoning renewable energy ventures.

It embodies the collective voice of African nations striving for equitable development opportunities amid evolving global financial landscapes.

The quest for alternative financial mechanisms, such as the re-channelling of SDRs, symbolises a collaborative effort to fortify the financial resilience of the continent.

This initiative, bolstered by the support of influential nations like Japan and France, signifies a pivotal step towards reinforcing Africa’s financial standing and addressing the complex challenges posed by evolving global economic paradigms.

 


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