New EU carbon tariffs to affect SA's already compromised steel industry

South African steel and aluminium exporters could face a fresh financial hit as the European Union (EU) prepares to roll out new carbon-based tariffs on imports.

The EU’s Carbon Border Adjustment Mechanism (CBAM) is set to take effect this month.

The mechanism applies to non-EU countries exporting carbon-intensive goods such as steel and aluminium.

Under the EU's new carbon rules, importers will need to register as approved CBAM traders and buy special certificates for the carbon emissions linked to the goods they bring into the EU.

The cost of these certificates will be linked to the EU’s carbon market price, which changes weekly.

While South Africa has been lobbying for an exemption from what it views as a protectionist tariff, there is still no clarity on whether those efforts have succeeded, despite assurances from the EU that the issue would be reconsidered.

The measure, which has been three years in the making, would deal another blow to South African exporters already under pressure from the 30% unilateral tariff imposed by the United States.

The CBAM is expected to cost the local steel industry billions of rand in compliance costs.

Critics warn this could lead to further job losses in a sector that has faced severe challenges since the COVID-19 pandemic.

South Africa, along with other affected countries, has argued that the tariffs are protectionist in nature and contravene World Trade Organization (WTO) rules.

Written by Dimakatso Leshoro