Economics of Measuring Carbon Emissions Content in CBAM and African Exports

This chapter aligns with the pursuit of Sustainable Development Goals (SDGs) 7, 11 and 13—affordable and clean energy (SDG 7), sustainable cities and communities (SDG 11) and climate action (SDG 13) respectively. Most African countries lack standard approaches for measuring CO2 emissions and producers rarely measure the embedded carbon content of their export products. As such, default rates of emissions intensity will be applied to determine the carbon tax on most Africa exports in the EU’s CBAM sectors. The chapter assesses the extent to which (EU) default rates of emission intensity implies higher CBAM tariffs for African exports. The chapter uses Multi-Regional Input-Output (MRIO) data to compute the carbon footprint of exports from selected African countries—Cameroun, Ethiopia, Mozambique, Nigeria and Tunisia. The data is used to determine their CBAM obligations based on different default values and discusses how the CBAM could be an incentive for industries to measure embedded carbon content. Results highlight potential savings in tax payments accruable to African exporters and relief for EU consumers by measuring embedded carbon-content of products. Furthermore, the outcomes indicate potential implications of African exports being charged higher CBAM tariffs due to application of (higher) default rates of emissions intensity. Additionally, the chapter’s outcome shows the potential exposure (loss accruable) to African exporters from default rates. Hence, empirical evidence is provided to justify and recommend the development of efficient systems for measuring and monitoring carbon content in production.