The dice are cast. And SA has got a break, for now. But we should not let it go to waste. In July, the EU released its new climate policy package, which includes a mechanism aimed at taxing goods imported into the EU based on their climate credentials.
Importantly, it sends a clear signal to the rest of the world: match the EU’s climate ambition or see access to the EU market being severely curtailed in future. A system known as a carbon border adjustment mechanism will progressively force exporters to the EU to pay the same carbon price as local producers, unless they are equally taxed in their home countries or have decarbonised.
A few adjustments do, however, give some time to prepare. First, the scheme will in effect only start from 2026 due to the inclusion of a three-year penalty-free period. Second, the carbon price will be ramped up progressively over a period of 10 years from 2026. Third, the carbon border adjustment mechanism only covers a limited number of products, as listed earlier. Lastly, only direct emissions linked to the production process of such products are covered.