South African Reserve Bank Sounds Alarm on Carbon Tax Impact

The South African Reserve Bank has sounded the alarm, warning that the country's economic growth could be severely hindered if carbon taxes are imposed on a large scale on its exports.

Potential Impact on Exports and GDP

According to the bank's calculations, the impact could reach 10.1% of exports and 9.3% of GDP by 2050 in the worst-case scenario, where carbon taxes are imposed on all exports by all trading partners. The European Union's new carbon border adjustment mechanism, which is being gradually implemented, is of particular concern. This mechanism is designed to protect the EU's competitiveness and set a fair price for emissions used in the production of imported goods. The EU will start imposing payments from 2026.

Current Impact on Mining Sector

Currently, the mechanism primarily affects the mining sector, which is a significant contributor to South Africa's economy. If things remain unchanged, exports to the EU would decrease by 4% by 2030, reducing the country's GDP by 0.02%. However, if the EU's mechanism is extended to all South African exports and adopted by other countries, such as the United States, Canada, and Japan, which are also considering similar proposals, the impact would be much more severe.

Job Losses and Employment Impact

The employment impact is also significant, with 350,000 jobs lost by 2050, and this number could rise to 2.6 million if all exports are subject to a carbon tax.

Need for Green Transition

The bank believes that these risks should consolidate efforts to transition to a greener economy, noting that although South Africa only contributes 1% to global greenhouse gas emissions, its economy has the highest carbon intensity among G20 countries. The country produces approximately 80% of its electricity from coal.

Proposed Solution

The proposed solution is to increase local carbon taxes and effectively utilize the additional revenue to accelerate the green transition and position South Africa as a green producer. Pretoria is negotiating exemptions, but risks could still emerge from changes in consumer sentiment or if other commercial rivals adapt more quickly to carbon border taxes.

Tunisia Also Affected

Tunisia is also concerned about these issues, as more than 70% of its exports are absorbed by the European Union. Although there are no studies quantifying this risk, it is significant, particularly in the textile industry. Urgent action is needed, especially in terms of financing. There is a growing awareness among funders, but companies must also react and propose serious pathways to shift to a more environmentally friendly production mode.