CBAM and the Paris Agreement: South Africa's Climate Obligations

The Paris Agreement Architecture and Carbon Leakage

The Paris Agreement (2015) established a framework for countries to make Nationally Determined Contributions (NDCs) to limit global warming to 1.5–2°C above pre-industrial levels. A fundamental challenge in this framework is carbon leakage: if one country implements strong carbon pricing, carbon-intensive production may shift to countries with weaker or no carbon pricing, resulting in no net reduction in global emissions.

The EU's Carbon Border Adjustment Mechanism is explicitly designed to address this problem. By ensuring that imported goods face a carbon cost equivalent to that faced by EU producers, CBAM removes the competitive disadvantage of EU climate policy and prevents carbon leakage.

South Africa's NDC and CBAM

South Africa's Nationally Determined Contribution (NDC) under the Paris Agreement commits SA to limiting greenhouse gas emissions to 398–510 MtCO₂e per year by 2025–2030. This represents a significant reduction from business-as-usual projections and requires substantial decarbonisation across SA's energy, industrial, and transport sectors.

The SA carbon tax — introduced in June 2019 at R120/tonne CO₂e and progressively increased — is the primary domestic policy instrument for meeting SA's NDC. The carbon tax applies to the same sectors covered by CBAM: steel, aluminium, cement, fertilisers, and hydrogen production.

The SA Carbon Tax Credit: The Paris Agreement Link

The CBAM regulation includes a provision for crediting carbon prices paid in the country of origin. This provision is directly linked to the Paris Agreement framework: it rewards countries that have implemented domestic carbon pricing aligned with their NDC commitments.

For SA exporters, this means:

• ▸SA carbon tax paid on covered goods reduces CBAM certificate costs for EU buyers
• ▸The credit is calculated as: (SA carbon tax rate in EUR/tonne) ÷ (EU ETS price in EUR/tonne) × embedded carbon
• ▸At current rates (R236/tonne SA tax, EUR 65/tonne EU ETS, R20.5/EUR exchange rate): credit = (236/20.5)/65 = approximately 17.7% of gross CBAM liability

The Just Transition Dimension

South Africa's Paris Agreement commitments include a just transition — ensuring that the shift to a low-carbon economy does not disproportionately harm workers and communities dependent on carbon-intensive industries.

CBAM creates both a challenge and an opportunity for SA's just transition:

Challenge: CBAM increases the commercial pressure on carbon-intensive SA exports, accelerating the economic case for decarbonisation and potentially threatening jobs in coal-dependent industries.

Opportunity: SA exporters who invest in decarbonisation — renewable energy, green hydrogen, low-carbon steel — gain a competitive advantage in EU markets, creating new economic opportunities aligned with SA's just transition goals.

For a complete CBAM compliance registration pathway, visit the Digital Product Passport Registry.