The Carbon Border Adjustment Mechanism (CBAM) of the European Union, which was agreed in December 2022 and adopted by the European Parliament in April 2023, presents one of the components of a complex framework of policies and measures. aiming to achieve the European objective of carbon neutrality by 2050.
The proposed EU policy aims to mitigate carbon leakage by imposing a tax on imports of goods from countries with less stringent climate policies than the EU, notes an analysis by Veronika Ertl, Dr. Lahcen Haddad and Ayoub Touati.
By taxing imported goods on the basis of their embedded carbon emissions, the measure is therefore supposed to put European companies on a level playing field and discourage non-European producers from exporting to the EU, with a “competitive” advantage. , carbon-intensive goods.
While many details regarding the CBAM are still under discussion, the implementation is envisaged in two periods, starting in October 2023 with a pilot phase in which a simplified CBAM would only require reporting obligations, followed by an implementation full implementation from 2026, when the obligation to buy certificates for carbon emissions comes into force.
Initially, the CBAM will apply to imports of iron and steel, aluminium, electricity, certain fertilizers, cement and hydrogen, it is pointed out, to note that decisions on a Possible extension of the mechanism to other products, such as organic chemicals and polymers, are pending and should be taken before full implementation in 2026.
Furthermore, this document is based on the discussions of a workshop organized jointly by the Regional Program Energy Security and Climate Change Middle East and North Africa of the Konrad-Adenauer-Stiftung (KAS-REMENA) and the Istiqlal Group in the second chamber of the Moroccan Parliament, February 7, 2023.
Expected impacts of CBAM on Morocco
Experts agree that the implementation of the CBAM will have far-reaching effects on the Moroccan economy. The EU is Morocco’s main trading partner, accounting for more than half of its total trade and 65% of its exports. Morocco mainly exports to the EU agricultural products, cars, textiles, aeronautical parts, fishing products and phosphate.
The expected effects of the CBAM include potentially negative impacts on the competitiveness and volume of Moroccan exports to the EU, in particular in the sectors directly covered by the CBAM (including fertilizers initially).
At the same time, the CBAM could also encourage Morocco to accelerate its energy and environmental transition by encouraging investment in renewable energies, supporting the transition to the use of these energies in industry and reducing greenhouse gas emissions. Greenhouse.
Among the challenges posed to the Moroccan economy by the implementation of the CBAM is the increase in the cost of exporting goods to the EU. The shift to renewables in phosphates and industry will require investments that will skyrocket production costs and therefore reduce the competitiveness of Moroccan exports. The government could divert part of these costs through direct support for exported products.
CBAM is likely to affect several key sectors in Morocco. The phosphate industry, particularly the fertilizer and chemical subsidiaries – a major source of exports for Morocco – is expected to be one of the hardest hit due to its currently high carbon emissions.
The current ambitious plan of the Office Cherifien des Phosphates (OCP – the Moroccan public company that oversees the production, processing and exports of phosphates) to invest USD 13 billion to achieve 100% carbon neutrality by 2040 will make certainly phosphate products more competitive in the long term, but in the meantime, Morocco’s exports to the EU are likely to be negatively affected, which will have a negative impact on its balance of payments and on its overall economic output.
While the direct effects will be felt by sectors that rely heavily on carbon-intensive exports, such as phosphates and cement, indirect effects are to be expected for industries linked to these sectors, such as transport and logistics. , due to changes in prices and demand.
The extent of the impact will depend on a range of factors, including the carbon intensity of exported products, the level of competition in the market, the ability of companies to adapt and innovate in response to the new regulatory environment and the willingness of the Moroccan government to put in place policies to support industry investments in efforts to transition to low-carbon energy sources.
Besides the challenges it poses, the CBAM also presents opportunities for Morocco. Experts see the CBAM as an opportunity to be used as an incentive to accelerate the transition to a low-carbon economy. Since the policy would make high-carbon products relatively more expensive, it should induce an increase in demand for low-carbon products.
The policy could therefore create opportunities for Morocco to develop its own low-carbon industries and reduce emissions in hard-to-cut sectors, by increasing the use of renewable energy and energy-efficient technologies.
Plans to transition to a zero-carbon production model, such as OCP’s 2023-2027 investment program and its zero-carbon vision 2040, could enable the industry to maintain its competitive edge in the wake of the CBAM application. Energy transition plans, however, require significant investment and innovation, as well as the development of new certification and control systems to ensure compliance with EU regulations.
Morocco has already invested heavily in the development of its renewable energy capacities and in the establishment of the necessary political, legislative and economic frameworks. It thus has a solid base and an ambitious framework on which to build to ensure an effective transition to a low-carbon economy, it is also well placed to become an exporter of renewable energy and hydrogen. green to the EU and other markets, which will give it an advantage over other exporters to the EU.
Path dependencies in current economic structures and relatively limited resources, however, pose a challenge to moving this transition forward in the necessary time frame. To succeed and capitalize on its benefits, Moroccan policymakers and businesses need to put in place bold investments in energy transition infrastructure and technologies, as well as develop new partnerships and collaborations with EU businesses and governments. .
Overall, the impacts of CBAM on the Moroccan economy are likely to be complex and multifaceted, with both challenges and opportunities arising.