Economic implications of the Carbon Border Adjustment Mechanism (CBAM) for South Africa and Mozambique

This paper evaluates the economic impacts of the European Union (EU) and United Kingdom (UK) Carbon Border Adjustment Mechanism (CBAM) on Mozambique and South Africa—two countries with high exposure due to carbon intensive exports. Using the Global Trade Analysis Project Circular Economy (GTAP-CE) Data Base and the dynamic computable general equilibrium (CGE) model ENVISAGE, we develop a baseline to 2035 and simulate the proposed CBAM. Results show modest macroeconomic effects but significant sectoral adjustments. Mozambique faces sharp declines in aluminium output and exports, while South Africa experiences smaller reductions in iron and steel and aluminium. Fiscal impacts are limited, though CBAM generates substantial revenue for the EU and UK. The findings underscore the importance of strengthening domestic Measurement, Reporting, and Verification (MRV) systems and aligning climate policies to mitigate competitiveness and distributional risks.