From the European Union to China, the UK and Japan, all African international trading partners are developing non-tariff trade measures that raise urgent questions about the sustainability of future African exports. These measures risk exacerbate Africa's economic vulnerability if not taken.
Recently, the EU and the UK have announced the Carbon Border Regulation Mechanism (CBAM), which is expected to be effective in 2026 and 2027, respectively. Compliance delays are estimated to cost African countries as much as $25 billion each year, so don't shrink them.
The EU has also announced measures that will affect the export of fossil fuels through methane regulation. African exporters of agricultural products such as cocoa have already issued warnings about their readiness to comply with the EU's deforestation Directive.
Africa has already experienced economic tensions in trade measures related to emerging climate. African exports – From South African steel to Ghana's cocoa and Mozambican aluminum, the risk of exclusion from major global markets through new carbon-related trade frameworks.
Without strategic support, these measures could halt growth, threaten employment and livelihoods, and deepen global economic inequality.
The Trade Decarbonization Fund will allow Africa to be more competitive, promote equity, strengthen supply chains, and enable Africa to move these measures and frameworks into a global trading system.
Through grant-based support for building emission monitoring systems and policy frameworks, and advanced concessional funding for green industrial processes and resources for low-carbon manufacturing, Trade Decarbonization Funds can provide financial building blocks to stay competitive. The fund is about global equity, supply chain resilience and strengthening Africa's capacity in an emerging global low-carbon trading system.
Green Trade Barrier
EU CBAM, which is expected to be fully implemented by 2026, aims to impose costs on carbon content. The UK plans to introduce its own CBAM by 2027.
Although not yet applied to international trade, China, Africa's largest trading partner, has significantly increased its Emissions Trading Scheme (ETS) since 2021, with the aim of controlling and gradually reducing CO2 emissions. ETS applies to several economic sectors, including the cement, steel and aluminum smelter industries. It's definitely only a matter of time before China expands ETS to international trade. Some G20 members, such as Brazil, have also established a regulated carbon pricing framework for key industries, but India adopted precursor regulations in its carbon margin trading scheme (CCTS) planned in July 2024.
These measurements differ in shape and pace in which they have been introduced, but represent structural adjustments to the global trade regulations. In other words, this is a new reality that African exporters must consider. The African Nature Fund is often touted as a solution to these shifts, but it must be unlocked by providing effective funding solutions to support the transition of existing African export industries, particularly while supporting the emergence of new ones.
For Africa, these reforms pose many risks. Africa must find ways to navigate these reforms and barriers.
The need for Africa's trade decarbonization fund
The African Trade Decarburization Fund will fund grants to support soft infrastructure buildings, such as emission counting systems, and concessions loans to support hard infrastructure. The fund could, for example, promote partnerships for the spread of new technologies to support more energy-efficient industrial processes.
Partners such as the EU have shown an eagerness to recycle CBAM revenues. The European Commission estimates that CBAM can generate approximately 1.5 billion euros per year in the EU budget from 2028. Under current law, revenues from EU CBAM are paid to the EU budget, but revenues can be channelled through African funds, as a transparency and effective use of resources. This requires EU regulations adjustments. Other partners can take a similar approach.
This approach is not about charity, but about mutual interest, global responsibility and commitment to principles set out in the Paris Agreement. The fund can be placed in regional banks in Africa, preferably import and export banks with proven track record of high leverage ratios.
A climate trade transition is underway with or without Africa input. If African economies flourish in this new era, they need tools to support adaptation and capture the opportunities presented by transitions that benefit African countries on paper. But that requires authentic, transformational efforts. Trade decarbonisation funds are not merely financial mechanisms, they are strategic needs.
