Border Carbon Adjustment and Inequality: Distributional Equity Concerns About the EU CBAM's Impacts in South Africa

Sammanfattning: Border carbon adjustment (BCA) policies are increasingly discussed as an instrument to avoid carbon leakage; however, their social implications are not well understood. Nevertheless, the EU introduced its CBAM, which will take effect in 2026. After showing that distributional impacts in exporting countries were not considered in the policy process, I examine the potential effects in South Africa, a country with sizable EU exports and already severe inequality and poverty levels. This thesis aims to explicate the underlying mechanisms through which regressive impacts could result from the policy and estimate their likelihood. By integrating theoretical knowledge and initial expert interviews, I identified two main routes to impact. First, export reductions could result in lay-offs in the targeted and associated industries. Second, regressive effects may follow from increases in the domestic carbon tax, motivated in part by the EU policy. Complemented by gathering empirical data, I mainly utilised interviews with various South African stakeholders (from government, industry, labour unions, and NGOs) to determine and investigate the links throughout the cause-and-effect chain between the CBAM implementation and higher inequalities. After examining the relevant conditions and moderating variables, I conclude that the policy as it was proposed by the EU Commission will likely exacerbate inequalities in South Africa. However, this is not easily transferable to other contexts. Considering relevant country-specific circumstances and the influence of policy design decisions, these impacts are neither universal nor unavoidable. Nonetheless, it is crucial that policymakers, both in the implementing and affected regions, are attentive to these mechanisms and potential outcomes. Targeted revenue recycling and redistribution to support low-income households and a just climate transition is likely able to avert adverse effects. Generally, future research should focus on equity implications of transnational climate policy to better understand the impacts on vulnerable communities and help resolve justice-environment trade-offs.