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Africa and Europe Must Turn Tensions over Carbon Trading Into Climate Opportunity
As the global development and climate finance architecture crumbles beneath our feet, new geopolitical alliances are emerging—creating both opportunities and challenges for the developing world.
In Africa, this seismic shift comes at a time when calls for win-win partnerships are growing louder, particularly from younger generations who are more politically engaged and attuned to global dynamics.
Against this backdrop, the upcoming African Union–European Union Summit in Luanda comes at a pivotal moment. The stakes could not be higher. Green development and trade are expected to dominate discussions at a time when traditional aid flows are shrinking and donor priorities are being redefined by domestic politics and security concerns.
The traditional pillars of development cooperation are rapidly methamorphosing. Domestic politics and rising defense budgets in donor countries have dealt a major blow to development assistance, dramatically reshaping the global development and climate finance landscape and altering the trajectory of external financing to low-income African nations. Against this backdrop, the European Union’s Carbon Border Adjustment Mechanism (CBAM) is about to addd a new layer of complexity.
Europe’s carbon border shock
Just weeks after the Luanda summit, the EU plans to begin phasing in its Carbon Border Adjustment Mechanism (CBAM)—a levy on imports of carbon-intensive products such as steel, aluminum, cement, and fertilizers. Starting early next year, African exporters will feel the full impact of this new carbon tariff.
Supporters describe CBAM as a climate-friendly innovation that levels the playing field for European firms subject to stricter emissions rules. Critics, on the other hand, see it as a thinly-veiled form of green protectionism—potentially inconsistent with World Trade Organization rules, and indifferent to the development needs of poorer economies.
Many African leaders are likely to voice such concerns when they meet their European counterparts in Luanda. And they would not be wrong: applying CBAM to imports from Africa appears to contradict the summit’s stated objectives of partnership and shared prosperity.
But realism must trump rhetoric. Given today’s geopolitical climate and the EU’s determination to stay the course, African complaints alone will not reverse CBAM. Instead, the continent should focus on how to turn this fait accompli into a catalyst for innovation and opportunity.
Three paths forward
African countries affected by CBAM essentially face three options.
First, they can pursue a unilateral response, individually or collectively, potentially through domestic policy changes or reciprocal tariff and trade measures. This approach appears to be the weakest. Africa’s limited market power in Europe leaves it with few tools for leverage or reprisal.
Second, the African Union and the European Union could negotiate a cooperative framework—an AU–EU agreement on trade in carbon-intensive goods that mitigates CBAM’s negative effects while advancing shared climate and industrial goals. This would be a win-win scenario. For Europe, it would help ease global backlash and restore credibility as a genuine partner in sustainable development. For Africa, it would provide predictability, technical support, and the chance to secure preferential access for low-carbon exports.
Finally, a third—and perhaps most forward-looking—option would be to form or join a climate coalition of willing countries. Such a coalition would link carbon pricing, trade, and development in a mutually reinforcing framework that transcends old divides between “donors” and “recipients.”
The case for a climate coalition
This last idea is gaining traction. A diverse working group of economists, policymakers, and technical experts—of which I was part—recently proposed a new type of climate coalition in a flagship report by the Global Climate Policy Project at Harvard and MIT.
Under our proposal, member countries would:
- Commit to setting a price on industrial carbon emissions;
- Apply border adjustments to imports from non-members; and
- Provide technical and financial assistance to developing economies to help them decarbonize and join the coalition.
Under this proposal, developing economies would receive support for low-carbon technologies, climate finance, and institutional capacity building. For pragmatic reasons, the coalition would start with high-emission sectors—steel, cement, aluminum, and fertilizers—where carbon pricing already covers over 80 percent of global output.
For African nations, joining such a coalition could be transformative. Many already face challenges in implementing carbon-pricing systems—ranging from limited technical capacity and data gaps to political reluctance and weak incentives. A fair and inclusive coalition could help overcome these barriers while leveraging Africa’s comparative advantage in cleaner, renewable-based supply chains.
But success will hinge on governance. The coalition must ensure that developing countries are better off inside than outside, notably through a strong, fair, and inclusive governance framework, transparent decision-making, and access to climate finance. Only then can it foster genuine alignment between climate ambition and economic opportunity.
A moment for leadership
At the COP30 Leaders Summit last week, Brazil, the EU, China, Rwanda, Zambia and other countries endorsed a declaration on the “Open Coalition on Compliance Carbon Markets.” The AU and EU should seize this momentum—jointly championing a new model of cooperation that bridges the gap between climate action and development.
Europe’s credibility as Africa’s strategic partner depends on it. As China eliminates tariffs on African exports and Gulf economies ramp up green-investment partnerships across the continent, the EU cannot afford to be seen as punitive or unilateral in its climate policies.
For Africa, this is a moment to lead, not just react—to shape a new narrative that connects industrialization, trade, and climate resilience. Turning CBAM into an opportunity will require vision, coordination, and assertive diplomacy—but the payoff could be enormous: a fairer, greener, and more integrated global trading system.
The clock is ticking. The Luanda Summit should not become another missed opportunity. If Africa and Europe can rise above carbon tensions to forge a shared path forward, they will not only redefine their partnership, but they may also set a new standard for climate cooperation worldwide.
