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The EU Carbon Border Adjustment Mechanism: Implications for Morocco and Necessary Policy Adjustments

REMENA Policy Paper Series No.1

This document is based on the discussions of a workshop jointly organised by the Konrad-Adenauer-Stiftung's Regional Programme Energy Security and Climate Change Middle East and North Africa (KAS-REMENA) and the Istiqlal Group in the second chamber of the Moroccan Parliament on 7 February 2023. It presents the measure in question and outlines the expected impacts on the Moroccan economy and the adaptation measures needed to adapt to these new requirements.

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The EU Carbon Border Adjustment Mechanism:  Implications for Morocco and necessary policy adjustments.
The EU Carbon Border Adjustment Mechanism: Implications for Morocco and necessary policy adjustments.

The EU’s planned Carbon Border Adjustment Mechanism (CBAM), which was agreed upon by the EU 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 aimed at achieving the European goal of carbon-neutrality by 2050. The proposed EU policy is an attempt to mitigate carbon leakage by imposing a carbon tax on imports of goods from countries with less stringent climate policies than the EU. By taxing imported goods based on their embedded carbon emissions, the measure is thus supposed to level the playing field for EU firms and discourage non-EU producers from exporting, at a “competitive” advantage, carbon-intensive goods to the EU. 

While many details concerning CBAM are still being discussed, the implementation is envisaged in two phases, starting in October 2023 with a pilot phase in which a simplified CBAM would require only reporting obligations, followed by a full implementation from 2026 onwards, when the requirement to purchase certificates for carbon emissions will kick in. Initially, CBAM will apply to imports of iron and steel, aluminium, electricity, certain fertilisers, cement, and hydrogen. Decisions on a possible extension of the mechanism to other products, such as organic chemicals and polymers, are outstanding and expected to be taken before full implementation kicks in in 2026.

Experts agree that the implementation of CBAM will have wide-ranging implications for Morocco's economy. The EU is Morocco's largest trading partner, accounting for over half of its total trade and 65 per cent of its exports. Morocco exports mainly agricultural products, cars, textiles, aeronautics parts, fisheries, and phosphates to the EU. Expected effects of CBAM include potentially negative impacts on the competitiveness and volume of Moroccan exports to the EU, particularly in the sectors directly covered by CBAM (especially fertilizers at an initial stage). At the same time, CBAM could also offer an incentive for Morocco to accelerate its energy and environmental transition by encouraging investment in renewable energy, supporting the transition to use renewables-based energy in industry, and reducing greenhouse gas emissions.

It is thus incumbent upon Morocco to adapt to these new requirements and accelerate its decarbonisation efforts to avoid any disruptions in the economy. Given that CBAM needs to be viewed as an element of a larger package aiming at decarbonisation, Moroccan policymakers should re-evaluate existing decarbonisation strategies, particularly in sectors affected by CBAM, but also beyond. Existing strategies should be updated and recalibrated with a view towards new challenges posed by CBAM and towards an overall acceleration of decarbonisation efforts. The paper at hand provides response options and concrete policy recommendations in this regard.

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