CBAM's Burden on Africa & Latin America

Meta Description: Research from the University of Benin quantifies CBAM's fiscal impact on Nigeria, South Africa, Brazil and Chile, and finds 89-100% of CBAM revenue flows to the EU, not green transition.

Target Keywords: CBAM Africa, CBAM Nigeria, CBAM South Africa, CBAM developing countries fiscal impact, CBAM revenue displacement

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Read From the South, CBAM Is a Fiscal Shock

"Read from the south, the picture changes shape. For Nigeria, South Africa, Brazil, and Chile — CBAM is not primarily an environmental instrument. It is a fiscal shock. The levy does not flow into green transition funds for these countries; it flows into the budgets of EU Member States." Faloore Samuel Ayomide, University of Benin (April 2026)

The paper applies a Differential Carbon Cost Incidence (DCCI) framework to four economies, Nigeria, South Africa, Brazil and Chile, across the full 2026–2034 phase-in, with Monte Carlo simulation over 600 EU ETS price paths.

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The Four Study Countries at a Glance

Country	Steel intensity (kgCO₂/$)	EU benchmark	Domestic carbon price	2034 levy (central: $150/t)
Nigeria	1.45 (9x EU)	0.16	$0	$84M/yr
South Africa	0.91 (5.7x EU)	0.16	$8/t	$360M/yr
Brazil	0.37	0.16	$0 (SBCE coming)	$206M/yr
Chile	0.13 (below EU)	0.16	$5/t	$3.7M/yr

Note on the benchmark: the "EU benchmark" (0.16 kgCO₂/$) is the JRC export-intensity benchmark used by the study — emissions per dollar of exports — not the CBAM product benchmark used for free-allocation deductions (e.g., steel BF-BOF = 1.370 tCO₂e/t).

South Africa carries the largest single exposure. Its iron and steel exports to the EU totalled $2.8 billion in 2024. Nigeria has the highest unit exposure: zero domestic carbon price, 9x-emission-intensity steel, and nascent MRV infrastructure means it will be assessed at default (maximum-penalty) values, overstating its true levy by an estimated 20–35%.

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The Revenue Displacement Effect

The paper's signature finding: CBAM revenue flows to the EU, not to green transition in the exporting country.

Country	Revenue displacement
Nigeria (P_dom = $0)	100%
South Africa ($8/t vs $65–85/t exposure)	89–91%
Overall	89–100% of CBAM-eligible revenue flows to EU Member States

"Revenue displacement is near-total for all four study countries, constituting a structural transfer of carbon rent from Southern industrial exporters to Northern fiscal authorities — a flow with no precedent in multilateral climate finance architecture." Faloore Samuel Ayomide, University of Benin (April 2026)

The European Commission estimates CBAM revenues will reach €9.1 billion annually by 2030, directed toward retiring NextGenerationEU borrowing, not financing green transition in exporting countries.

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Monte Carlo: The Uncertainty That Belongs on Sovereign Risk Registers

The paper simulates 600 EU ETS price paths (Geometric Brownian Motion, drift 7.5%, volatility 22%, S0 = $72) for South Africa:

Statistic	Cumulative CBAM cost 2026–2034
P25	$782M
Median	$1,130M
P75	$1,627M
Tail (ETS → $150–200/t)	$2.5–3.0B

The acceleration is relentless: the CBAM factor climbs 10% (2028) → 22.5% (2029) → 48.5% (2030), with the sharpest relative single-year jump in 2028→2029 (10% → 22.5%, ×2.25): "a pace with no symmetrical domestic adjustment mechanism" for developing economies.

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Who Actually Bears the Cost

The paper finds the incidence is regressive within exporting countries:

• Costs concentrate in communities around integrated steelmaking (Vanderbijlpark, Newcastle, Vereeniging in South Africa)
• The burden lands on workers and export-dependent firms rather than shareholders who can exit through capacity rationalisation
• South Africa's carbon tax ($8/t) offsets only ~12% of potential exposure at a $65/t ETS price, and it isn't indexed to ETS movements, so the gap widens automatically

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Policy Implications

Recommendation	Detail
Revenue recycling	Set aside 25–30% of CBAM revenue attributable to developing-country imports for a dedicated Green Transition Fund, jointly managed
Differential phase-in	Extend the 22.5% threshold to 2031 and 48.5% to 2033 for qualifying developing economies (estimated added leakage <0.3% of EU ETS emissions)
MRV capacity support	EU-funded MRV infrastructure (via AFD, GIZ, etc.) would reduce default-value overpayments of 20–35%
WTO legitimacy	South Africa has considered a WTO complaint; Russia initiated a WTO case (May 2025) — the legitimacy contest is deepening

The Chile counter-example: with steel intensity (0.13) below the EU benchmark (0.16), Chile faces zero CBAM levy on steel, proof that the mechanism rewards low-carbon industrialisation.

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Key Takeaways

1. South Africa faces the largest absolute burden ($360M/yr by 2034 central scenario; $1.13B median cumulative)
2. Nigeria has the highest unit exposure: zero carbon price plus default values overstate its levy 20–35%
3. 89–100% of CBAM revenue displaces to the EU, a structural South-to-North transfer
4. The accelerating phase-in (10% → 22.5% → 48.5% by 2030) is a cliff developing economies can't absorb
5. Chile proves the reward structure: below-benchmark intensity means zero steel levy

Related: How CBAM Affects Your Exports | CBAM for Gulf/MENA Exporters | What Data Does Your EU Customer Need?

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Frequently Asked Questions

Does CBAM have an exemption for developing countries?

No. The October 2025 Omnibus amendments (Regulation 2025/2083) introduced a 50-tonne de minimis exempting ~90% of importers, but there is no developing-country exemption, a contested choice that has drawn formal WTO complaints from India and South Africa.

How much will South Africa pay?

Central scenario: $360M/yr by 2034; Monte Carlo median cumulative burden of $1.13B over 2026–2034 (IQR $782M–$1,627M).

Could CBAM actually help some countries?

Yes. Chile's below-benchmark steel intensity means zero CBAM levy on steel exports, showing the mechanism rewards decarbonised production routes.

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Regulation Status

Field	Value
Last reviewed	2026-08-01
Based on	Regulation (EU) 2023/956, Regulation (EU) 2025/2083 (Omnibus); University of Benin working paper (April 2026)
Applies to	CBAM permanent phase (2026+)

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References

• Faloore, S. A. (2026). The CBAM Burden: Fiscal Incidence and Export Revenue Risk. University of Benin, Carbon & Policy Finance Series, April 2026
• European Commission — CBAM
• World Bank — CBAM Exposure Indexes
• IMF — Macroeconomic exposure to the EU's CBAM (WP/25/182)
• EU Regulation 2023/956

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Last updated: August 2026 | Sources: Faloore (2026), University of Benin working paper; World Bank, IMF, UN Comtrade, Eurostat