In terms of absolute embedded CO2 emissions in exports to the EU, we found the Russian Federation is the most exposed compared to all other countries. The U.S. follows well behind in rank 2, and ranks 3 through 7 are occupied by oil-producing developing economies. China follows only in rank 8 and features a more diverse portfolio, with its top three emission exports originating from chemicals, pharmaceuticals and aluminum.
What does this mean for policymakers? Africa will play a crucial role in the development of the hydrogen economy, so it is in the EU’s very own interest not to jeopardize existing trade relations by applying the strict logic of CBAM. A functioning hydrogen economy is a necessary component of a complete European renewable energy transition, but as the EU has itself acknowledged, domestic production won’t be enough to satisfy the expected hydrogen demand. Africa has an abundant potential for producing cheap green hydrogen through solar and wind energy, and the development of an African hydrogen economy was declared as a primary aim of the EU Africa strategy announced earlier this year. It should be very clear that this would result in the EU being strongly dependent on Africa. The critical risk factors in this dependency will be rather institutional. Developing an African hydrogen economy would require a focus on stabilizing the continent politically and improving living conditions. A functioning hydrogen economy in turn will essentially contribute to these aims. Solving this chicken-and-egg puzzle will be the key to success for the EU energy transition.