THE EU CARBON BORDER ADJUSTMENT MECHANISM (CBAM) AND ALGERIA’S HYDROCARBON EXPORTS: LEGAL FRAMEWORK AND ECONOMIC ADAPTATION STRATEGIES

Abstract

The European Union's carbon border adjustment system was implemented in October 2023. This mechanism influenced international commerce by linking climate objectives to trade restrictions and levying taxes primarily on carbon-intensive and high-emission imports. The objective of this approach was to avert carbon leakage and to guarantee equitable competition. This mechanism poses significant challenges for developing nations dependent on fossil fuel exports, like Algeria, where exports to the EU primarily consist of fossil fuels and carbon-intensive goods, potentially reducing its revenue and market access opportunities. This study employs a descriptive and analytical methodology to delineate the legal framework of the carbon border adjustment mechanism, assess its compliance with World Trade Organization regulations, and evaluate its economic implications for Algeria. The data indicate that the mechanism has a negligible impact on Algeria's economy, accounting for approximately 0.2% of the nation's GDP. The mechanism's impact is concentrated in the fertilizer, steel, and iron sectors, jeopardizing the nation's competitiveness and employment opportunities. Furthermore, the carbon tax exacerbates the existing structural vulnerabilities within the Algerian economy. The vulnerabilities include overdependence on hydrocarbons, high carbon intensity, insufficient use of renewable energy, and the absence of a regional carbon pricing mechanism.