Morocco faces crucial crossroad as EU's carbon border adjustment mechanism nears entry into force

In a recent report, the Policy Center for the New South unveils how Morocco can mitigate the impact of the  European Union’s Carbon Border Adjustment Mechanism (CBAM) on its economy, to unlock new opportunities for the kingdom’s green transformation.

In a bid to combat climate change and tackle carbon leakage, the CBAM  has taken center stage as a pivotal policy tool.

This mechanism, designed to impose a price on carbon emissions embedded in select imported goods, has far-reaching implications for economies worldwide, with Morocco poised to navigate a potential sea of challenges and opportunities.

As the CBAM evolves, Morocco’s economy finds itself at a critical juncture, confronting multifaceted hurdles that demand strategic foresight and decisive action.

The challenges that lie ahead for Morocco are manifold, with potential ramifications spanning costs, competitiveness, compliance requirements, supply chain adjustments, and heightened risk exposure.

As the country’s industries adapt to the new regulatory landscape, concerns arise about potential cost burdens and the need to maintain competitiveness in the global market.

Nevertheless, amid these challenges, glimmers of hope emerge as the brief illuminates a range of opportunities for Morocco to embrace.

To capitalize on the potential advantages of CBAM, experts recommend implementing targeted policies, reinforcing the regulatory framework, fostering capacity-building initiatives, and promoting international cooperation.

For Morocco, the looming CBAM transition period demands a thorough understanding of the mechanism’s intricacies and the proactive pursuit of strategies.

By seizing opportunities and addressing challenges head-on, Morocco stands poised to chart a course toward a greener, more resilient future, navigating the transformative policy landscape with poise and determination.

“The first step for Morocco should be to review the list of goods traded with EU importers to identify precisely and quantitatively those that fall within the scope of the EU’s CBAM regime,” said the report.

This comprehensive examination would enable the identification of the specific industries and goods most likely to be impacted by the CBAM.

This assessment will highlight financial significance areas and allow key stakeholders along the value chain to coordinate compliance measures.

“Morocco could explore the option of implementing its own carbon-pricing mechanisms that are rigorous, objectively monitored, and recognized as equivalent by EU partners. By demonstrating its commitment to reducing carbon emissions, Morocco can potentially avoid additional taxes through the CBAM and can establish itself as a responsible trading partner,” suggests the study.

Policymakers should continue to encourage the development of renewable energy sources, both to meet domestic energy needs and to position the country as a major exporter of renewable energy, effectively mitigating the carbon footprint associated with industrial production and the economy as a whole.

At the same time, it is critical to underline that the energy transition must be based on equity principles.

Morocco, as a developing country, faces the difficult issue of harmonizing its socioeconomic development aspirations with the need for decarbonization, according to the research.