Carbon Competitiveness: South Africa at the Net Zero–Trade Nexus

As countries ratchet up decarbonisation to meet their Paris Agreement commitments, the clean energy transition is redrawing the global trade map.

South Africa’s carbon-intensive export model faces mounting pressure in a global economy increasingly shaped by climate policy, clean energy industrial strategies, and cross-border carbon pricing. While the country has a formal net zero target for 2050, this sits uneasily alongside short-term energy choices that favour fossil fuel expansion and delay coal phase-out — undermining confidence in the country’s decarbonisation trajectory and exposing its carbon-intensive exports to growing international risk.

• Overall, 78% of South Africa’s exports — worth $135 billion — are sold to countries with net zero targets, supporting 1.2 million domestic jobs (or 7.5% of national employment in 2023).

• For exporters from countries without credible carbon pricing like South Africa, Carbon Border Adjustment Mechanisms (CBAMs) pose an expanding risk of reduced competitiveness, shrinking market access and potential job losses:

  • 422,000 South African jobs currently depend on exports to jurisdictions with active or incoming CBAMs, such as the EU's (fully active from 2026) and UK's (fully active from 2027).

  • 89,000 jobs are linked to other economies considering similar measures.

• China, South Africa’s largest trading partner, imported $31.1 billion in goods and services in 2023 — over 98% from sectors where the emissions intensity of South Africa’s production exceeds that of China. As China moves to price domestic carbon more systematically, these sectors are likely to face growing carbon scrutiny.

As climate policies like CBAMs gain traction, there’s a growing risk that Global South countries like South Africa are unfairly penalised — despite their low historical and per capita emissions. The BASIC group — Brazil, South Africa, India, and China — has criticised CBAMs as an ‘unfair shifting of responsibilities from developed to developing countries’, warning they could ‘aggravate the trust deficit amongst Parties.’ For developed countries, closing this trust gap and aligning trade with international equity requires honouring the Paris Agreement and ensuring unilateral measures like CBAMs are paired with financial, technical, and capacity support for rapidly developing economies like South Africa.

Meanwhile, multinational companies are accelerating supply chain decarbonisation — raising the economic stakes for countries that lag in cleaning up their grids and produce goods with high embodied emissions.

• In South Africa’s 10 largest export markets, 323 major companies — representing $11 trillion in annual revenues — have full value chain (Scope 3) net zero commitments, meaning South African firms in their supply chains will have to measure and reduce emissions or risk losing business.

• An additional 45 companies in those markets have full Scope 3 reduction targets, accounting for a further $1 trillion in annual revenues.

• As emissions become a metric of competitiveness, carbon intensity is fast emerging as a trade barrier, particularly for high-emission sectors.

South Africa’s key export industries face especially acute exposure:

• Mining and Basic Metals made up over 50% of South Africa’s export value in 2023, supporting 404,000 jobs.

• Its Basic Metals sector has nearly twice the embodied CO₂ emissions of its next most carbon-intensive peer country, accounting for 32% of exports and 14% of GDP. More than 80% of Basic Metals exports go to markets with net zero targets, and 30% — worth $16.7 billion and supporting 23,000 jobs — go to countries with active or incoming CBAMs.

• The automotive sector, South Africa’s third-largest exporter, is also at risk: 65% of its export value is exposed to CBAMs either active, incoming, or under discussion. South Africa’s embodied CO₂ emissions from auto manufacturing are the second highest in the world, and while existing CBAM schemes are currently focussed on raw materials their scope is expected to expand. South Africa should proactively mitigate this medium-term risk.

• In agriculture, South Africa faces growing competitive pressure from lower-emissions suppliers: Across all top agricultural export categories and destination markets, alternative producers exist with at least three times lower embodied emissions — and are poised to scale into those markets.

For South Africa, this is both a warning and an opportunity. With the second-highest carbon intensity of electricity generation among major economies (behind India) and high embodied emissions in goods, its exports will become more vulnerable. This has implications for jobs, inequality and tackling poverty in one of the world’s most unequal societies.

Yet South Africa also holds key advantages: world-class renewable energy resources, critical minerals essential to the global transition, and access to major trade and diplomatic frameworks, including the G20 and BRICS.

The country is a leading producer of platinum group metals, manganese, vanadium, and chromium — minerals critical to clean energy technologies, such as batteries, wind turbines and hydrogen fuel cells. The International Energy Agency (IEA) projects that the country will surpass its target of nearly 30 GW of total renewable capacity by 2030, as outlined in its Integrated Resource Plan (IRP). South Africa's Climate Change Act 2024 and Just Transition Framework provide a foundation for long-term, low-carbon, inclusive transformation. At the same time, the Electricity Regulation Amendment Act and revised Integrated Resource Plan mark a long-overdue positive shift in energy policy.

As the current US administration undermines the multilateral rules based system and the global trade landscape shifts beneath its feet, South Africa’s path forward is clear: pivot both geographically and strategically — from climate laggard to leader in net zero-aligned, trade-competitive growth.

But this path hinges on developed countries, especially those backing South Africa’s Just Energy Transition Partnership (JETP) — the UK, EU, Denmark, France, Germany, and the Netherlands — delivering on their $8+ billion commitment to support and accelerate the country’s clean energy transition.

To protect and grow its exports in key net-zero-aligned markets, South Africa should — with additional international support — accelerate grid decarbonisation, fast-track coal phase-out, and position itself as a strategic supplier in low-emission value chains. These steps could be formalised in its updated emissions-cutting Nationally Determined Contribution (NDC), due to the UN in September 2025.