South Africa’s Export Engine at Risk as Biggest Markets go Clean

Johannesburg, Monday 9 June 2025: South Africa’s trade-oriented economy faces mounting risks as companies decarbonise supply chains and countries begin to impose penalties on carbon-intensive imports.

A new report from the Net Zero Tracker, Carbon Competitiveness: South Africa at the Net Zero–Trade Nexus, finds that the country’s coal-dependent power grid — which drives up embodied CO2 emissions (1) — makes it uniquely vulnerable, threatening billions in export revenue and hundreds of thousands of jobs.

Key findings:

• 78% of South Africa’s $135 billion in exports go to countries with net zero targets — supporting 1.2 million jobs, or 7% of national employment.

• For exporters from countries like South Africa, which lack credible carbon pricing, 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 Carbon Border Adjustment Mechanisms (CBAMs),(2) such as the EU (fully active from 2026) and UK (fully active from 2027).

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

• Across all major export sectors, other country producers exist with substantially lower embodied emissions. South Africa’s Basic Metals sector has nearly twice the embodied CO2 emissions of its next most carbon-intensive counterpart; across all top Agricultural export categories and markets, alternative producers exist with at least three times lower embodied emissions

• In South Africa’s 10 largest export markets, at least 323 multinational companies with a combined $11 trillion in revenue have Scope 3 (supply chain) net zero targets, placing pressure on suppliers to slash the embodied emissions from their exports. (3)

• Accelerated decarbonisation of its grid is the single most impactful step South Africa can take to remain export competitive and cut trade-exposed emissions.

Despite these risks, the report outlines a path forward. With world-leading renewable resources, critical minerals, and trade access to rapidly decarbonising markets (the EU) and electro states (China), South Africa is well-positioned to become a key supplier of low-emission goods.

To unlock South Africa’s potential, developed countries should match climate-related trade measures like CBAMs with enhanced finance and capacity-building support — including full delivery of South Africa’s $12 billion Just Energy Transition Partnership (JETP).

John Lang, Net Zero Tracker Lead (The Energy and Climate Intelligence Unit), said:

“Unless South Africa aligns near-term energy and industrial choices with its long-term net zero goal, it risks losing export markets, stalling investment, and deepening inequality. Rich countries should lean in — through finance and market access — because global decarbonisation hinges on emerging economies like South Africa.”

“South Africa has the tools to pivot — proven renewables potential, critical minerals, and seats at global tables like the G20 and BRICS. With a recalcitrant US trading leadership for tariffs, South Africa faces a choice: climate-proof its exports or stay exposed to rising risks from more lucrative markets, including the EU and China.”

Pivot Point: As US Tariffs Bite, Climate-Aligned Markets Beckon for South Africa

Amid rising US tariffs, the report highlights growing pressure — and opportunity — across South Africa’s key trading partners:

• South Africa exported $31.1 billion in goods and services to China, its largest export market, in 2023. 98% from sectors where South Africa’s CO2 emissions intensity(4) exceeds China’s.

• The EU, which accounts for 18% of South Africa’s exports and 14% of fossil fuel exports, is phasing out coal — with demand set to drop by 20% by 2027 (IEA). The EU’s CBAM tariffs, fully active from 2026, will drive up the costs of carbon-intensive goods, particularly metals and minerals.

• India, South Africa’s third-largest export destination, is a major coal importer but is rapidly scaling up renewables, targeting at least 500 GW of non-fossil power capacity by 2030 (up from 220 GW today) and introducing domestic carbon pricing. With 38% of South Africa’s fossil fuel mining exports going to India, this transition threatens long-term export value.

The report points to a likely shift away from the US as a trade partner, driven by the Trump administration’s average 31% tariffs on South African imports, its anti-climate stance, and strained diplomatic ties. With less than 9% of exports going to the US, South Africa is better aligned with larger climate-focused markets like the EU and China.

To protect and expand its exports in key net zero-aligned markets, the report recommends that South Africa should, with more international support, accelerate grid decarbonisation, phase out coal more rapidly, and position itself as a strategic supplier in low-emission value chains — steps that could be formalised through its updated Nationally Determined Contribution (NDC), due to the UN in September.

Thomas Hale, Professor of Global Public Policy, the Blavatnik School, University of Oxford, said:

“South Africa’s enormous renewable potential creates a generational opportunity to transition its exports from a carbon-intensive liability into a clean machine for growth and jobs. This potential also means that the EU, UK, and other countries imposing carbon tariffs have not only a moral responsibility, but also a profitable opportunity, to invest in South Africa’s transition.”

Sectors: Agriculture, Automotives, and Basic Metals at Risk

The report identifies three key sectors facing heightened exposure as trading partners’ commitments to reduce carbon emissions from their supply chains (known as ‘Scope 3’ targets), stimulates demand for low-carbon suppliers over high-carbon ones:

Agriculture - Why Global Food Giants May Look Beyond South Africa

• Supports 22% of South Africa’s export-linked jobs, despite making up just 5% of export value.

• The sector is also one of the most emissions-intensive globally. South African agricultural goods emit 1,128 tonnes of CO₂ per $1 million output — more than triple key competitors like Spain and Brazil.

• Several global food manufacturers with significant supply chains in South Africa have net zero targets that include Scope 3 (supply chain) emissions, aiming to reduce the embodied emissions of their products, including:

  • ABInBev, PepsiCo and Coca-Cola — full Scope 3 commitments.

  • Nestlé and Unilever — partial Scope 3 commitments.

Automotive -— Why Carbon Intensity Could Cost South Africa’s Car Exports

• South Africa’s third-largest sector by export value, 65% of vehicle exports go to markets with active or incoming CBAMs, including the EU and UK.

• Local vehicle production ranks among the most emissions-intensive in the world — second only to India.

• Several global auto manufacturers with supply chains in South Africa have climate targets that include Scope 3 emissions, including:

  • BMW, Toyota and Isuzu — full Scope 3 net zero commitments.

  • Volkswagen, Nissan and Mercedes-Benz — partial Scope 3 commitments.

Basic Metals — Why High Emissions Could Price South Africa Out of Global Markets

• Make up 32% of exports and 14% of GDP.

• Produced at twice the emissions intensity of the next most carbon-heavy peer.

• Over 80% of these exports go to net zero-aligned countries, and $16.7 billion (30%) in exports and 23,000 jobs are already exposed to CBAM tariffs either active or incoming.

The path forward: aligning energy and trade

South Africa’s export competitiveness depends on grid decarbonisation — the fastest way to reduce embedded emissions, future-proof supply chains, and maintain market access.

South Africa’s wind industry is an example of how clean energy technologies are reshaping its electricity system — boosting decarbonisation, energy security and economic growth.

• A contracted capacity of 3,897 MW of wind power has been installed across 40 operational utility-scale wind farms (as of April 2025).

• More than 2.5 GW of new wind capacity is currently under construction, with 53 GW in the pipeline.

• South Africa’s draft Integrated Resource Plan (IRP) 2025 sets out an ambitious trajectory for wind energy, targeting up to 70 GW of installed capacity by 2050.

Wangari Muchiri, Africa Lead, The Global Wind Energy Council, said:

“South Africa’s wind energy sector has quickly evolved into a cornerstone of the national electricity mix, delivering clean, reliable power and drawing strong investor interest. With a robust pipeline and long-term policy ambition, wind energy is poised to play a transformative role in decarbonising the energy system, boosting energy security, and driving industrial and economic development.”

As president of the G20 in 2025, South Africa can positively influence global climate and trade policy. And as one of the most trade-exposed emerging economies, it can help chart a just transition that balances climate ambition with industrial competitiveness. Its active role in BRICS — which recently issued recommendations that prioritised climate-related trade impacts — reflects growing momentum among emerging economies to shape, not just respond to, shifting global trade rules. By leveraging its leadership positions, South Africa can help steer a clean industrialisation agenda for the Global South.

Footnotes:

(1) Embodied CO2 emissions refer to the carbon dioxide generated during the production of a good or service — including upstream emissions from the extraction and transport of raw materials, and fuel combustion for electricity and heat used in manufacturing.

(2) CBAM policies aim to ‘level the playing field’ so that domestic and imported goods pay an equivalent price for carbon emissions.

(3) Scope 3 emissions are indirect emissions that occur in its value chain, both upstream (suppliers) and downstream (customers) — they often account for the majority of a company’s total carbon footprint.

(4) Full upstream supply chain CO2 emissions, measured in tonnes of carbon dioxide per million dollars of output.

About the analysis:

This report draws from the Net Zero Tracker’s unique, global dataset of climate commitments at national, subnational, and company levels, and overlays this on a new database combining (i) global trade flows, (ii) employment, and (iii) emissions data to offer new insights into the risks and opportunities for South Africa’s trade, mainly exports. The NZT database compiles data on the net zero targets of more than 4,000 global entities, including all nations that are parties to the UNFCCC, every region in the largest 25 emitting nations, all cities with more than 500,000 inhabitants, and the world's largest 2,000 publicly listed companies by annual revenue.

About The Energy and Climate Intelligence Unit (ECIU):

The Energy and Climate Intelligence Unit (ECIU) is a non-profit organisation that supports informed debate on energy and climate change issues in the UK.

The ECIU supports journalists, parliamentarians and other communicators with accurate and accessible briefings on key issues, and works with individuals and organisations that have interesting stories to tell, helping them connect to the national conversation.

About The Net Zero Tracker (NZT):

The Net Zero Tracker is the most comprehensive and up-to-date database of public net zero commitments made by nations, states & regions, cities and major companies. It includes:

• all UNFCCC member states and a selected number of territories;

• subnational states & regions in the 25 largest emitting countries;

• all cities around the world with populations over 500,000;

• publicly listed companies that were listed in the Forbes Global 2000 in 2020;

• 100 of the world’s largest private companies.

Using a combination of automated web data-scraping and manual searching by volunteer data analysts working in a range of languages, the NZT gathers and collates data on the status of net zero targets and robustness parameters across 4000+ entities. Parameters include the existence of interim targets, intentions regarding offsetting, the existence of a published plan, and what the target covers in terms of GHGs and emission scopes.

NZT is an independent research consortium, comprising The Energy & Climate Intelligence Unit (ECIU); Data-Driven EnviroLab (UNC); NewClimate Institute; and Oxford Net Zero.