CEPII, Recherche et Expertise sur l'economie mondiale
Greening the implementation of the African Continental Free Trade Area Agreement

Lionel Fontagné
Stephen Karingi
Simon Mevel
Cristina Mitaritonna
Yu Zheng

 Highlights :
  • While the AfCFTA negotiations have not yet dealt in depth with climate change and green transition issues, the establishment of a national carbon market is now on the agenda of many African countries.
  • According to simulations with the MIRAGE-Power model implementing the AfCFTA Agreement without adopting any climate policies in Africa would increase the continent’s emissions in 2045 by 0.3%.
  • The adoption of climate policies in line with African countries’ NDCs, in addition to implementing the AfCFTA Agreement, would enable a 25% decrease in GHG emissions by 2045, assuming a common carbon price in line with the IMF’s ICPF proposal for low-income countries.
  • Differentiated but coordinated efforts between African countries to reduce emissions through carbon pricing could bring the cost of abatement to US$ 19.00 per ton of carbon.

 Abstract :
The African Continental Free Trade Area (AfCFTA) Agreement aims to create a single market for goods and services, increase intra-Africa trade and promote sustainable socioeconomic development in Africa. African countries need to balance efforts to address these goals with the urgency of climate change. As of the 27th session of the Conference of Parties of the United Nations Framework Convention on Climate Change in 2022, most African countries had submitted their Nationally Determined Contributions (NDCs) to mitigate the impact of climate change. Establishing a carbon market is now on the policy agenda. This paper uses a dynamic general equilibrium model with different sources of energy (including renewable energy) and an in-depth presentation of greenhouse gas emissions to assess the economic and environmental impacts of implementing the AfCFTA Agreement and adopting various climate policies in Africa, including those NDCs and the International Monetary Fund’s proposal of carbon price floors. It shows that implementing the agreement and achieving Africa’s climate objectives are compatible. Continental coordination of emissions reduction among African countries proves most efficient for climate action.

 Keywords : International Trade | Climate Change | AfCFTA

 JEL : F13, F17, F18, Q56
CEPII Working Paper
N°2024-04, February 2024

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