Environmental Effects of AFCFTA
The African Continental Free Trade Agreement (AFCTA), which was entered into force in May 2019, is the world’s largest free trade area with a combined Gross Domestic Product (GDP) valued at 2.5 US trillion dollars. The primary objectives of this agreement are to create a single market, deepen the continent’s economic integration, achieve market liberalization, allow the movement of capital and people, and foster investment. In sum, the implementation of the agreement aims to achieve sustainable and inclusive socio-economic development.
Environment protection is one of the vital concerns for trade policymakers since it helps ensure the sustainability of a country’s economic growth. Hence, trade and environment share common grounds and need to be consulted before policy formulation. Although the African continent holds the lowest records for carbon emissions, its Greenhouse Gas (GHG) emissions are not negligible. They show signs of a significant impact on both the environment and, thereby, the trade. This study sets out to answer a specific question: can AfCFTA reduce pollution? It also aims to estimate the impact of trade liberalization on the African continent and other air pollutants.
The GTAP database version 10a and our customized extension of the standard GTAP model are the primary data and methodology used in this paper. We use this extension for emissions accounting to examine the impact of trade policy on emissions. Furthermore, we include other types of emissions and pollutants, which is a novel contribution of our model extension within the GTAP framework.
As we use this model to understand trade liberalization and environmental pollution, it is evident that this liberalization increases emissions, especially in countries like Ethiopia, Cameroon, and Burkina Faso. An increase in trade creates the need for an increased transportation movement, causing the emission levels to soar. About 29% of total imports in Kenya are attributable to intermediate products, which will become cheaper as tariffs are removed, which will increase production activity. The increase in economic activity leads to a rise in emissions. By contrast, many South-Central African Nations experience a reduction in emissions due to geographical differences since they are not transit countries with big ports.
In the end, we notice through the CGE and GTAP model for the AfCFTA member countries that the implementation of this free trade agreement has induced an assortment of effects, and these results have been heterogeneous across the continent due to various factors. The analysis indicates that most African nations experience increased trade and GDP (except for Senegal and Mauritius) and significant employment creation effects. Concerning the environmental impacts, CO2 emissions are expected to increase marginally, while non-CO2 greenhouse gas (GHG) emissions increase significantly.
The policy inferences from this study are that it is crucial to do a comprehensive environmental impact assessment on Free Trade Agreements. The same trade policies that may lead to a significant increase in non-CO2 emissions may result in marginal changes in CO2 emissions. The overall impact of trade on GHGs is not apparent. Therefore, in addition to the trade integration, AfCFTA member countries should support each other in reducing GHG emissions by investing in renewable energy infrastructure and working on environmentally sustainable practices and incentives. Since a reduction in GHGs is essential both in the context of global warming and free trade.