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The EU Proposal for a Carbon Border Adjustment Mechanism (CBAM): An Analysis under WTO and Climate Change Law

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  • Espa, Ilaria
  • Francois, Joseph
  • van Asselt, Harro

Abstract

This paper scrutinizes the European Union’s proposal for a carbon border adjustment mechanism (CBAM) under the rules of the World Trade Organization (WTO) and climate change law. It first examines the logic behind the CBAM as a border carbon adjustment measure, having due regard to the complex interplay between its stated carbon leakage rationale and its fair competition mechanics. It then dissects the main anticipated features of the CBAM and discusses how they may fare under both WTO law and climate change law. Finally, it identifies the most critical proposed design elements from a legal perspective and discusses possible alternatives or variations that could better align the CBAM with its climate change purpose.

Suggested Citation

  • Espa, Ilaria & Francois, Joseph & van Asselt, Harro, 2022. "The EU Proposal for a Carbon Border Adjustment Mechanism (CBAM): An Analysis under WTO and Climate Change Law," CEPR Discussion Papers 17629, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:17629
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    Cited by:

    1. is not listed on IDEAS
    2. Neuhoff, Karsten & Sato, Misato & Ballesteros, Fernanda & Böhringer, Christoph & Borghesi, Simone & Cosbey, Aaron & Das, Katsuri & Ismer, Roland & Johnston, Angus & Linares, Pedro & Matikainen, Sini &, 2025. "Industrial decarbonisation in a fragmented world: an effective carbon price with a "climate contribution"," EconStor Research Reports 311220, ZBW - Leibniz Information Centre for Economics.
    3. Neuhoff, Karsten & Sato, Misato & Ballesteros, Fernanda & Böhringer, Christoph & Borghesi, Simone & Cosbey, Aaron & Deletombe, Thibault & Felsmann, Balázs & Ismer, Roland & Johnston, Angus & Linares, , 2026. "Industrial decarbonization in a fragmented world: Carbon pricing with border adjustments using standardized values," Energy Policy, Elsevier, vol. 216(C).
    4. Lydgate, Emily & Winters, L. Alan, 2025. "The UK's border carbon leakage trilemma," Energy Policy, Elsevier, vol. 198(C).
    5. Sheldon, Ian M. & McCorriston, Steve, 2023. "Vertical Markets, Carbon Border Tax Adjustments and ‘Dirty Inputs’," 2023 Annual Meeting, July 23-25, Washington D.C. 335697, Agricultural and Applied Economics Association.
    6. Simon Otto, 2025. "The external impact of EU climate policy: political responses to the EU’s carbon border adjustment mechanism," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 25(2), pages 177-194, June.
    7. repec:ags:aaea22:335697 is not listed on IDEAS

    More about this item

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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