Working Paper: CEPR ID: DP17629
Authors: Ilaria Espa; Joseph Francois; Harro Van Asselt
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.
Keywords: carbon leakage; CBAM; border carbon taxes; trade; climate
JEL Codes: F18; Q56
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| CBAM (F33) | prevent carbon leakage (F64) |
| CBAM (F33) | competitive equality (L13) |
| CBAM (F33) | influence third countries' climate policies (F64) |
| perception of CBAM (D91) | legal viability of CBAM (K35) |