The EU’s Carbon Border Adjustment Mechanism (CBAM)

Perspectives from International Trade and Climate Change Law

In 2023, the EU started phasing-in its controversial ‘Carbon Border Adjustment Mechanism’ (CBAM), the stated objective of which is to ‘to prevent the risk of carbon leakage, thereby reducing global carbon emissions and supporting the goals of the Paris Agreement’. In alleged pursuance of this objective, the CBAM imposes a carbon price on emissions ‘embodied’ in imports from third countries that matches the carbon price imposed on corresponding EU products under the EU’s Emission Trading System (ETS). Through this carbon price equalization, the CBAM is expected to tackle the risk of carbon leakage—namely, that increasing carbon prices in the EU would simply result in a shifting of emissions abroad through European companies strategically relocating to jurisdictions with no or less demanding carbon constraints in place, or/and increased EU imports of carbon-intensive goods from these countries.

Ever since the CBAM was first proposed, its lawfulness and broader legitimacy have been fiercely contentious in academic and policymaking circles. Especially in its early stages, the debate tended to focus on questions of the CBAM’s compatibility with international trade law, and on its relationship with questions of fair trade and distributive justice. However, more recently, further questions have been raised as to the CBAM’s alignment with international climate change law—most notably, with the core principle of ‘common but differentiated responsibilities and respective capabilities’. This relatively recent perspective casts a new light on the CBAM’s impact on the economies of third countries, raising more specific questions from the vantage point of climate fairness or justice.

This webinar of the Max Planck Law Initiative ‘Law, Climate Change, and the Environment‘ aims at holistically unpacking the complex debates surrounding the CBAM, addressing its multifaceted legal, economic, and political significance.

Gracia Marín Durán is Professor of International Economic Law at University College London, where she is also Vice Dean (International) in the Faculty of Laws and Co-Director of the Centre for Law and Environment. She has held permanent and visiting positions at the University of Edinburgh, the European University Institute, the University of Oxford, and the Geneva Graduate Institute. Further, she has worked on matters of international trade at the EU Delegation to South Africa and the WTO. Professor Marín Durán’s research and teaching specializes in international economic law, international environmental law, and on the interplay between them, particularly in the context of the EU’s external relations. She has provided legal advice on these matters to international organizations, governments, and non-governmental organizations.

Joost Pauwelyn is Professor of International Law at the Geneva Graduate Institute, where he is also Co-Director of the Centre for Trade and Economic Integration (CTEI). He has previously held permanent and visiting positions at Georgetown, Duke, Neuchâtel, Columbia, NYU, Stanford, and Harvard, and has practised international law in several capacities (including as legal adviser for the WTO Secretariat). Professor Pauwelyn has published widely on matters of public international law, international economic law, and the relationship between the two fields, and has received several prizes for his research in those areas. Since 2020, he serves as a Standing Arbitrator for the WTO’s Multi-Party Interim Appeal Arbitration Arrangement (MPIA).