EU Carbon Border Adjustments and WTO Law, Part Two

November 2021
ELR 10935
Joachim Englisch and Tatiana Falcão

In July 2021, the European Commission published a proposal for a Carbon Border Adjustment Mechanism (CBAM), part of a wider package of laws aimed at implementing the European Union (EU) Green Deal. The exact design of the CBAM is in flux, and priorities will have to be set. The chief concern is the compatibility of a CBAM with the law of the World Trade Organization (WTO). This Article explores whether and how the various CBAM design options under consideration can be reconciled with WTO requirements, focusing on a possible import border adjustment scheme. Last issue’s Part One described different instruments under consideration for the EU’s proposal; this part assesses the validity of these measures against the public policy exceptions contained in Article XX of the General Agreement on Tariffs and Trade, and concludes. The measure will require careful design, and even then there is legal uncertainty in the WTO jurisprudence. In any event, the EU will be required to intensify its efforts to reach out to other jurisdictions to come to globally coordinated solutions.

Joachim Englisch is Professor of Public Law and Tax Law at the University of Muenster (Germany). Tatiana Falcão was a Women in Research (WiRe) Fellow at the University of Muenster while writing this Article; she is also the Coordinator of Helsinki Principle 3 (carbon pricing) at the Coalition of Finance Ministers for Climate Action, and a Member of the United Nations Subcommittee on Environmental Taxation.

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