EU Carbon Border Adjustment Mechanism: Legal Challenges and Relevance in Light of the Current Sanctions Regime

Abstract

Carbon Border Adjustment Mechanism (СBAM) is one of the European Union's Green Deal initiatives aimed at creating a “climate neutral” economy. The specific feature of this mechanism is the creation of additional costs when importing goods from non-EU countries, the production of which is associated with emissions of large amounts of greenhouse gases. The measure implies the reporting of carbon emissions amount and the sale of CBAM certificates depending on the amount of carbon emissions resulting from the production of imported goods. The author of the article analyses the dynamics of CBAM legal framework development as well as challenges that CBAM may face following its entry into force given the current trade restrictions introduced within the sanctions regime against Russia. The article also addresses challenges to CBAM in terms of its consistency with WTO law. The conclusion is made that new obligations for EU importers imposed by CBAM together with import bans and trade restrictions against the former major exporter of CBAM-covered goods to the EU would be very burdensome for EU importers. Furthermore, the compatibility of CBAM in its current form with WTO law non-discrimination standards is questionable; CBAM has been subject to criticism by the WTO members that are likely to be affected by the measure. This explains the recent shift of CBAM entry into force from January to October 2023 and could be a ground for further adjustment of CBAM rules.