Implementation of the EU's CBAM under the WTO Rules: Process, Relations, Responses

Abstract

The European Union (EU), a global leader in carbon reduction measures, formally adopted its proposed Carbon Border Adjustment Mechanism (CBAM) in April 2023. However, it may not comply with existing WTO rules due to its design flaw. Thus, it may be viewed as a new trade barrier, which may result serious legal issues and trade disputes regarding the compatibility of CBAM with the trade rules of the General Agreement on Tariffs and Trade (GATT) under the World Trade Organization (WTO). In practice, however, the adoption and implement of CBAM has not been prevented by these conflicts. Therefore, this article attempts to explore this contradiction and evaluate the impact of CBAM on WTO rules. Eventually, this article concludes that CBAM as an attempt to put forward environmentally friendly trade rules may promote updating WTO rules under international consensus of carbon reduction. The focus of this article will be discussed by providing a systematic review of the process and content of CBAM, examining the relationship between the CBAM and WTO rules and analysing the responses to CBAM of other countries.