(Re)framing Responsibility? Assessing the Division of Burdens Under the EU Carbon Border Adjustment Mechanism

Abstract

As part of its highly anticipated Fit for 55 Package, in July 2021 the European Commission introduced a proposed regulation establishing a carbon border adjustment mechanism (CBAM). The CBAM places a price on carbon embedded in imports from certain energy-intensive sectors, and is intended to combat the risk of carbon leakage arising from the gap between EU climate ambitions and those of trading partners. In the words of Commission President von der Leyen, ‘carbon must have its price – because nature cannot pay the price anymore’. This raises the question, however, of who should pay it instead. From the EU’s perspective, the proposed CBAM reflects the EU’s ‘responsibility to continue playing a leading role in global climate action’ through reducing its global GHG footprint in line with the Paris Agreement. However, several newly industrialised countries have attacked the proposal as discriminatory and contrary to the principles of equity and common but differentiated responsibilities and respective capabilities (CBDRRC). Against this backdrop, this article assesses how the EU’s framing of responsibility fits within the applicable public international law framework. First the article examines how the EU’s faming of ‘responsibility’ fits within the law of state jurisdiction, which conditions regulators’ competence to place burdens on actors beyond their territory. It then turns to the division of responsibilities under the UN climate agreements, with a particular focus on opportunities for incorporating a more equitable differentiation of burdens in line with CBDRRC. Such differentiation would only be feasible for regulators if it could pass the obstacles posed by the law of the World Trade Organisation (WTO). Unpacking the challenges and opportunities, it is argued that these hurdles need not be insurmountable, though much would depend on the willingness of both the EU and the WTO dispute settlement body to accommodate competing trade and environmental interests.