THE FAIRNESS CONTROVERSY OVER CBAM AND ITS POLICY IMPLICATIONS

Abstract

The idea of a carbon border adjustment mechanism (CBAM) has aroused fervent discussion recently. It is proposed as an effective tool to address the competitiveness loss and carbon leakage induced by unilateral carbon policies. Yet on the brink of this policy being rolled out, its ethical justification seems insufficiently clarified. CBAM implementation would provoke a huge fairness controversy. This paper illustrates the main ethical challenges impeding CBAM’s fairness perception. Two stand out in particular: The first is the lack of a global consensus on appropriate climate equity principles. This means that there is no basis for determining the fairness of CBAM’s burden shifting impact. The second is that CBAM is likely to undermine the procedural justice of the current quantity-oriented responsibility distribution regime under the Paris Agreement. We conclude that CBAM is not well-suited for solving the free-rider problem of the current climate change mitigation policies and emphasize that incentivizing innovation is key for an ambitious mitigation strategy.