The intersection between international trade law and international environmental law represents a whirlpool of colliding interests. On the one hand, there is the global imperative to mitigate the drivers of climate change and avert a crisis beyond human control. In this light, contemporary climate change mitigation policies focus on attaining ‘net-zero’ emissions by specific target dates and temperature trajectories linked to binding international agreements. On the other hand, a strong gravitational pull toward non-renewable sources of energy prevents a significant proportion of the global economy from implementing trade-based measures that penalise emissions-intensive technologies and production processes. These measures are primarily perceived as an existential threat to trade, commerce and economic development rather than an opportunity to decarbonise and transform the global economy into one that is circular and green.
Against this backdrop, the European Union (EU) remains on the verge of implementing a Carbon Border Adjustment Mechanism (CBAM) – a unilateral trade-based measure designed to complement the bloc’s domestic climate ambitions and equalise competitive conditions between imports and exports for certain emissions-intensive products within its internal market. Moreover, the EU Commission has claimed that the CBAM was designed to be compatible with various arms of international law. However, this assurance has done little to temper the international resentment towards unilateralism in trade policy. Instead, the CBAM’s design raises serious questions about the circumstances in which a state can lawfully implement unilateral measures with extraterritorial effects, which may inadvertently limit international trade and conflict with existing obligations under international law.
To this end, this dissertation critically analyses the legality of the proposed CBAM through the lens of international trade law and international environmental law. This analysis is premised on an intertextual interpretation of the international treaties annexed to the Agreement Establishing the World Trade Organisation (WTO) and an application of the corresponding jurisprudence to the CBAM’s proposed legal framework. Finally, as a measure with significant extraterritorial effects, this dissertation will conclude by analysing the international response to the CBAM and its implications on international trade.