The Carbon Border Adjustment Mechanism: Reconciling the Principles of Sustainability and Free Trade in the EU’s External Action?

The Carbon Border Adjustment Mechanism (CBAM) is key for the European Union’s (EU) climate action and trade policy. Yet, many criticize it as a disguised protectionist measure that violates the EU’s obligations under World Trade Organization (WTO) law. This Chapter proposes a different view. It claims that CBAM may be considered to conform with WTO law subject to certain conditions. CBAM should be understood as a regulation by which the EU contributes to reshaping WTO law that is currently undergoing a fundamental crisis. The Chapter argues that the European Treaties allow and even call upon the EU to engage in a balanced reshaping of WTO law. CBAM is a way by which the EU tests the waters how to reconcile various constitutional goals that it is obliged to follow in its external actions: to combat climate change by internalizing the costs for polluting the atmosphere in a coherent manner, while at the same time promoting free trade and respecting the positions of developing countries.