Rasim Huseynov
Managing Editor of Seamless Trade and International Trade Consultant at Tevolution Ltd
5 October 2023
I. Introduction
II. CBAM and Trade Law
III. CBAM and Climate Justice
IV. CBAM and Free Trade
V. Conclusions
VI. Bibliography
I. Introduction
The solution to environmental problems has long been anticipated through the use of various policy instruments[i]. The European Union was the first to introduce a unilateral Carbon Border Adjustment Mechanism (CBAM), aimed at avoiding carbon leakage. This mechanism seeks to prevent the relocation of carbon-polluting goods production to countries with less stringent carbon taxation rules. It thereby avoids incentives to move pollution abroad. Such movement would defeat the purpose of mitigation efforts and undermine the manufacturing efforts of more ambitious actors[ii]. Additionally, it aims to establish climate leadership and promote environmentally sound practices globally[iii].
In my essay, I will argue that CBAM represents the next step in utilising complex policy to facilitate climate change mitigation within established legal frameworks of trade and environment.
CBAM is reanimating the debate about the projection of Eurocentric power and agendas onto developing countries. Whether CBAM is a new attempt to exert Western control through the climate change narrative, with hidden aims of protectionism and attempts to repatriate industry, or trade compliant product of climate policy, it ignores strategic economic interests of developing countries. It has raised eyebrows, attracting criticism not only in the Global South but also in Western countries[iv]. This position, also predetermined by existing frameworks of international trade law and the complexities of the diverse aims of EU regulatory policies. It creates diplomatic and future strategic obstacles for gaining the support of developing countries in the global green transition and efforts in climate change mitigation. Exploring opportunities for developing countries to secure their fair share in the emerging global green economy remains a complex issue. It appears that this was not fully anticipated by EU industrial strategists as part of the new energy transition and industrial policy conundrum. Developing countries, on the other hand, don’t see the possibility of moving away from fossil fuels without clear guarantees of access to finance and technology.
In this context, understanding whether the CBAM is balanced, skilfully designed both tactically and strategically, and rationally developed to achieve its goals is crucial. While the CBAM was created with the EU's compliance with the Paris Agreement's Nationally Determined Contributions (NDCs) in mind, its design seems incongruent with the approaches of the Paris Agreement. The Paris Agreement increased tensions between trade and the environment, revealing a disconnect between the urgent planetary needs and the interfaces of trade law. It was designed narrowly and without adequate consideration of future concerns in the environmental, social, and governance (ESG) aspects of trade. These aspects are often viewed by WTO law more as trade barriers than as integral components of sustainable trade practices.
The key point of the essay is that environmental policy, to be efficient, must focus on its major objective and must be equitable. It cannot effectively and equally promote policies such as industrial, trade, or energy policy within an environmental framework aiming to resolve a narrow objective. By creating a multiples of objectives, it is inevitably dilutes and undermines the effectiveness of the policy.
Environmental policies that employ market tools, such as cap and trade, must not be imposed on sovereign developing states without considering their heterogeneous differences. The commoditisation and financialisaton of nature, and transforming environmental externalities into tradable tokens, are far from being the only or best options for resolving the pollution crisis. A combination of market and administrative tools is essential. This includes the reduction and recalibration of consumption from an individual to a collective level, and fostering a love and appreciation for nature and its resources. These elements cannot be separated. Legal rights to private property have granted excessively imbalanced protection to private ownership, at the cost of neglecting the rights of the commons.
Furthermore, the development agenda cannot be decoupled from the narrative of trade and environment, and it represents the red line from the point of view of developing countries. This view is consistent with the position of the WTO and does not represent a departure from the post-Second World War narrative of development. Recalibrating approaches in line with the sustainability agenda cannot ignore this radical incoherence. To start resonating, the development agenda itself needs to be recalibrated, in order to work for developing countries.
The design of the CBAM is pivotal in defining its underlying rationale. How do the economic interests implied and the environmental concerns declared weigh in this multi-purpose instrument? This leads to questions about how environmental claims are translated into actionable systems through implementation mechanisms. Additionally, it is crucial to consider whether the interests and concerns of developing countries are addressed, and if the chosen design aligns with the narrative of climate leadership.
Given the significant threat of climate change to humanity, the Carbon Border Adjustment Mechanism (CBAM) and its role warrant thorough examination.
The first section will outline the essence and framework of the Carbon Border Adjustment Mechanism (CBAM), and examine its legitimacy from the point of view of trade law, reflecting the aims of the policy and how it is balanced with the interests of developing world. In the second section, the focus shifts to the concept of climate justice, and whether the CBAM fits within the concepts of climate justice. The third section will analyse the 'level playing field' approach, the use of market instruments in climate change mitigation, and their effects on developing countries.
II. CBAM and Trade Law
Legal scrutiny of CBAM by the WTO raises several compatibility questions concerning the eligibility of environmental measures. Bodansky identified a number of characteristics for an environmental measure which can help reveal its legitimacy with trade law: whether it directly or indirectly affects trade, whether it is adopted unilaterally or multilaterally, whether it has extraterritorial implications, whether it is based on scientific evidence, and whether it targets the product itself or the process by which the product is produced[v]. While a comprehensive analysis of the legal framework for the Carbon Border Adjustment Mechanism (CBAM) is beyond the scope of this discussion, a brief examination of each section can reveal its specific vulnerabilities, particularly how they might impact developing countries.
Are concerns of carbon leakage genuine? The EU introduced the EU ETS, issuing tradable carbon credits to businesses responsible for the most carbon-intensive products or services[vi]. Carbon allowances issued to EU companies have served as a mechanism to mitigate imbalances imposed by higher costs on EU businesses and reducing the effects of carbon leakage[vii]. There is evidence of an increase in carbon leakage to developing countries through Global Value Chains (GVC)[viii]. Phasing out free carbon credits will inevitably exacerbate the problem.
CBAM directs its measures not only at products but also at the methods by which they are produced, classifying similar products through their harmonised tariff classification[ix]. Whether goods are produced through more environmentally harmful methods, affecting embedded carbon, determines the amount of carbon emissions and the resultant charges applied. For example, hydrogen produced through processes using renewable energy is treated differently from hydrogen produced using fossil fuels[x]. Additionally, selection and scope of EU ETS products not the same as for CBAM products. Although the specific tariff-like charge is not applied at the border, it is used to identify relevant imports and to notify importers of their obligation to acquire carbon credits, effectively moving the charge inland. If this measure is challenged as discriminatory, the EU can attempt to use an exception under Article XX, but it must meet the requirements of the preamble, known as the 'chapeau’[xi].
Normally, border tax adjustments like VAT and Excise are consumption-based and charged at the destination. This isn't entirely applicable to CBAM, where emissions calculations are based on installations at the origin[xii]. The 'applied technology' criterion within CBAM bases the charge on the actual production process in the country of origin, but imported products are charged as if produced using equivalent technology in the destination country. This means that the stricter standards of the destination country are applied to imports, mirroring the treatment of local low-standard goods but based on approaches of local EU ETS[xiii].
The EU's decision to adopt the 'applied technology' approach, despite potential litigation threats, indicates a strategic balancing act. By ensuring that foreign products are subject to the same environmental standards as local products, the EU aims to maintain fair competition while also pushing for global environmental standards. Bodansky maintains, that these types of approaches are consistent with the use of coercion as a defence mechanism in trade, suggesting that environmental measures in the context of trade should not shy away from similar strategies[xiv]. This weighs in favour of Pirlot’s argument that the CBAM, despite claiming to be a multi-purpose policy instrument, primarily serves as an instrument of climate leadership according to its legal design[xv].
CBAM is designed as a local charge, similar to the one that must be met by local EU companies with carbon reduction obligations under the EU ETS. It is not positioned as a measure directed at trade like an import duty, but rather as a local tax. However, it charges importing companies based on the principle of origin, specifically based on their installations. The same principle is applied in the EU ETS, where compliance with measurement and verification is required according to the EU ETS manual[xvi]. The design aims to fulfil national treatment obligations but remains vulnerable to Most Favoured Nation (MFN) approaches, as it differentiates between countries within the scope of the EU ETS and those with climate clauses in Free Trade Agreements. The function of this measure is to achieve environmental policy through coercion, which is not illegitimate from a trade law perspective, provided it is not carried out in a discriminatory or arbitrary manner and genuine. The charge in this instance is determined extraterritorially. The charge depends not only on the method of production and embedded carbon but also on the floating price of carbon in the EU ETS, averaged weekly for CBAM purposes . Although this may qualify the CBAM as a charge through the application of a broad interpretation of 'charge' under WTO law, it still has to be identifiable and there is no tradition for it to be variable. Its floating nature brings the CBAM into uncharted waters[xvii].
Awareness of potential retaliation is deeply ingrained into the CBAM's framework. However, the same level of consideration does not seem to apply to incorporating historical empathy and balancing the interests of developing countries. CBAM is meticulously designed to align with trade law tolerances. The CBAM could not be implemented without first gaining internal approval in the EU, considering broader aspects of energy and industrial policy. This approach may not be born out of naivety, but rather from an acknowledgement of the sobering realities of global geopolitical rivalries and a desire to retain pragmatic leverage in the critical minerals race[xviii]. Hence, the CBAM not only embodies the traditional, interwoven interests of EU Energy and Climate Policy but also encompasses an implicit industrial policy dimension. However, it does not directly incorporate the developmental interests of the Global South. The CBAM overlooks the question of how the fossil fuel-dependent and underfunded developing world will manage its transition. Instead, it is poised to impact exports and reduce access to sales revenue for these countries. The EU has decided to maintain flexibility regarding the future use of CBAM funds, choosing not to directly link them to the climate change challenges faced by developing countries, but to make them a part of their own resources[xix]. In this regard, CBAM is not only unilateral but also shows a lack of social solidarity with developing countries
WTO law does not set any requirements on the allocation of funds for environmental measures. Conversely, Article 9 of the Paris Climate Agreement requires the provision of financial aid for technology and green transition in developing countries[xx]. CBAM disregards the environmental principles of common but differentiated responsibilities (CBDR), a cornerstone of the Paris Climate Agreement[xxi] and principles of special but differential treatment in relation to developing countires applied in GATT[xxii]. Furthermore, The CBAM has not taken any considerations regarding how it will adjust for differences in carbon markets, nor does it allow more time for developing countries to prepare for the measure. Nevertheless, It does this indirectly through a lengthy transition period[xxiii].
It is important to recognise that the CBAM is unique and unprecedented in its scale and reach. It is rightly characterised by Kulovesi as highly debated, yet significantly abstract due to the absence of any live references[xxiv]. CBAM is an endeavour of diplomacy as much as a legal effort according to Pander Maat[xxv].
III. CBAM and Climate Justice
The consideration of climate justice in the CBAM extends beyond just moral, philosophical, or ethical reasons; it is also a practical matter. Whether the CBAM is workable or not depends partly on the history of relationships between the North and South, and the real capabilities of developing countries to meet the CBAM's requirements, both technically and financially. To assess the justice element of the CBAM, we need to consider if it targets the right persons, if it is balanced and can be efficiently allocated, and how it compensates any effects on the poor and disadvantaged. Furthermore, the credibility of the leadership narrative, the coherence of language and definitions, and the acceptability of these terms by all participants play crucial roles. It is important to recognise that the history of market-driven development, led by the WTO and other post-Bretton Woods financial organisations, has often exacerbated imbalances and inequality. This approach has left many developing countries grappling with chronic debt.[xxvi]. Climate inequality starkly shows that those most impacted by environmental exploitation are the countries facing direct environmental degradation and the global poor, who lack adequate protection against extreme weather events[xxvii].
The immediacy of environmental problems in developing countries is underscored by the challenges of adapting to climate change, especially given the increasing prevalence of extreme heat and climate disasters[xxviii]. These countries, grappling with acute underfunding, are often unable to assess and prepare climate adaptation plans and twenty of the least developed countries failed to present their plans due to financial constraints and bureaucratic complexities in climate finance[xxix]. This situation highlights a significant disconnect between the real capacities of developing countries and the demanding technical expectations of new policies.
Criticising the Carbon Border Adjustment Mechanism (CBAM) for being unjust at the COP28 Conference, the Representative of the Ministry of Foreign Affairs and Foreign Trade of Barbados, Kerry Simons, referred to the basic Aristotelian principle of equality and proportionality, which is lacking in CBAM[xxx]. Chang rightly noted that it is only fair to set the playing field in favour of developing countries, providing the same level of justice that is naturally expected in sports competitions[xxxi]. Apparently, the economic playing field of CBAM has taken precedence over an equitable environmental playing field.
Dora Correa, Deputy General of EU DG Trade, underlined how the EU is responding to the concerns of developing countries by financing the climate transition for Mozambique’s aluminium industry through the Aid for Trade fund[xxxii]. Although this is commendable and very good news for a country like Mozambique and the rest of the world, one may have to consider the developing countries' fatigue from the decades-long stigma of being seen as climate laggards, phenomena brilliantly described by Arturo Escobar. This includes the cultivated narrative and the notion that the 'benevolent (white) hand of the West will save the Earth”[xxxiii].
It is important to underline that the polluter pays principle, which is adopted by the EU as a main environmental principle according to Article 191(2) of the TFEU, even if not applied directly, governs EU climate law[xxxiv]. It is not contradictory to the principle of common but differentiated responsibility (CBDR); in fact, CBDR is based on the same foundational principle. This principle may often be misinterpreted as an act of charity, but it should not be. Although it incorporates elements of reason and goodwill from developed countries, this approach is grounded in real scientific realities and must be unconditionally upheld. It should be incorporated into any trade policy with an environmental aspect to make it less prone to rejection on the grounds of exemption. Additionally, policies that lack this essential element of justice may require supplementary measures to ensure not only legal but also equitable legitimacy. It still has to be borne in mind that there is no common agreement on how to approach the carbon emissions of the industrial North prior to 1990.
The inherent shortage of room for flexibility under WTO law for achieving distributional justice may trigger the necessity of creating a new framework. This framework would allow solutions within a new environmental law context. The WTO's ability to support developing countries is constrained by the complex nature of the law and the need for scrutinising environmental claims. There is an obvious need for more flexibility in the broader interpretation of enabling clauses[xxxv]. This would allow the EU and other players to provide special but differential treatment for new measures within the existing framework. Carbon pollution is a planetary problem, and the intellectual property approach to green technologies may need a modern revamp to adopt the perspective of public goods.
An obvious disadvantage of the Carbon Border Adjustment Mechanism (CBAM) lies in its failure to adequately address issues of climate justice.
IV. CBAM and Free Trade
After the Second World War, the developing world was mostly guided by the Bretton-Woods discourse on free markets and development. This posited that all other problems would incidentally be resolved if one accepted the rules of free trade as reconfigured by new neoliberal thinkers[xxxvi]. New ideologists of international trade advocated not bothering with the negative externalities of trade and focusing solely on wealth accumulation[xxxvii]Oreskes and Convey presented compelling evidence of how scientific evidence of global warming was frustrated by free market ideologues and the apparatus of the Cold War in the US[xxxviii]. The narrative of free trade was not as straightforward and fair as it seemed when it was first introduced.
Daley rightly cautions that the theory of comparative advantage does not consider many phenomena of developed capitalism, such as the export of capital and people, the monopolisation of trade, and thus cannot be mechanically applied to scenarios of modern international trade[xxxix]. Following Daley's views, the idea of using comparative advantage to determine the concept of neutralising the cost of compliance through CBAM is more suitable as a measure for Ricardian internationalist views rather than modern globalists' views. Furthermore, Ricardian comparative advantage theory could not have anticipated the new approaches of the modern world to trade and moral money. Pirlot noted that although the theory of comparative advantage agreed to tax neutrality as a condition of non-distorted trade, it did not consider aspects such as skills or standards[xl].
The CBAM aims to mitigate the effects of increased compliance costs ( or internal taxation as acceptable under trade law) by equalising local and international companies. However, it does not take into account that not all countries have carbon markets and that they are at different stages of development. Xu and Jinchang suggest that the EU is trying to impose its own liabilities, which it is obliged to take under the Paris Agreement, on overseas businesses while pushing for green hegemony[xli]. They state that the EU does very little to use non-market measures to prevent companies from relocating manufacturing to countries with more lax legislation[xlii]. Although they do not mention the limited EU leverage on other Multinational Enterprises (MNEs) without EU residency but operating in developing countries, the EU has historically shown an appetite for introducing environmental measures that affect companies extraterritorially. An example is aviation emissions, which, after international backlash and legal actions, were withdrawn from the EU Emissions Trading System (ETS) shortly after introduction in 2011[xliii].
It should not be though illogical, however, to require MNEs - major historical and current beneficiaries of the exploitation of natural resources in developing countries - to pay their share of historical and current emissions. Corporate activities have created a triple whammy for these countries: depleting their resources, inflicting environmental harm, and failing to internalise the cost of damages. According to the UN, developing countries require $378 billion USD annually to meet their climate adaptation needs[xliv]. The challenges facing developing countries are not just a matter of solidarity, but also represent real potential economic peril for the EU and the world economy. Seventy-two percent of European businesses will be affected by the loss of biodiversity, a major share of which will fall on the developing countries of Asia and Africa, according to Frank Elderson, a member of the Board of the European Central Bank.[xlv]
However, EU companies are not the sole creators of pollution externalities. Moreover, the EU has been neither unambitious nor idle in environmental matters, even as leading economies outside the EU hesitated to endorse multilateral environmental agreements. Notable examples of this include the reluctance of the United States to commit to agreements such as the Kyoto Protocol and the Paris Climate Agreement[xlvi]. The EU remained steadfast and continued its efforts to support international climate mitigation, notably by enhancing the EU Emissions Trading System (ETS), which has become the largest of its kind in terms of volume and has demonstrated significant resilience[xlvii]. As allowances are being phased out and the price of carbon is increasing, there is limited room for manoeuvre for the EU, unless it is prepared to compromise the EU ETS, which is one of the major carbon trading platforms in the world. Could then developing countires to get reliant on market lead cap and trade system in their carbon reduction efforts whilst meeting requirments of CBAM? If we imagine the developing world embracing free-market approaches once again and rushing to implement them, what would be the consequences for these countries?
According to research carried out by Zahar, it took 20 years for Annex I parties to build their Measurement, Reporting, and Verification capacities for carbon gases, while developing countries cannot envisage having these systems in place even by 2030[xlviii]. When mentioning diverse countries, it must always be borne in mind that they are at various levels of development and sophistication, and these heterogeneous differences cannot be ignored. Bodansky et al. see MRV (Measurement, Reporting, and Verification) as an assurance of a level playing field, but also as a costly element in the equation[xlix]. Has the aspect of financial and technical preparedness for the CBAM in developing countries, which requires substantial effort, been carefully considered?
Kulovesi maintained that carbon allowances issued in the absence of proof of carbon leakage, and not based on real mechanisms to adjust production, have a distortive effect on their own[l] . The UK Emissions Trading Scheme, a post-Brexit spin-off from the EU ETS, surprised the market earlier by paying millions to UK installations that ceased trading, sparking a new debate about loopholes in emission trading systems[li].
At the same time, IMF cautions that without a tax on carbon, there is no feasible response to climate change[lii]. While there is widespread support for the use of a carbon tax and cap-and-trade for climate change mitigation, a global deal to set a carbon price floor remains a theoretical exercise and is not practically feasible, according to Misato Sato[liii].
Stavins provided a comprehensive analysis that not only outlines the efficiencies and limitations of both cap-and-trade and carbon tax systems, but also demonstrates their impact from various perspectives, including performance, interaction with complementary policies, ease of linkage with other countries, administrative complexity, transaction costs, initial and ongoing expenses, market volatility, potential for corruption, and susceptibility to market manipulation.[liv] Analysing Stavins' research, it becomes evident that although developing countries can greatly benefit from cap-and-trade systems in relation to carbon taxes, particularly from the perspectives of lower running costs [lv], and the ease of linking to other carbon markets [lvi], these systems inherently possess disadvantages. These drawbacks include macroeconomic effects [lvii], price volatility[lviii] and uncertainty[lix], susceptibility to market manipulation[lx] and higher upfront cost of introduction[lxi]. Nordhaus, as one of the prominent supporters of carbon taxes, stressed the interactions between energy policy and climate policy, as well as fiscal interdependency. He validly viewed carbon taxation as one of the few available means to simultaneously reduce government debt, carbon pollution, and increase energy efficiency[lxii]. Critics of carbon taxation point out that it provides primitive view of climate as public good as it is not reflecting priceless values, loss of biodiversity or climate event uncertainty phenomena[lxiii].
Once again, the developing world faces the daunting task of navigating through perplexing choices, responding to the new wave of nature's capitalisation and Eurocentric encroachment on its sovereignty. Such capitalisation poses acute challenges, as the commoditisation of the nature has been a cornerstone of capitalism from its early days, characterised by self-indulgent accumulation and encroachment on the commons[lxiv]. Can we address the problems caused by reckless consumerism and accumulation with the tools provided by the same system? While cap and trade may not be a comprehensive solution, it could be a part of a multitude of efforts. However, care must be exercised to ensure that the negative effects and potential for conflict associated with Carbon Border Adjustment Mechanisms (CBAMs) do not outweigh their benefits.
During COP28, an article appeared in the Financial Times' opinion section, penned by Kristalina Georgieva, Ursula von der Leyen, and Ngozi Okonjo-Iweala. It advocated for global carbon markets and emphasised collaboration through carbon market mechanisms.[lxv] Such a united stance highlights the unprecedented nature of the changes that global development and trade institutions are expected to promote. However, this time around, securing the participation of developing countries is not going to be straightforward. Unless these countries are given a strategic position at the negotiating table, a united front and success should not be assumed.
At the time of completing this paper, countries reached an agreement at the COP28 climate event to transition away from fossil fuels in order to achieve global net zero emissions by 2050. The agreement text recognises that targets will be considered with regards to the circumstances of poorer countries[lxvi].
V. Conclusion
WTO law will not be hostile to the Carbon Border Adjustment Mechanism (CBAM)[lxvii] ; however, geopolitical and rivalry tensions cannot be overlooked when reflecting on its outcomes[lxviii] . The unilateral nature of the agreement does not place it in the same league as its multilateral counterparts, such as CITES and the Montreal Protocol, which received tacit approval without interference, since no party challenged congruence of MEA trade measures with GATT[lxix] . Furthermore, in the last two years, the WTO has shown a keen interest in positioning itself as a leader and authority in climate transformation, shifting its stance from that not only being an independent arbiter but also a hands-on facilitator[lxx]. Certainly, this shift unavoidably predetermines that new environmental trade policy measures will maintain a definitive market-oriented tilt. This approach is not designed to address the distributive justice aspect of the puzzle, and it remains to be seen how effectively the WTO can reflect on interests of affected developing countries. Although the WTO's new 'Trade Policy Tool for Climate Action', introduced at COP28, is not intended to reflect the formal position of its members or the WTO itself, it could help shed the light on doctrinal approaches and the prevailing mood.
In concluding this comprehensive analysis of the Carbon Border Adjustment Mechanism (CBAM), it is clear that the intersection of environmental policy, trade law, and climate justice presents a complex and multifaceted challenge. The CBAM, while a bold step in the EU's climate policy, raises significant questions about fairness, particularly in relation to developing countries.
The CBAM's intent to prevent carbon leakage and establish the EU as a leader in climate action is commendable. However, its design and implementation reveal inherent tensions between the EU's environmental ambitions and the practical realities of global trade and development. The mechanism is a reflection of the EU's attempt to balance its internal economic interests with its environmental commitments. However, this balance seems skewed towards protecting its own industries and markets, often at the expense of developing nations.
A critical issue with the CBAM is its lack of direct consideration for the developmental interests and economic capabilities of the Global South. The mechanism does not fully address the challenges that developing countries face in transitioning to greener economies, particularly their dependency on fossil fuels and lack of access to finance and technology. This oversight risks exacerbating existing inequalities and could potentially hinder global efforts in climate change mitigation.
The CBAM's design, while compliant with WTO law, does not adequately reflect the principles of climate justice. It overlooks the historical responsibility of developed nations in contributing to global emissions and the principle of common but differentiated responsibilities. This raises ethical concerns about the fairness of imposing the same standards on countries with vastly different economic and developmental contexts.
Furthermore, the CBAM's approach to funding allocation and the use of market tools in climate policy underscores the need for a more inclusive and equitable framework. It highlights the necessity for policies that not only aim to reduce emissions but also support sustainable development in less affluent nations. This requires a paradigm shift from viewing environmental policy as a tool for market regulation to one that genuinely integrates the needs and capabilities of all global stakeholders.
The EU's leadership in climate policy is crucial, but it must be exercised with a greater sense of global solidarity and responsibility. There is a need for more collaborative approaches that consider the diverse needs of different countries, especially those in the developing world. The EU should strive to align its climate policies more closely with the broader objectives of sustainable development and climate justice.
In summary, while the CBAM represents a significant step in addressing climate change, its current form raises important questions about equity and justice in global climate policy. For the CBAM to be truly effective and fair, it must evolve to accommodate the diverse economic realities of all countries and foster a more inclusive and cooperative global response to the climate crisis.
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VI. Bibliography and References
Primary Sources of Law
General Agreement on Tariffs and Trade (GATT) 1994
Paris Agreement (adopted 12 December 2015, entered into force 4 November 2016) 993 UNTS 3
Council Regulation (EU) 2023/956 of the European Parliament and of the Council of 10 May 2023 establishing a carbon border adjustment mechanism [2023] OJ L130
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Millard Rachel et al. ‘Three UK manufacturers given millions in free carbon allowances for closed plants’ Financial Times (London 23 October 2023)
Mooney, A. ‘Developing countries need up to $387bn a year to adapt to extreme weather, says UN’ Financial Times (London 2 November 2023)
Mooney, A., Williams, A., Kerr, S. ‘Countries reach “historic” COP28 deal to transition from fossil fuels’ Financial Times (from Dubai13 December 2023)
Strauss, D. ‘Why putting a price on carbon has been fraught with difficulty’ Financial Times (London 30 November 2023)
Swan, E. ‘Why act now on climate change? Look at the disasters around you’ Financial Times (London 8 November 2022)
World Trade Organization, 'DDG Paugam: WTO Rules No Barrier to Ambitious Environmental Policies' (16 September 2021)
Video Conferences
Trade House Event at COP28 WTO, ODI and Enhanced Integrated Framework : Enabling a “Green Seize” of New Trade Opportunities for LDCs: United Nations Conference on Trade and Development, 03 December 2023
Trade House Event at COP28 ICC, ITC, UNCTAD, WTO: Shaping Ministerial Leadership and Collective Action for Trade and Climate Change," United Nations Conference on Trade and Development, 04 December 2023
Trade House Event at COP28 WTO and UNCTAD: A Positive Agenda for Trade, Climate, and Development Goals," United Nations Conference on Trade and Development, 02 December 2023
[i] See inter alia Oliver De Schutter, The Special Regime of Border Tax Adjustments: Levelling the playing Field: Trade in the Service of Sustainable Development Linking Trade to Labour Rights and Environmental Standards (Oxford and Portland 2015); Alice Pirlot Environmental Border Tax Adjustments and International Trade Law (Edward Elgar Publishing 2017); Condon J. Bradley, J. and Tapen Sinha The Role of Climate Change in Global Economic Governance (OUP 2013); William Nordhaus The Climate Casino: Risk, Uncertainty, and Economics for a Warming World (YUP 2015)
[ii] Commission, 'Carbon Border Adjustment Mechanism' (Taxation and Customs Union) https://taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism_en accessed 3 December 2023
[iii] Commission, 'Carbon Border Adjustment Mechanism: Questions and Answers' (14 July 2021) https://ec.europa.eu/commission/presscorner/detail/en/qanda_21_3661 accessed 3 December 2023.
[iv] Africa Climate Foundation and The London School of Economics and Political Science, ‘Implications for African Counties of a Carbon Border Adjustment Mechanism in the EU’. 2023; UK Climate and Trade Commission ‘Policy Brief: Towards a Fair and Strategic Trade and Climate Policy’ December 2022
[v] Daniel Bodansky, Jessica C. Lawrence ‘Trade and Environment’ in Bethlehem Daniel (ed.) et al. The Oxford Handbook of International Trade Law (OUP 2009) 518-528
[vi] Edwin Woerdman, Martha Roggenkamp, Marijn Holwerda (Eds.) Essential EU Climate Law (Edward Elgar Publishing 2022) 45
[vii] Kati Kulovesi ‘EU Emissions trading Scheme: preventing carbon leakage before and after the Paris Agreement’ in: Leal-Arcas, R., Wouters, J. (eds.) Research Handbook on EU Energy Law and Policy, (Edward Elgar Publishing 2017) 422
[viii]Yuqing Xing, Ran Wang, David Dollar, Asian Development Bank, Institute of Developing Economies — Japan External Trade Organization (IDE-JETRO), Research Institute for Global Value Chains at the University of International Business and Economics (UIBE) Beijing, and World Trade Organization, 'Global Value Chain Development Report 2023: Resilient and Sustainable GVCs in Turbulent Times' (2023) https://www.wto.org/english/res_e/publications_e/gvc_dev_rep23_e.htm accessed [05/12/2023] p xxxiv
[ix] Regulation (EU) 2023/956 of 10 May 2023 establishing a carbon border adjustment mechanism, OJ L 130, 16.5.2023, Annexes I and II
[x] Commission, Guidance Document on CBAM Implementation for Installation Operators Outside the EU, Brussels, 17 August 2023, p38
[xi] The GATT, p37
[xii] Commission, Guidance Document on CBAM, p22
[xiii] Commission, Guidance Document: The Monitoring and Reporting Regulation-General Guidance for Installations, Brussels, 20 February 2023 https://climate.ec.europa.eu/system/files/2023-03/gd1_guidance_installations_en.pdf Accessed [06/12/2023] p21
[xiv] Bodansky and Lawrence (n5) 520
[xv] Alice Pirlot ‘Carbon Border Adjustment Measures: A Straightforward Multi-Purpose Climate Change Instrument?’ (2022 ) 34 Journal of Environmental Law 25, 45-46
[xvi] Commission (n12)166
[xvii] Giulia Claudia Leonelli, ‘Export Rebates and the EU Carbon Border Adjustment Mechanism: WTO Law and Environmental Objections’. (2023) 56, no.6 Journal of World Trade 963, 971
[xviii] Borderlex.net ‘An Interview with Alfonso Medinilla, the Head of Climate Action and Green Transitions Team of European Centre for Development Policy Management ECDPM – EU green trade agenda needs ongoing dialogue with developing countries by Robert Francis’ https://borderlex.net/2023/11/01/interview-eu-green-trade-rule-rollout-needs-ongoing-dialogue-with-developing-countries/ 1 November 2023 [accessed 5 December 2023]
[xix] Nikolaus J. Kurmayer, 'At COP28, Europe Must Grapple with Consequences of Carbon Tariff', Euractiv.com (28 November 2023) https://www.euractiv.com/section/climate-environment/news/at-cop28-europe-must-grapple-with-consequences-of-carbon-tariff/ accessed [5 December 2023].
[xx] Paris Agreement (adopted 12 December 2015, entered into force 4 November 2016) 993 UNTS 3, Article 9 pp13-14 https://unfccc.int/sites/default/files/resource/parisagreement_publication.pdf accessed [5 December 2023]
[xxi] Ibid, Article 2.2 p3
[xxii] General Agreement on Tariffs and Trade (GATT) 1994, Article XVIII, Geneva, July 1986, pp 28-36
[xxiii] Paolo Gentilone, ‘Non-European companies need not fear the EU’s new carbon border tax’ Financial Times (London, 28 September 2023) https://www.ft.com/content/00a3da6c-1a86-415a-8057-2f9e83865794 accessed 11 December 2023
[xxiv] Kulovesi (n7) 424
[xxv] Eva Pander Maat ‘ The Carbon Border Adjustment Mechanism and the challenge of being ‘a good’ climate and trade actor’. In: Fahey E, Monnet J, et al. (eds.) Understanding the EU as a Good Global Actor: Ambitions Values and Metrics (Edward Elgar Publishing 2022), p157
[xxvi] Yanis Varoufakis, Techno Feudalism: What Killed Capitalism? (The Bodley Head, 2023) 165
[xxvii] Lucas Chancel, Philipp Bothe, Tancrede Voituriez, (2023)‘Fair taxes for a sustainable future in the Global South’. Climate Inequality Report 2023, World Inequality Lab study 2023/1 p 9
[xxviii] Esan Swan, ‘Why act now on climate change? Look at the disasters around you’ Financial Times (London 8 November 2022) https://www.ft.com/content/d0758186-f7c0-4e11-a38f-970f8e6f32f9 Accessed 10 December 2023
[xxix] Trade House Event at COP28 WTO, ODI and Enhanced Integrated Framework : Enabling a “Green Seize” of New Trade Opportunities for LDCs: United Nations Conference on Trade and Development, 03 December 2023, [online] available at: https://www.youtube.com/watch?v=Xk_7gOxeRPg (accessed [03/12/2023]).
[xxx]Trade House Event at COP28 ICC, ITC, UNCTAD, WTO: Shaping Ministerial Leadership and Collective Action for Trade and Climate Change," United Nations Conference on Trade and Development, 04 December 2023, [online] available at: https://www.youtube.com/watch?v=44RnXgnUpCI&t=22435s (accessed [04/12/2023]).
[xxxi] Ha-Joon Chang, Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism (Bloomsbury 2013) 219
[xxxii]Trade House Event at COP28 WTO and UNCTAD: A Positive Agenda for Trade, Climate, and Development Goals," United Nations Conference on Trade and Development, 02 December 2023, [online] available at: https://unctad.org/meeting/trade-house-event-cop28-positive-agenda-trade-climate-and-development-goals (accessed [02/12/2023])
[xxxiii] Arturo Escobar, Encountering Development: The Making and Unmaking of Third World, (Prinston University Press 1995) 193
[xxxiv] Woerdman, Roggenkamp, Holwerda (n6) 13
[xxxv] Sasmal, S., Zhang, D. et al. ‘Exempting Least Developed Countries from Carbon Border Adjustments: a Legal and Economic Analysis’ Centre for Inclusive Trade Policy (CITP) Briefing Paper 5, 6 October 2023, Part 2, A
[xxxvi] David Harvey, A Brief History of Neoliberalism (OUP 2007) 8
[xxxvii] Naomi Oreskes and Erik M. Conway, The Big Myth: How American Business Taught Us to Loathe Government and Love the Free Market’ (Bloomsbury, 2023) 4
[xxxviii] Naomi Oreskes and Erik M. Conway Merchants of Doubt: How a Handful of Scientists Obscured the Truth on Issues from Tobacco Smoke to Global Warming (Bloomsbury, 2013) 230
[xxxix] Herman Daley and Joshua Farley, Ecological Economics: Principles and Applications, (Island Press 2004) 317
[xl] Alice Pirlot, Environmental Border Tax Adjustments and International Trade Law, (Edward Elgar Publishing 2017) 16
[xli] Xu Xin and Wu Jinchang, ‘European Union Carbon Border Adjustment Mechanism: Content Review and China’s Emergency Response’. (2023) Vol13 Iss.1 Journal of WTO and China 12,18
[xlii] Ibid 22
[xliii] Woerdman, Roggenkamp, Holwerda (n6) 55
[xliv] Attracta Mooney, ‘Developing countries need up to $387bn a year to adapt to extreme weather, says UN’ Financial Times (London, 2 November 2023) https://www.ft.com/content/d61425c5-0707-40bf-964b-4725a123d355 Accessed 9 December 2023
[xlv] Martin Arnold, ‘ECB flags stark economic risks from biodiversity loss’ Financial Times (Frankfurt, 8 June 2023) https://www.ft.com/content/d83602d0-1296-4928-b58a-21cf2a6d2a0f Accessed 09 December 2023
[xlvi] Kulovesi (n7) 424-425
[xlvii] Sven Rudolph and Elena Aydos Carbon Markets Around the World: Sustainability and Political Feasibility, (Edward Elgar Publishing 2021) 58
[xlviii] Zahar ‘Climate Change Mitigation Law and Policy in the Asia Pacific’ in: Reins, L., Verschuuren, J. (eds.) Research Handbook on Climate Change Mitigation Law, (Edward Elgar Publishing 2022) 172
[xlix] Daniel Bodansky, Jutta Brunnee and Lavanya Rajamani International Climate Change Law, (OUP 2017) 66
[l] Kulovesi (n46) 418
[li] Rachel Millard et al. ‘Three UK manufacturers given millions in free carbon allowances for closed plants’ Financial Times (London 23 October 2023) https://www.ft.com/content/50229b7c-e937-482d-9923-dea25dea6fc7 Accessed [05/12/2023]
[lii] Delphine Strauss ‘Why putting a price on carbon has been fraught with difficulty’ Financial Times (London, 30 November 2023) https://www.ft.com/content/d91d6daa-a5bf-42fd-9a9b-24f86e3fbc6b Accessed 8 December 2023
[liii] Ibid
[liv] Robert N. Stavins ‘Carbon Taxes vs. Cap and Trade: Theory and Practice’ Discussion Paper ES 19-9, (Harvard Kennedy School November 2019) 10
[lv] Ibid 15
[lvi] Ibid 17
[lvii] Ibid 16
[lviii] Ibid 13
[lix] Ibid 11
[lx] Ibid 15
[lxi] Ibid 17
[lxii] William Nordhaus, W. The Climate Casino: Risk, Uncertainty, and Economics for a Warming World, (YUP 2015) 231
[lxiii] Gretchan Daily, Nature’s Services: Societal Dependence on Natural Ecosystems (ed.)’, (Island Press 1997) 86
[lxiv] Escobar (n33) 200
[lxv] Kristalina Georgieva, Ursula von der Leyen, Ngozi Okonjo-Iweala ’No more business as usual: the case for carbon pricing’ Financial Times ( London, 3 December 2023) https://www.ft.com/content/921381a8-48a4-4bb9-9196-b1d49f871bb7 Accessed 12 December 2023
[lxvi] Attracta Mooney, Aime Williams and Simeon Kerr ‘Countries reach “historic” COP28 deal to transition from fossil fuels’ Financial Times ( From Dubai, 13 December 2023) https://www.ft.com/content/3ffd821c-6200-4808-b16d-ac9cb2207f11Accessed 12 December 2023 Accessed 13/12/2023
[lxvii] World Trade Organization, 'DDG Paugam: WTO Rules No Barrier to Ambitious Environmental Policies' (16 September 2021) https://www.wto.org/english/news_e/news21_e/ddgjp_16sep21_e.htm accessed 3 December 2023
[lxviii] Ganesh, J ‘Don’t blame the west if the global south goes its own way’ Financial Times (London, 6 June 2023) https://www.ft.com/content/ac0acfbf-4fd7-4657-aa17-c8310ae3af16 Accessed 8 December 2023
[lxix] Alan Boyle and Catherine Redgwell, International Law and the Environment, (4th edn. OUP 2021) p784
[lxx] WTO Secretariat, 'Trade Policy Tools for Climate Action' (2023) https://www.wto.org/english/res_e/publications_e/tptforclimataction_e.htm accessed [accessed 5 December 2023]Due to be published by 31/01/2024
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