INTRODUCTION

Adopted in May 2023, the European Union (EU) Carbon Border Adjustment Mechanism (CBAM) is representative of a paradigmatic shift in European climate policy, entailing use of unilateral measures to address the intersection of international trade and climate change. Following decades of theoretical discussion of border carbon adjustments (BCAs) as a policy to level the economic playing field in a world of uneven climate action, the CBAM imposes carbon costs on certain categories of imported goods equivalent to those faced by domestic producers under the EU Emissions Trading System (EU ETS). It is thus primarily aimed at preventing carbon leakage – where economic activity and the associated emissions shift to countries with less stringent climate policies – while trying to maintain the competitiveness of European industry.

Despite its conceptual appeal and compelling rationale, the evolution of the CBAM from design to implementation has been characterised by political, legal, and economic challenges. Its trajectory to date underscores the EU commitment to ambitious climate action amidst geopolitical tensions and a fragmented, highly competitive global economy, influenced by factors such as the persistent asymmetry of domestic climate efforts under the Paris Agreement, the unsteady participation of the United States in international climate cooperation, and the recent escalation on global trade conflicts. This chapter traces the legislative history of the CBAM (§2), offers a legal assessment of its adopted design (§3), and identifies a number of implementation challenges (§4), concluding with brief takeaways on an instrument of EU climate policy that has spurred international debate like few others (§5).