CAO Hui:EU Carbon Border Adjustment Mechanism: Legitimacy Debate and Its Impacts


The Carbon Border Adjustment Mechanism (CBAM) is regarded by the EU as a key institutional design to achieve the “European Green Deal” and carbon neutrality by 2050. Based on the European Union’s emissions trading system, the carbon price will directly reflect the future pricing of carbon tariffs. In terms of legitimacy, the EU will seek to comply with WTO rules through internal legislation, revision of existing international trade rules as well as preventing “carbon leakage”. The EU is allying with the US, who has come back to the Paris Agreement, and trying to create a global climate governance order with carbon markets and carbon tariffs at its core by pushing the reform of the World Trade Organisation and linking trade rules with environmental and labour standards. However, the EU’s unilateral introduction of a carbon tariff-like adjustment regime could backfire and undermine the global efforts to reduce emissions. EU being a major trading partner of China and a leading player in global climate governance, its  CBAM means both a challenge and an opportunity for China.