Encyclopedia of Economic Law Journal

The EU Carbon Border Adjustment Mechanism under the Lens of International Law: Conflicts and Strategies for Developing Countries

Document Type : Scientific research

Authors

farzane ahmadi 1
Azam Amini 2
Seyyed Hossain Mosavifar 3

1 M.A Student in International Law, Faculty of Law and Political Science, Ferdowsi University of Mashhad, Mashhad, Iran.

2 Associate Professor of Public International Law, Faculty of Law and Political Science, Ferdowsi University of Mashhad, Mashhad, Iran.

3 Assistant Professor of Public International Law, Faculty of Law and Political Science, Ferdowsi University of Mashhad, Mashhad, Iran.

https://doi.org/10.22067/economlaw.2026.96977.1508
Abstract
The European Union’s Carbon Border Adjustment Mechanism (CBAM), adopted in December 2023, represents an innovative policy to harmonize climate and trade objectives. However, it has faced widespread criticism since its inception. This paper employs a descriptive and analytical approach to critically examine CBAM from two perspectives: international trade obligations and climate commitments. By drawing upon the jurisprudence of the World Trade Organization’s Appellate Body, the article investigates the potential conflict between CBAM and the fundamental principles of the World Trade Organization (WTO), including the prohibition of discrimination and the national treatment obligation. The study highlights how its implementation may place countries lacking robust carbon pricing infrastructure at a trade disadvantage. Additionally, CBAM is analyzed in light of climate obligations and the principle of common but differentiated responsibilities under the legal framework of the Paris Agreement, and its impacts on developing countries are elaborated. The paper concludes by offering strategies to mitigate CBAM’s adverse effects, including enhancing domestic infrastructure, strengthening reporting capacities, and actively participating in international negotiations to achieve a global carbon pricing framework. This study aims to strike a balance between environmental imperatives and sustainable development within the global trade landscape.

Keywords

European Union Carbon Border Adjustment Mechanism
Carbon Leakage
Climate Commitments
Extraterritorial Effects of Regulations
World Trade Organization
Subjects
 ]1[Abdollahi,M, Moarefi,S. (2010). Common but differentiated responsibility principle in International environmental law. Public Law Research,12(29.1), 199-224. (in Persian).
]2 [Amini,A, Mianabadi, H, Daryadel, E, (2019), Nature and Key Legal Issues of Paris Agreement on Climate Change, law research magazine (sbu), Tehran, (in Persian).
]3 [Bacchus, J. (2021). Legal issues with the European carbon border adjustment mechanism. CATO Briefing Paper, 125, 3-6.‏
]4 [Brandi, C. (2021). Priorities for a Development-Friendly EU Carbon Border Adjustment Mechanism (CBAM), Briefing Paper 20/2021, Deutsches Institut für
Entwicklungspolitik/German Development Instiute. DOI: https://doi. org/10.23661/bp20.‏
]5 [Brenton, Paul; Chemutai, Vicky. The Trade and Climate Change Nexus: The Urgency and Opportunities for Developing Countries (English). Washington, D.C.: World Bank Group.
]6 [BRICS leaders champion global effort for fair climate finance in historic Rio Declaration
]7 [http://documents.worldbank.org/curated/en/644711632894241300/The-Trade-and-Climate-Change-Nexus-The-Urgency-and-Opportunities-for-Developing-Countries.p.68.
]8 [Cho, B. K., Jung, H., Chung, J. B., & Song, C. K. (2024). Implications of the Carbon Border Adjustment Mechanism on South Korean industries: Challenges and policy recommendations. Journal of Cleaner Production, 444, 141278.‏
]9 [Commission Implementing Regulation (EU) 2024/2493 of 23 September 2024 amending Implementing Regulation (EU) 2018/2066 as regards updating the monitoring and reporting of greenhouse gas emissions pursuant to Directive 2003/87/EC of the European Parliament and of the Council.
]10 [Communication from the (EU) Commission ‘Fit for 55’: delivering the EU’s 2030 Climate Target on the way to climate neutrality, 2021.
]11 [Corvino, F. (2023). The Compound Injustice of the EU Carbon Border Adjustment Mechanism (CBAM). Ethics, Policy & Environment, 1-20.‏
]12 [Das, K., & Bandyopadhyay, K. R. (2025). Impact of carbon border adjustment mechanism (CBAM) on steel decarbonization in India: a multi-stakeholder perspective on ambition vs. equity. International Environmental Agreements: Politics, Law and Economics, 1-35.‏
]13 [ Dobson, N. L. (2020). Competing climate change responses: Reflections on EU unilateral regulation of international transport emissions in light of multilateral developments. Netherlands International Law Review, 67(2), 183-210.‏
]14 [Eicke, L., Weko, S., Apergi, M., & Marian, A. (2021). Pulling up the carbon ladder? Decarbonization, dependence, and third-country risks from the European carbon border adjustment mechanism. Energy Research & Social Science, 80, 102240.‏
]15 [European Commission, Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL establishing a carbon border adjustment mechanism COM/2021/564 final (2021), https://eur-lex.europa.eu/eli/reg/2023/956/oj/eng
]16 [Freestone, David, and Charlotte Streck (eds), Legal Aspects of Carbon Trading: Kyoto, Copenhagen, and beyond (Oxford, 2009; online edn, Oxford Academic, 1 Feb. 2010).
]17 [Gailhofer, P., & Graichen, V. Monitoring, Reporting and Verification in a Carbon Border Adjustment Mechanism.‏
]18 [General Agreement on Tariffs and Trade (GATT), WTO | Services - CBT - Basic Purpose and Concepts - Most-Favoured-Nation Treatment - Page 1.
]19 [Guidance Document On Cbam Implementation For Installation Operators Outside The Eu. (2023).
]20 [Gupta, A., Pandey, R., & Sapatnekar, S. (2024). Potential implications of the EU's Carbon Border Adjustment Mechanism. National Institute of Public Finance and Policy.
]21 [Grácová, K. (2024). UNION CARBON BORDER ADJUSTMENT MECHANISM (Doctoral dissertation, Central European University).‏
 
]22 [Hufbauer, G. C., Schott, J. J., Hogan, M., & Kim, J. (2022). EU carbon border adjustment mechanism faces many challenges. Peterson Institute for International Economics Policy Brief, 22-14.‏
]23 [International Movement ATD Fourth World. Policy Brief and Proposals: Common but DifferentiatedResponsibilities.2011.url: https://sustainabledevelopment.un.org/getWSDoc.php?id=4086
]24 [Jousseaume, M., Menner, M., & Reichert, G. (2021). CBAM: Damaging to Climate Protection and EU Export Industries. Cep-Study.‏
]25 [Kardish, C., & Wildgrube, T. (2022). Carbon border adjustment mechanism. Administrative structure and implementation challenges. Interim report (No. UBA-FB--000825/ENG). Umweltbundesamt (UBA).‏
]26 [Leal-Arcas, R., Faktaufon, M., & Kyprianou, A. (2022). A legal exploration of the European Union’s carbon border adjustment mechanism. European Energy and Environmental Law Review, 31(4).‏
]27[ Leonelli, G. C. (2022). Exporting the EU Climate Regime: The CBAM, Extraterritoriality, and the ‘Brussels Effect’. European Journal of International Law.
[28] Leal-Arcas, R. (2012). Unilateral trade-related climate change measures. The Journal of World Investment & Trade, 13(6), 875-927.‏
[29 [ Otto, S. (2025). The external impact of EU climate policy: political responses to the EU’s carbon border adjustment mechanism. International Environmental Agreements: Politics, Law and Economics, 1-18.‏
]30 [Park, C. Y., Yamamoto, Y., & Doong, M. A. L. (2023). European Union Carbon Border Adjustment Mechanism: Economic Impact and Implications for Asia.‏
]31 [Perdana, S., & Vielle, M. (2022). Making the EU Carbon Border Adjustment Mechanism acceptable and climate friendly for least developed countries. Energy Policy, 170, 113245.‏
[32 [Piri, M; Maleki, R (2025). The European Union Carbon Border Adjestment Mechanism and its Implications for Iran. Public Law Studies Quarterly, 55 (2), 985-1004. (in Persian).
]33 [Research Center of Iran Chamber of Commerce, Industries, Mines and Agriculture, (2023). Climate change and the future of global trade. (in Persian).
]34[ Simola, H. (2021). CBAM! –Assessing potential costs of the EU carbon border adjustment mechanism for emerging economies.
]35[ Scott, J. (2014). Extraterritoriality and Territorial Extension in EU Law. American Journal of Comparative Law, 62(1), 87-126
[36 [Shiravi, A., (2010), emission trading, law research magazine (sbu), Tehran, (in Persian).
]37 [Smith, D. (2022). The Legality of the European Union’s Carbon Border Adjustment Mechanism and the Limitations of World Trade Organization Rules on Effective Climate Action.‏
]38 [Smith, I. D., Overland, I., & Szulecki, K. (2024). The EU's CBAM and its ‘significant others’: Three perspectives on the Political Fallout from Europe's unilateral climate policy initiative. JCMS: Journal of Common Market Studies, 62(2), 603-618.‏
]39 [UNCTAD, A European Union Carbon Border Adjustment Mechanism: Implications for developing countries.
]40 [Venzke, I., & Vidigal, G. (2022). Are Unilateral Trade Measures in the Climate Crisis the End of Differentiated Responsibilities? The Case of the EU Carbon Border Adjustment Mechanism (CBAM). In Netherlands Yearbook of International Law 2020: Global Solidarity and Common but Differentiated Responsibilities (pp. 187-225). The Hague: TMC Asser Press.
]41 [WBG, The Trade and Climate Change Nexus
]42 [World Bank Group. Relative CBAM Exposure Index. 2023. url: https://www.worldbank.org/ en /data/interactive/2023/06/15/relative-cbam-exposure-index#3.
]43 [WTO, United States – Import Prohibition of Certain Shrimp and Shrimp Products – Recourse to Article 21.5 of the DSU by Malaysia (21 November 2001) WT/DS58/AB/RW, (‘US – Shrimp (21.5 Malaysia)’), /https://www.wto.org/english/tratop_e/dispu_e/58abr.pdf
]44 [12 [WTO, Brazil – Measures Affecting Imports of Retreaded Tyres – Report of the Appellate Body (17 December 2007) WT/DS332/AB/R (Brazil–Retreaded Tyres)
/https://www.wto.org/english/tratop_e/dispu_e/332abr_e.pdf
]45 [ Załucki, K. (2015). Extraterritorial Jurisdiction in International Law. International Community Law Review, 17(4-5), 403-412.‏
]46 [Петрова, Т. П. (2023). EU Carbon Border Adjustment Mechanism: Legal Challenges and Relevance in Light of the Current Sanctions Regime. Журнал ВШЭ по международному праву (HSE University Journal of International Law), 1(1), 67-76.‏
Send comment about this article
Enter Name.
Enter a valid email address.
Enter a vaid affiliation.
Enter comments (At leaset 10 words)
CAPTCHA Image
Enter Security Code Correctly.
Encyclopedia of Economic Law Journal
Volume 33, Issue 29 - Serial Number 29
September 2026
Pages 132-154

  • Receive Date 26 December 2025
  • Revise Date 13 May 2026
  • Accept Date 27 July 2026

Home

Editorial Board

Publication Ethics

Contact Us