Export rebates and the EU Carbon Border Adjustment Mechanism: WTO law and environmental objections

Leonelli, Giulia Claudia (2022) Export rebates and the EU Carbon Border Adjustment Mechanism: WTO law and environmental objections. Journal of World Trade 46 (6), pp. 963-984. ISSN 1011-6702.

Abstract

The EU proposal for a carbon border adjustment mechanism (‘CBAM’) has triggered a lively academic and policy debate. In June 2022, the European Parliament put forward amendments regarding the potential introduction of export rebates under the EU Emission Trading System (‘ETS’) and the CBAM. This article focuses on this specific proposal, enquiring into the WTO law compatibility of ETS/CBAM export rebates. First, it enquires whether the ‘pecuniary burden’ associated with compliance with the CBAM would qualify as a ‘charge’ that is ‘equivalent to an internal tax’ and that is ‘imposed consistently with Article III:2 GATT’. Second, it suggests that the ‘pecuniary burden’ associated with compliance with the ETS/CBAM is unlikely to qualify as an adjustable product tax; the analysis draws on a close examination of relevant provisions in the GATT 1994 and the Agreement on Subsidies and Countervailing Measures (‘SCMA’). Finally, the article develops some brief considerations on the detrimental environmental effects of export rebates. As the article concludes, the regulatory design of the CBAM is not perfect; export rebates, however, would make this scheme considerably worse.

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