Export rebates and the EU carbon border adjustment mechanism: WTO law and environmental objections

Giulia Claudia Leonelli

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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 General Agreement on Tariffs and Trade (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.

Keywords: agreement on Subsidies and Countervailing Measures; border tax adjustment; carbon border adjustment Mechanism; carbon border measures; charge; emission trading system; export rebates; GATT 1994; tax (search for similar items in EconPapers)
JEL-codes: J1 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2023
New Economics Papers: this item is included in nep-ene, nep-env and nep-int
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Published in Journal of World Trade, 2023, 56(6), pp. 963-984. ISSN: 1011-6702

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