Carbon border measures, environmental effectiveness and WTO law compatibility: is there a way forward for the steel and aluminium climate club?

Giulia Claudia Leonelli

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

Abstract: with its narrow focus on price-based policies and 'explicit' carbon prices, the EU carbon border adjustment mechanism (CBAM) aims to prevent carbon leakage by ensuring that imported products 'bear' the same exact economic costs 'borne' by EU products. The proposed US border carbon adjustment (BCA) and the recent proposal for a global steel and aluminium arrangement (GSAA), by contrast, reflect a broader focus on environmental equivalence and recourse to punitive or quasi-punitive remedies. All recently proposed carbon border measures suffer from specific limitations. Further, albeit to a different extent, they are all associated with problematic aspects in terms of WTO law compatibility. This research note enquires whether the GSAA could be fine-tuned at the regulatory design stage in such a way as to provide an environmentally effective and WTO law compatible way forward. The analysis illustrates that recourse to an installation-based approach, emission limit values and product standards would achieve these goals. Nonetheless, the implementation of this ambitious strategy would be fraught with political obstacles.

Keywords: 'Global Steel and Aluminium Arrangement'; 'Green Steel Deal'; carbon border measures; CBAM; climate clubs; GATT 1994 (search for similar items in EconPapers)
JEL-codes: J1 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2022-06-24
New Economics Papers: this item is included in nep-ene, nep-env and nep-int
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Published in World Trade Review, 24, June, 2022, 21(5), pp. 619-632. ISSN: 1474-7456

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