Trade-related environmental leverage and its limits: Is the EU carbon border adjustment mechanism incompatible with common but differentiated responsibilities and respective capabilities?

Abstract The European Union (EU) carbon border adjustment mechanism (CBAM) has come under attack for its alleged incompatibility with the principle of common but differentiated responsibilities and respective capabilities (CBDR-RC). This article provides a normatively informed analysis of the justification of the EU CBAM under the Chapeau of Article XX of the General Agreement on Tariffs and Trade (GATT), as interpreted in light of CBDR-RC. The article builds on the principle’s capabilities limb to advocate a dynamic and forward-looking interpretative approach. As the article illustrates, this narrower interpretation is normatively desirable for several reasons. First, it safeguards and reinforces the environmental effectiveness of the CBAM’s arrangements. Second, it aligns more closely with the operationalization of the principle of CBDR-RC under the Paris Agreement. Third, it is more faithful to the WTO dispute settlement organs’ interpretation and application of the Chapeau.