Border Carbon Adjustments (BCAs) may play an important role in lowering the economic costs of greenhouse gas mitigation and in overcoming political-economy constraints on the use of carbon taxes or equivalent measures. A carbon tax plus a full BCA could deal with the competitiveness challenges arising from carbon taxes by using the WTO's National Treatment principle to apply equal levies on domestic production and on imports, and by symmetrically rebating the carbon tax on exports in the manner of a value-added tax (VAT) export rebate. This approach would shift the base for carbon taxation from production to demand and potentially achieve substantial reductions in the cost of cutting emissions. It would avoid the massive measurement and compliance problems associated with BCAs based on foreign emission intensities. By contrast, import-only BCAs distort prices of importables relative to exportables; create divisive trade conflicts and deterioration in the terms of trade for developing countries; and likely require development of complex sets of import preferences.

This article examines a significant question in navigating trade and climate tension: how to recognize another country as having equivalent climate regulations. Such equivalence forms a core component of many proposed models of so-called climate clubs. Establishing equivalence between distinct national climate regulation regimes poses a unique challenge that draws upon both trade and environmental international cooperation. Drawing on existing proposals, I examine prospects for country-based cooperation through three models: ETS-linking, benchmarking of shared methods and minimum standards, and benchmarking of outcome duties. The analysis concludes that all models necessitate some trade-offs between the goals of rigorous oversight of climate objectives, inclusivity, and WTO compliance. Benchmarking of shared methods and minimum standards seems most feasible, and would provide a deeper level of integration between trade and climate cooperation, but necessitates a shift in how countries, particularly the EU, oversee regulatory compliance.

Long examined by the academic literature as a challenging technical-legal fiction with a strong geopolitical impact, border carbon adjustment is on its way to becoming a European reality. This Article provides an overview of the European legislative process with a comparison of the initial Carbon Border Adjustment Mechanism (‘CBAM’) project presented by the Commission in July 2021 with the positions formalised by the European Parliament and the Council in 2022. With a detour through the doctrine of international law and building upon the work of Professor Thomas Cottier on the concept of Common Concern of Humankind (‘CCH’) in international law, the Article examines the European CBAM, and more broadly, the recent multiplication of unilateral environmental initiatives with extraterritorial impacts, as a contextual transition from a logic of coexistence to a logic of cooperation in the field of environmental policies. It concludes on the necessity to design the European CBAM accordingly, by redistributing its direct revenues and developing open and inclusive cooperation frameworks, to accelerate this transition in the field of industrial decarbonisation.