The EU Volunteered to Lead the Vanguard in the Fight Against Climate Change, but Will the WTO Let It?

• Author: Raul Orozco
• Position: J.D. and Global Law Scholar, Georgetown University Law Center; M.A., Georgetown Walsh School of Foreign Service (expected May 2023)
• Pages: 1009-1038

The EU Volunteered to Lead the Vanguard in the

Fight Against Climate Change, but Will the WTO

Let It?

RAUL OROZCO*

INTRODUCTION

As the Earth rapidly approaches a tipping point in the fight against climate

change, governments are scrambling to create cost-effective and efficient cli-

mate-change-fighting policies that may be implemented without violating World

Trade Organization (“WTO”) obligations. Of all the governing bodies in the

world, the European Union (“EU”) has created the most cost-effective and effi-

cient climate-change-fighting policy, thus volunteering to stand in the vanguard

and lead the way forward in the fight against climate change: the EU’s Emissions

Trading System (“ETS”) as its shield and its Carbon Border Adjustment

Mechanism (“CBAM”) as its sword.

The ETS has long been the EU’s shield to guard the environment against the

EU’s own climate change contributing activities—namely carbon emissions. The

ETS accomplishes this by requiring that domestic producers include the cost the

environment incurs from their carbon emissions into the final price of their prod-

uct. The success of the EU’s ETS as a shield has been criticized by environmen-

talists for not being expansive enough—not eliminating the EU’s climate change

contributions—nor having an “offensive” capacity to reduce climate change con-

tributions from other States. In response to these criticisms and the looming threat

of climate change, the EU forged its CBAM to act as its sword. If implemented,

the CBAM will require foreign importers to also include the cost the environment

incurs from their carbon emissions into the final price of their product. In this

manner, the CBAM acts as a sword to slash carbon emissions originating from

within and outside the EU. Despite the CBAM’s promising climate-change-fight-

ing capabilities coupled with the urgency and threat of climate change, the

CBAM may be knocked out of the fight by the World Trade Organization before

it can demonstrate its merit.

The WTO may side with CBAM critics that argue the European Union’s

CBAM is merely a protectionist ruse to disguise a tax that discriminates in favor

of domestic producers, favoring imports from certain countries over others. If

critics are correct, the CBAM is a clear violation of the most favored nation

* J.D. and Global Law Scholar, Georgetown University Law Center; M.A., Georgetown Walsh School of

Foreign Service (expected May 2023). © 2022, Raul Orozco.

1009

clause under Article I of the General Agreement on Tariffs and Trade (“GATT”).

Yet, this Note argues that the CBAM will remain in the fight against climate

change because the CBAM is a charge equivalent to an internal tax imposed on

like domestic products in accordance Article II.2 and Article III.2 of the GATT.

Even if the CBAM is inconsistent with any substantive GATT provision, such

inconsistency is permissible under Article XX of the GATT.

This Note also considers the role legal ethics may play in the fight against cli-

mate change. Because of the existential threat climate change poses to the lives

and wellbeing of all life on this planet, can and should legal ethics play a role in

ensuring carbon price measures like CBAM are successfully implemented?

While this Note finds that legal ethics should not play a role, such a possibility

may arise as climate change’s harmful effects become ever more visceral.

Ultimately, whether States are prepared for the fight against climate change or

not, the fight is here, and the threat is existential. Because of the real dangers of

climate change, the WTO should interpret the GATT broadly to find that the

CBAM is in accordance with the substantive provisions of the GATT or that the

CBAM is permissible under the Article XX exception(s). States must also care-

fully craft policies to combat climate change to prevent the need for legal ethics

to play a role in implementing such policy measures. The CBAM is the first of its

kind, and its success or failure will influence other States that are considering

implementing a CBAM or a similar program.

Section I of this Note provides the legislative history of the EU’s climate

change policy from 1992 to 2021 and the economic policy arguments that support

a CBAM. Section II argues that the CBAM is consistent with Article II.2 and

III.2 of the GATT. Section III considers that even if the CBAM is not in accord-

ance with the GATT, the CBAM may still survive under Article XX of the

GATT. Section IV discusses what role legal ethics may play in the enforcement

of carbon price measures.

I. THE LEGISLATIVE HISTORY OF CBAM AND ECONOMIC POLICY

ARGUMENTS IN FAVOR OF CBAM

A. THE CBAM AS THE EU’S “NEWEST” LEGAL INSTRUMENT TO COMBAT

CLIMATE CHANGE

The CBAM presented in the EU’s “Fit for 55” package

1

is a product resulting

from over thirty years of policy measures intended to combat climate change.

2

Andreas Prahl & Elena Hofmann, European Climate Policy - History and State of Play, CLIMATE POL’Y

INFO HUB (Nov. 14, 2014), https://climatepolicyinfohub.eu/euro-pean-climate-policy-history-and-state-play

[https://perma.cc/H47M-3A4B].

The EU proposed a “carbon tax” in 1992 after the Intergovernmental Panel on

Climate Change (“IPCC”) first issued its climate change report.

3

The IPCC’s

1. Commission Communication 2021 O.J. (L. 550) 6 [hereinafter Fit for 55].

2.

3. Id.

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