EU Carbon Border Adjustment Mechanism Under WTO Rules And China’s Response

As the environment and climate issues are of global relevance to sustainable development,the international community has adopted the approach of Nationally Determined Contributions(NDCs)to urge developed and developing countries to participate in reducing emissions.In July 2021,the European Commission formally proposed the Carbon Border Adjustment Mechanism(CBAM)legislation,becoming the first CBAM legislation in the world.CBAM entered into force on 17 May.Throughout the legislative agenda,the EU has maintained that CBAM does not conflict with its obligations as a member of the World Trade Organization(WTO).However,as a unilateral trade measure based on environmental claims,CBAM will inevitably raise the cost of China’s exports.This article adopts a combination of textual research,legal interpretation and case study methods to identify the legality of CBAM under WTO rules,sort out its impact on China,and then put forward suggestions for response,based on an analysis of the legislative content and relevant documents of EU CBAM,specifically:The first part is an overview of the EU CBAM.The first part is an overview of CBAM in the EU.It discusses the background,causes,development history,content and operation mechanism of CBAM as well as the controversies that have arisen,laying the foundation for the analysis of the legality of CBAM and China’s response to it.The second part is an analysis of the legality of CBAM under the WTO,which leads to the conclusion that CBAM may violate the two non-discrimination principles of MFN and NT,and that although it may comply with Article 20(g)of the General Agreement on Tariffs and Trade(GATT),the EU’s invocation of the Article 20 "environmental exception" is difficult because it cannot pass the test of its Article 20 preamble.However,as it cannot be tested through its Article 20 preamble,it is difficult for the EU to invoke the Article 20 "environmental exception" for its defense,which sets the stage for the Chinese response later on.The third part is an in-depth analysis of the potential negative impacts of CBAM on China,in terms of climate governance,carbon pricing rights,export trade,fiscal mechanisms,and emission reduction pathways,respectively.In the fourth part,on the basis of the above analysis that the EU CBAM may be inconsistent with the relevant WTO rules,and taking into account the main negative impacts of CBAM on China,the fourth part proposes solutions from a legal perspective,such as insisting on climate governance under the WTO framework,exploring the establishment of bilateral cooperation mechanisms between China and Europe,accelerating the legislation on national equivalence measures,using the law to promote the optimization and upgrading of trade structures,and improving the system of low-carbon emission reduction rules.In order to enhance the practicability,innovation and feasibility of this paper,we propose solutions such as the development of a low-carbon emission reduction rule system,and the improvement of a low-carbon emission reduction rule system.