The EU and Carbon Leakage: How to Reconcile Border Adjustments with the WTO?

Abstract: Climate change is a global problem that needs a comprehensive international response. If countries adopt different measures this may lead to carbon leakage that then leads to further emissions and to competitiveness concerns from those countries that have adopted more stringent measures. One approach to deal with carbon leakage and competitiveness concerns is through the adoption of border adjustment measures. This paper focuses on possible climate border adjustment measures that may arise from the development of the current EU climate policy, the final goal being to determine their compatibility vis–à–vis the WTO regime.