Third Countries’ Reactions to the EU CBAM: a Law & Economics Approach (JSDA Conference 2025)

The Carbon Border Adjustment Mechanism (CBAM) is a measure of the European Union (EU)aimed at imposing its carbon price on foreign producers of certain carbon-intensive products,with the final goal of addressing the risk of carbon leakage and contributing to the objectives of the Paris Agreement. However, it has been widely perceived by third countries as a protectionist instrument, and as a way to interfere with their domestic climate policies. This article explores how third countries may react to the CBAM, given the current weakness of the IEL and WTO dispute resolution systems. It divides the possible responses between cooperatives and non-cooperatives and concludes that while the CBAM bears the risk of further fragmenting international climate policy, it has the potential to contribute to the reduction of greenhouse gas emissions by incentivizing the adoption and strengthening of carbon pricing systems in third countries.

This article draws from my thesis project for the award of the degrees from USI – University of Lugano and theCatholic University of Milan. The thesis is supervised by Professor Ilaria Espa, to whom goes my gratitude forher guidance and support during the last two years