Codifying Border Carbon Adjustments? Climate Clauses in EU Trade and Investment Agreements

Abstract

Trade and investment agreements currently negotiated by the EU, including the EU-Australia free trade agreement (FTA), embed 'climate clauses'. This policy note briefly reviews the lawfulness of border carbon adjustments (BCAs), a key element of the environmental policy currently proposed by the EU Commission. Arguably, climate clauses embedded in trade and investment agreements codify and make explicit a consistent jurisprudence of the WTO dispute settlement bodies establishing the lawfulness of environmental exceptions to free trade. In this context, if adequately framed, BCAs afford an effective legal mechanism to implement sustainable policies.