With its narrow focus on price-based policies and ‘explicit’ carbon prices, the EU carbon border adjustment mechanism (CBAM) aims to prevent carbon leakage by ensuring that imported products ‘bear’ the same exact economic costs ‘borne’ by EU products. The proposed US border carbon adjustment (BCA) and the recent proposal for a global steel and aluminium arrangement (GSAA), by contrast, reflect a broader focus on environmental equivalence and recourse to punitive or quasi-punitive remedies. All recently proposed carbon border measures suffer from specific limitations. Further, albeit to a different extent, they are all associated with problematic aspects in terms of WTO law compatibility. This research note enquires whether the GSAA could be fine-tuned at the regulatory design stage in such a way as to provide an environmentally effective and WTO law compatible way forward. The analysis illustrates that recourse to an installation-based approach, emission limit values and product standards would achieve these goals. Nonetheless, the implementation of this ambitious strategy would be fraught with political obstacles.

This paper analyses the EU proposal for a carbon border adjustment mechanism (CBAM) and a recent US proposal for the establishment of a border carbon adjustment (BCA) as examples of ‘defensive’ policies, broadly informed by an economic level playing field and an environmental level playing field rationale. From an environmental law perspective, the CBAM's narrow focus on price-based policies, distortions of competition and trade intensity is unsatisfactory; however, the EU CBAM is more feasible in practical terms and overall more likely to be WTO law compatible than the US proposal for a BCA. An environmental level playing field perspective is associated with several practical problems: these relate to the determination of environmental equivalence, the identification of appropriate remedies, and the demarcation of the scope of application of the relevant regulatory arrangements. Further, measures informed by an economic level playing field rationale can be easier to justify under WTO law. Taking stock of these findings, the paper concludes that practical obstacles and structural legal constraints push towards a narrower focus on an economic level playing field, as a matter of regulatory design.