Climate change is not only an environmental issue but also a global trade challenge that requires urgent policy action. Trade policies play a crucial role in this effort by regulating economic activities to incentivize low-carbon practices and discourage environmentally harmful ones.

At the forefront of these responses is the European Union’s (EU) Carbon Border Adjustment Mechanism (CBAM). This initiative seeks to address the risk of carbon leakage occurring outside the EU, by levying a tax on products imported from third countries based on the carbon content of their production.

While the CBAM has been hailed as a groundbreaking policy innovation that could pave the way for a more climate-friendly trading system, it also raises several political and legal challenges, in particular regarding its compatibility with the World Trade Organization (WTO) rules.

This thesis delves into the complex interplay between climate change mitigation measures and international trade law. It analyzes the mechanism of the CBAM and its compatibility with the General Agreement on Tariffs and Trade (GATT). In addition, it highlights the implications of the CBAM for the future of global trade and climate policy, by exploring the concepts of EU climate leadership, climate clubs, and the prospects for a WTO reform.