CBAM and the Least Developed Countries: A Legal Analysis of the Balance Between Climate Ambitions and Development Considerations

Abstract

This thesis explores how the European Union’s Carbon Border Adjustment Mechanism (CBAM) affects Least Developed Countries (LDCs), and how the design of CBAM can reconcile climate objectives with developmental fairness. While CBAM aims to prevent carbon leakage and uphold the EU’s ambitious climate agenda, it risks imposing disproportionate economic burdens on LDCs, many of which rely on exporting carbon-intensive goods to the EU. The thesis investigates potential negative consequences for LDCs – as a result of the implementation of CBAM in its current form - including trade diversion, and the risk of double carbon taxation despite existing environmental levies in third countries.Through a legal analysis grounded in EU law, WTO law, and international climate law -particularly the principle of Common But Differentiated Responsibilities and Respective Capabilities (CBDR-RC) - the thesis assesses whether and how LDC exemptions or compensatory mechanisms could be lawfully integrated into CBAM. It further evaluates the compatibility of such differentiation with WTO rules, including the Most-Favoured-Nation (MFN) principle and relevant exception clauses under GATT Article XX. The study also considers the scope for recognizing carbon pricing systems in LDCs and the legal and practical barriers to doing so.The thesis concludes that while CBAM can be designed to avoid unfair treatment of LDCs, this requires a careful legal balance and political will. Without proper safeguards, CBAM may undermine the climate and development ambitions embedded in the Paris Agreement and the United Nations Framework Convention on Climate Change (UNFCCC). The thesis proposes legal and policy-based solutions and concludes that a failure to acknowledge and implement the CBDR-RC principle risks undermining political trust and weakening international cooperation, ultimately impeding rather than advancing the overarching objective of reducing global carbon emissions.