"Interconnection Between the Ecodesign for Sustainable Products Regulation (ESPR) and the Carbon Border Adjustment Mechanism (CBAM): Regulatory Compliance Challenges and Trade Implications"

Abstract

This article examines the complex legal and economic interplay between two key instruments of the European Union’s environmental regulatory framework: the Carbon Border Adjustment Mechanism (CBAM) and the Ecodesign for Sustainable Products Regulation (ESPR). While each serves a distinct objective, CBAM aims to prevent carbon leakage through border carbon pricing, and ESPR promotes product circularity and sustainability via ecodesign requirements, their concurrent application may result in a disproportionate regulatory burden, particularly for non-EU exporters. The analysis highlights how the EU’s regulatory power generates a de facto extraterritorial effect, often referred to as the “Brussels Effect,” by imposing substantial compliance obligations on third-country producers. These include granular emissions reporting, product traceability, and potential redesigns to meet EU market standards. Drawing on the case law of the Court of Justice of the European Union (CJEU), the article explores the legal foundations for this extraterritorial influence, rooted in the territorial nexus of market access, while also underscoring the complex legal questions that arise when EU rules govern production processes entirely situated outside the Union. The article further scrutinises the proportionality and cost-effectiveness of CBAM and ESPR, particularly with respect to their impact on EU consumers. It evaluates the principle of proportionality in EU law and the legal requirement for comprehensive impact assessments, with reference to BSEF v Commission to illustrate the CJEU’s rigorous scrutiny of regulatory balance. In conclusion, the article reflects on the broader tension between the EU’s environmental ambitions and the practical constraints faced by international trading partners and EU citizens. It proposes recommendations for improving regulatory coherence, ensuring that the EU’s global standard-setting role is exercised with legal clarity, procedural fairness, and sensitivity to the cumulative burden imposed on global supply chains and consumers.