The Carbon Border Adjustment fails due to logistical barriers.

Despite its positives, CBAM has several challenges on an international scale. First, tariffs could further exacerbate US-China relations and antagonize high-emissions economies such as India, decreasing US diplomatic leverage.

Second, insufficient regulation could incentivize countries to abuse the system and reorganize their production to export from the most efficient production lines while diverting pollution towards non-CBAM-impacted exports and domestic products such as consumer products.

Third, the US would also need to develop exceptions and robust global financial programs for green development to mitigate the adverse effects on the poorest countries and prevent diplomatic challenges arising from the “protectionism” tag attached to CBAM.

Lastly, the adjustment mechanism is incredibly complex, with many proposed versions. Unfair legislation, such as an import-only CBAM, could violate commitments to the World Trade Organization and trigger litigation.

While public support and political will exist, the devil is in the details. With many possible variations of the already complex CBAM proposed, US legislators must agree on the specifics. Some propose wholesale carbon pricing, while others argue that existing US environmental regulations already create enough costs for firms.