WTO panel to review EU carbon border mechanism and emissions trading scheme

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WTO panel reviews EU carbon rules

Highlights

On 25 September, the WTO Dispute Settlement Body established a panel after Russia's second request to review the EU's CBAM and emissions trading scheme.
Russia claims the EU's CBAM package constitutes significant trade barriers and that emissions allowances under the ETS act as export subsidies for EU industries.
A large group of members including China, India, the U.S., and Brazil will participate as third parties, highlighting broad global trade implications of EU carbon measures.

Dispute panel process and claims

As reported by the World Trade Organization, the Dispute Settlement Body agrees at its 25 September meeting to establish a panel following Russia's second request to examine whether the EU measures are consistent with WTO commitments.

Russia argues that the CBAM package creates significant trade barriers for covered goods imported into the EU. It also says the EU's allocation of allowances to certain companies under the Emissions Trading System amounts to an export subsidy designed to strengthen the competitiveness of some domestic industries.

The panel request follows an earlier procedural step in which the EU objects to Russia's first request at a DSB meeting on 24 July. Under WTO procedures, the second request leads to the panel's establishment.

EU response and wider trade implications

The EU says it is extraordinary that Russia, which it says continues to wage war against Ukraine, is seeking to rely on international law to improve access for exports into the EU market. It says it will take part in the proceedings to reaffirm support for the rules-based multilateral trading system and expresses confidence that both CBAM and the ETS are consistent with WTO rules.

A broad group of members reserves third-party rights to participate in the proceedings, including Argentina, Brazil, Canada, China, India, Indonesia, Japan, Saudi Arabia, South Korea, Malaysia, Norway, Paraguay, Singapore, Switzerland, Chinese Taipei, Thailand, the UK and the U.S. Their participation underscores the wider commercial significance of carbon-related border measures and emissions trading rules for global exporters.

In our earlier article on Canada’s trade diversification push amid rising U.S. tariff pressure, we outlined how Ottawa is seeking to reduce reliance on its largest trading partner as protectionist risks intensify. We also noted that the shift could reshape supply chains and deepen ties with other markets, underscoring how disputes between major economies can ripple through the wider rules-based trading system.

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