WTO to Weigh Russia Complaint Over EU Carbon Border Levy

The World Trade Organization (WTO) will appoint experts to investigate Russia's complaint regarding the European Union's carbon border tax, known as the Carbon Border Adjustment Mechanism (CBAM), announced a Geneva-based trade official on Friday. This decision came during a meeting of the WTO Dispute Settlement Body (DSB). The CBAM is designed to make sure that foreign producers pay a carbon cost comparable to that paid by European companies under the EU’s internal emissions trading system.

Importers of carbon-intensive goods such as steel, aluminum, and fertilizer must report the CO2 emissions associated with their products and pay a levy if they exceed EU standards. The EU promotes the CBAM as an environmentally beneficial policy that encourages greener practices globally. However, the policy has encountered significant opposition due to concerns that it limits trade and benefits European manufacturers.

Russia filed its initial complaint against the CBAM with the WTO in May of the previous year, seeking consultations with the EU and its member states. The EU denied the request, stating that discussions would be unproductive considering the consequences of Russia's invasion of Ukraine since February 2022. In July, Russia requested the establishment of a panel of experts to examine the case, but the EU blocked the request.

The DSB granted the second request on Friday. According to WTO rules, a party can block the first request for an arbitration panel, but if the party makes a second request, the panel is almost certain to be established. The EU responded to the renewed panel request with a communication stating that Russia's ongoing war of aggression in violation of international law makes it inappropriate for Russia to seek an assessment of the CBAM's compatibility with international law.

Despite this stance, the EU has agreed to participate in the process due to its commitment to the rules-based multilateral trading system, but only through the panel and not directly with Russia. The EU maintains that as long as Russia continues its war against Ukraine, it cannot expect improved access for its exports to the EU market under WTO rules.