The WTO has agreed to set up a dispute panel to examine the EU's Carbon Border Adjustment Mechanism (CBAM) after Russia filed a challenge. CBAM requires importers of steel, aluminum, cement, fertilizers, and electricity to buy certificates covering embedded emissions. Russia claims the mechanism violates WTO rules and that the EU's free ETS allowances act as an illegal export subsidy. The EU defends CBAM as a climate tool designed to prevent carbon leakage. Eighteen WTO members, including China, India, and the US, have reserved third-party rights, so the outcome will set a precedent for how border carbon levies fit with trade rules. That matters for exporters in carbon-heavy industries and for the future of carbon pricing globally. The panel's decision could either legitimize border carbon adjustments or force the EU to redesign parts of CBAM, which would ripple through international supply chains.
