The World Trade Organization has agreed to set up a dispute panel to examine the EU's Carbon Border Adjustment Mechanism (CBAM) and its emissions trading system, following a request from Russia. The panel will assess whether the EU's carbon border tax and related measures violate international trade rules under GATT and other agreements. Russia argues that CBAM and the EU ETS unfairly penalize its exports, while Brussels maintains the mechanism is necessary for climate action and has refused direct consultations due to the Ukraine conflict. CBAM has been in force since January 2026, covering steel, aluminum, cement, fertilizers, electricity, and hydrogen. The EU sets certificate prices based on ETS auctions, with recent values around €75 per tonne of CO2. The WTO panel's decision could have significant implications for the future of carbon border adjustments worldwide, as other countries consider similar mechanisms.
