WTO to weigh Russia complaint over EU carbon border levy

The World Trade Organization will appoint experts to examine a complaint from Moscow over the European Union's carbon border tax, a Geneva-based trade official said Friday.

The decision was reached during a WTO Dispute Settlement Body (DSB) meeting, the official said on condition of anonymity.

The Carbon Border Adjustment Mechanism (CBAM) aims to ensure foreign producers pay a carbon cost similar to what European companies already pay under the bloc's internal emissions trading system.

Importers of carbon-heavy goods produced abroad like steel, aluminium and fertiliser must declare the CO2 emissions embedded in their products, and pay a levy if they exceed EU standards.

The EU has promoted the key environmental policy, which took effect at the start of the year, as a "virtuous" tool that encourages greener practices worldwide.

But the policy has faced strong opposition amid charges that it restricts trade and favours European manufacturers.

Arguing that the CBAM breaches the rules of global trade, Russia filed its initial complaint with the WTO over the policy in May last year.

At that point, Moscow requested consultations with the EU and its member states regarding this issue, as well as on the two-decade-old Emissions Trading System (ETS), which enables certain industries to benefit from free carbon allowances.

Brussels swiftly rejected the consultation request, insisting such discussions could not be fruitful given the circumstances created by Russia's full-scale invasion of Ukraine since February 2022.

Moscow then asked the WTO this past July 10 to establish a panel of experts to examine the case, but the EU blocked the request.

The DSB granted the second request on Friday, the trade official said.

Under WTO regulations, parties in a dispute can block a first request for an arbitration panel, but if the parties make a second request, it is all but guaranteed to go through.

In a communication sent to the WTO this week, the EU said Russia's renewed panel request had created "an extraordinary situation" in which a country "that for more than four and a half years continues to wage a war of aggression... in violation of the most fundamental rules of international law" was asking for an assessment of the "international law compatibility of a regulatory, climate-oriented, environmental measure".

Brussels said it would agree to take part in the process due to its "firm support for the rules-based multilateral trading system", but stressed that it would "only engage with the panel and not directly with the Russian Federation".

As long as Russia "is waging its war of aggression against Ukraine, it cannot expect to be able to rely on WTO rules for improved access for its exports to the market of the European Union", the bloc said.