Russia files WTO complaint against EU's carbon border adjustment mechanism

Russia filed a formal complaint on May 20 with the World Trade Organisation (WTO) against the European Union’s Carbon Border Adjustment Mechanism (CBAM), arguing the measure violates global trade rules and unfairly restricts access for non-EU producers.

The Russian Ministry of Economic Development said it had submitted a request for consultations with the EU under the WTO’s dispute settlement procedures. This marks the first stage of a potential legal challenge, with both parties having 60 days to resolve the issue before it can be referred to a WTO panel.

CBAM, a key component of the EU’s Green Deal introduced in October 2023, aims to apply the same carbon taxation to imports into the EU as domestic production, in order to encourage stricter emissions standards globally while also avoiding carbon leakage, where EU companies might relocate industrial plants outside the EU to avoid higher carbon tax, causing a loss to the bloc’s economy. 

According to Moscow, however, CBAM is less about addressing climate change and more about protecting domestic industries from foreign competition. The regulation is due to enter full force in 2026, when importers of certain carbon-intensive goods will be required to purchase emissions certificates to match the carbon price paid by EU producers.

Russian Economic Development Minister Maxim Reshetnikov accused Brussels of using climate policy as a pretext to impose trade restrictions. “The EU’s real aim is to shield its industries from efficient foreign competitors and address its own inefficiencies,” he said. “Climate protection is merely a justification. CBAM has nothing to do with it.”

Reshetnikov added that the mechanism drains financial resources from developing nations, diverting funds that could otherwise be invested in industrial modernisation or climate mitigation efforts better suited to local conditions. He also reiterated that Moscow had raised concerns about CBAM’s compatibility with WTO principles – including the most-favoured-nation treatment, non-discrimination and limits on import restrictions – since its inception.

“These concerns were repeatedly conveyed to EU officials during the design phase of the mechanism, but Brussels chose to ignore them,” Reshetnikov said.

Although Russian exports to the EU have fallen sharply under sanctions, CBAM still affects Russian interests, as it applies across full product value chains. Prior to sanctions, the value of Russian exports potentially covered by CBAM – including steel, aluminium, cement, electricity, fertilisers and hydrogen – was estimated at €8.5bn ($9.6bn) annually.

In a 2023 assessment, the Macroeconomic Research Centre of the Russian Ministry of Finance projected CBAM-related losses at 0.17% of Russia’s GDP.

The EU published the draft CBAM regulation in July 2021, with initial transitional measures coming into effect on January 1, 2023. From 2026, only certified importers will be permitted to bring affected goods into the EU, subject to carbon certificate purchase obligations.

If WTO consultations fail to yield a resolution within 60 days, Russia may request the formation of a dispute settlement panel comprising three independent experts to review the case.