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Wednesday, March 6, 2024

CBAM update - Potential WTO complaints over CBAM

NexantECA CBAM Update - Potential WTO Complaints Over CBAM

Trade experts have shared insights on the potential challenges countries would face filing complaints with the World Trade Organisation (WTO) against the EU's Carbon Border Adjustment Mechanism (CBAM). The lengthy process would extend for years, with uncertain outcomes.

Why the Complaints?

Countries such as South Africa, India, and China are expected to be significantly affected by CBAM due to their carbon intensive energy mixes. This would place a high price on products imported from these countries. While CBAM aims to protect against carbon leakage, the mechanism has received backlash and been described by some as “unilateral” and “protectionist”. So far, no formal complaints have been lodged with the WTO.

The Complaint Process:

If a formal complaint was lodged with the WTO, two routes become available: bilateral consultations towards a solution or the WTO can establish a dispute panel. Where the WTO dispute panel is established, this process may not result in a black and white decision, would only result in a recommendation, and may be appealed by either side of the complaint.

The Appeal Process:

Even if CBAM is found WTO-illegal by the dispute panel, the EU could appeal the recommendation, leading to prolonged processes and potential delays in implementing fundamental changes. As an example, a US-EU dispute on aerospace subsidies took 17 years to settle. The EU's careful alignment of CBAM with WTO rules also adds complexity to any potential dismantling of the mechanism.

As it stands, from a WTO perspective, it seems CBAM is here to stay for now!

Navigating the Future:

As the global community grapples with the implications of CBAM, businesses must stay informed and adapt. Brundtland Consulting remains committed to providing guidance on sustainable practices and navigating the complexities of environmental regulations.


Via Carbon Pulse


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