WTO Sets Up Panel on the EU Carbon Border Mechanism as 18 Members Join as Third Parties
The World Trade Organization’s Dispute Settlement Body agreed on 25 September to establish a panel to review the European Union’s Carbon Border Adjustment Mechanism (CBAM) and an alleged export subsidy under the EU Emissions Trading System. The panel was set up on Russia’s second request. A total of 18 members, including China, India, the United States, Japan, Saudi Arabia and South Korea, reserved their rights to take part as third parties. The case, DS639, reached this stage 501 days after consultations were requested on 12 May 2025, on our calculation.
What the panel will examine
Russia argues that the CBAM package creates significant trade barriers for covered goods imported into the EU, and that the allocation of emission allowances to certain companies under the ETS amounts to an export subsidy. The EU had objected to Russia’s first request for a panel at the meeting of 24 July. At this meeting it said it would take part in the proceedings and expressed confidence that both the CBAM and the ETS are consistent with WTO rules.
The mechanism under review entered its definitive regime on 1 January 2026, after a transitional phase from 2023 to 2025, according to the European Commission. It covers imports of cement, iron and steel, aluminium, fertilisers, electricity and hydrogen. Importers must buy and surrender CBAM certificates matching the carbon emissions embedded in those goods, and the certificates are priced on EU ETS allowance auction prices.
| DS639 milestone | Date |
|---|---|
| Consultations requested | 12 May 2025 |
| CBAM definitive regime begins | 1 Jan 2026 |
| EU objects to first panel request | 24 Jul 2026 |
| Panel established | 25 Sep 2026 |
| Next regular DSB meeting | 27 Oct 2026 |
Dates from the DS639 case page and meeting summary, and from the European Commission for the definitive regime.
Appellate Body vacancies raised for the 100th time
At the same meeting Colombia, speaking for 130 members, put forward for the 100th time the proposal to start selection processes for Appellate Body vacancies, and the United States did not support it. Several members encouraged the Multi-Party Interim Appeal Arbitration Arrangement. The WTO’s current list of the arrangement’s 35 parties includes the EU but not Russia, so on our reading it does not presently provide an appeal route for DS639. The parties could, however, jointly agree another form of Article 25 arbitration.
Why it matters: The panel will rule on both the CBAM charge on imports and the allocation of ETS allowances that Russia calls an export subsidy. With 18 members reserving third party rights, the case reaches well beyond the 2 parties to the dispute.
Outlook: The panel still has to be composed, and the next regular Dispute Settlement Body meeting is on 27 October. With the proposal to fill the Appellate Body vacancies now tabled 100 times without agreement, whether a panel ruling becomes final will turn on how any appeal is handled, including whether the parties agree an Article 25 arbitration.
Sources: World Trade Organization, European Commission.
