CBAM on trial: What the Russia-EU WTO case means for Africa

Russia’s challenge to the European Union’s (EU) Carbon Border Adjustment Mechanism (CBAM) at the World Trade Organization (WTO) has advanced in recent weeks. Following the failure of consultations between the EU and Russia, with the EU citing “Russia’s war of aggression against Ukraine”, a dispute settlement panel was established in September 2026 to examine whether CBAM and related EU emissions trading measures violate WTO rules.

Under WTO procedures, a request for consultations formally initiates a dispute. Consultations give the parties an opportunity to discuss the matter and seek a mutually satisfactory solution before proceeding to litigation. If consultations fail to resolve the dispute within 60 days, the complainant may request the establishment of a panel. The establishment of a panel in this case therefore marks a significant step towards the first major legal test of CBAM’s compatibility with WTO law.

Russia’s challenge puts CBAM to the test

Russia’s case rests on two main arguments: first, that CBAM constitutes a trade barrier; and second, that the free allocation of emissions allowances under the EU Emissions Trading System (ETS) amounts to an unlawful subsidy. On the first point, Russia argues that CBAM is a protectionist and discriminatory measure that violates the General Agreement on Tariffs and Trade (GATT).

Specifically, it alleges breaches of the most-favoured-nation (MFN) principle, national treatment obligations and the prohibition on quantitative restrictions, citing requirements for purchasing CBAM certificates, calculating emissions and registering with the relevant authorities. MFN treatment requires WTO members to extend trade advantages granted to one country to all other WTO members, while national treatment requires imported goods to receive treatment no less favourable than that afforded to like domestic products. The prohibition on quantitative restrictions generally bars quotas and other restrictions on trade volumes, subject to certain exceptions.

On the second issue, Russia contends that the free allocation of emissions allowances to European industries under the ETS constitutes an unlawful subsidy under the WTO Agreement on Subsidies and Countervailing Measures. Its argument centres on the criteria used to determine eligibility for free allowances, including factors related to emissions and trade intensity. The EU ETS operates as a cap-and-trade system under which companies must surrender allowances corresponding to their greenhouse gas emissions. Certain industries receive some allowances free of charge, a practice critics argue undermines claims that CBAM ensures equal treatment of domestic and imported products.

What the dispute means for Africa

The dispute has significant implications for carbon pricing and border adjustment measures, particularly regarding non-discrimination, the treatment of imported products and the relationship between environmental objectives and international trade rules. It also creates an opportunity for third parties to participate in the proceedings. For African countries affected by CBAM, as outlined in this report, third-party participation could provide a route to engage with the legal challenge without bearing the substantial costs typically associated with initiating a WTO dispute.

There is, however, an important caveat: the WTO’s appeal mechanism remains non-functional. This creates the risk that a panel report could be appealed “into the void”, leaving the dispute without a final resolution. Nevertheless, the panel’s findings could influence how trade and climate measures are interpreted in future disputes.

Diplomacy must complement legal action

African countries should not, however, place all their hopes in the WTO’s legal process. While the proceedings may clarify whether CBAM is compatible with international trade rules, Africa’s response must also include proactive diplomacy and regional coordination.

One avenue worth revisiting is the dialogue platform on CBAM’s impact announced in the declaration following the EU–African Union summit in November 2024. There has been little visible follow-up since that commitment. Reviving the platform would provide an opportunity for both regions to discuss CBAM’s effects and explore possible ways forward.

Building a coordinated African CBAM response

Africa can also draw lessons from countries that have engaged the EU directly on CBAM. India, which is participating as a third party in the WTO dispute, recently signed a free trade agreement (FTA) with the EU. The agreement includes a dedicated annex on CBAM, although it does not exempt India from the EU’s carbon border charges. Instead, it establishes a framework for flexibility, recognition of Indian verifiers and the possible crediting of domestic carbon pricing once India’s system becomes operational. African countries should consider whether similar arrangements could form part of their own strategies for addressing CBAM.

The EU’s approach to cooperation with the United States on CBAM, compared with its more prescriptive approach towards countries in the Global South, also raises questions about consistency and fairness. Ensuring that carbon border measures are applied in a transparent and non-discriminatory manner is essential. Greater flexibility, the recycling of CBAM revenues, technology transfer and capacity-building support are among the options that African countries could pursue in negotiations with the EU.

The establishment of a WTO panel to examine the Russia–EU CBAM dispute marks an important moment in the debate over the legality of unilateral climate-related trade measures. Concerns about fairness and discrimination are now being tested through formal legal proceedings. Although the WTO’s appeal mechanism remains non-functional, the panel’s findings could help clarify how CBAM measures up against WTO rules.

For African countries, the proceedings offer an opportunity to strengthen their arguments on CBAM’s trade and development implications. But the legal process alone will not resolve the challenges the mechanism poses. The African Group must continue to pursue parallel strategies through diplomacy, regional coordination and direct engagement with the EU, ensuring that the continent’s interests are represented as the relationship between trade and climate policy evolves.

Shimukunku Manchishi is senior policy officer – trade at the African Future Policies Hub (AFPH).