A Study on the WTO Compatibility of EU CBAM and the Supposed WTO Dispute Settlement Scenario

Since 1990s, all countries in the world have deeply recognized various climate catastrophes causing by the climate change. Recognizing this possible severity of human being's future by climate change, UN members have adopted several conventions including Paris Convention, and have duty implement to its nationally determined contributions (NDCs). As well known, EU has made consistent endeavors taking the lead to resolve the world-wide serious problems due to climate change. Namely, EU promulgated its CBAM in July 2021 to reduce world widely production of carbon-intensive products and use of embodied carbon dioxide emissions in global value chains. EU CBAM is scheduled to implement in full scale from January 2026. However, there are much possibilities of hot trade disputes against CBAM between EU and the much affected countries including China, Russia, India, etc, and also LDCs. Most of developing countries argue that EU CBAM is contrary to the principle of free and fair trade in GATT/WTO system. Therefore, there is much possibility of serious international trade disputes if the officially announced CBAM is enforced without considering the position of developing countries. This article, therefore, examines rationales of EU CBAM, the positions of other countries including main developing nations, conformity of CBAM with WTO rules. And also, it explores the supposed scenarios of trade disputes in WTO/DSB between the concerned country groups, and tries to find and propose some alternatives and implications of EU CBAM.