*Originally published in Jota

**This is an AI-powered machine translation of the original text in Portuguese.

The recent proposals by the European Union for environmental regulations on products highlight the growing intersection between environmental law and international trade law.

Three regulations are particularly noteworthy in this regard: the Green Claims Directive (GCD), a proposed directive to regulate sustainability claims of products, aiming to combat greenwashing; the Deforestation Regulation (EUDR), approved in 2023, which seeks to ensure that certain commodities and their derivative products supplied to the European market demonstrate their sustainability; and the Carbon Border Adjustment Mechanism (CBAM), a policy designed to ensure that imported products (initially including cement, iron and steel, aluminum, fertilizers, electricity, and hydrogen—sectors with high carbon footprints) are subject to the same carbon tariff as those produced within the European Union.

While the intentions to combat greenwashing and promote sustainable practices are commendable, these regulations have raised concerns about their compatibility with World Trade Organization (WTO) rules and their disproportionate impact on developing countries, such as Brazil.

The GCD, for example, imposes strict requirements for environmental verification and traceability, requiring companies to prove the ecological credentials of their products through robust certifications and independent audits. This requirement, in itself, would not be problematic if it were part of a global standardization framework based on multilateral principles and supported by technical and financial assistance mechanisms for developing economies.

However, the GCD ignores the environmental, social, and productive specificities of tropical countries and agricultural exporters like Brazil, imposing regulatory costs that, in practice, may end up functioning as non-tariff barriers.

While European companies benefit from institutional infrastructure and easier access to certification labels, Brazilian producers—especially small and medium-sized ones—face high costs and practical difficulties in adapting their production chains to the new regulation. This disparity could even result in the exclusion of sustainable products from international markets, contradicting the goals of promoting sustainability.

The same issues are raised in relation to the EUDR. There are criticisms regarding the regulation’s impact on major Brazilian exports (beef, soy, coffee, and cocoa), not only due to the increased costs of accessing the European market, but also because of the regulation’s lack of sensitivity to the local context, calling into question its ability to achieve its stated objectives.

For example, the EUDR does not consider certain key Brazilian biomes—such as the Cerrado and Caatinga—to be "forests" (and therefore excludes them from the scope of the regulation), even though they are also areas of agricultural expansion and deforestation. This blind spot may create the unintended consequence of incentivizing expansion into these non-forested areas, rather than encouraging the registration and documentation of agricultural production in the Amazon and other regions included under the EUDR, with negative impacts on Brazilian biomes.

The CBAM has also been the target of criticism from emerging countries. The policy aims to combat carbon leakage, a phenomenon in which carbon-intensive industries relocate their production to countries with less stringent environmental regulations than those of the European Union.

China has already raised the issue before the WTO Market Access Committee, arguing that the CBAM constitutes a unilateral and discriminatory measure under international trade law and is incompatible with the principle of common but differentiated responsibilities under the Paris Agreement. It also fails to take into account differences in development stages and the historical responsibilities of countries for carbon emissions. In Brazil’s case, there is once again a lack of sensitivity to the local context, as the standardized method for calculating emissions established by the CBAM does not adequately reflect the Brazilian energy matrix, which is predominantly clean.

From a legal perspective, these cases illustrate a clash between two global governance regimes: the environmental regime (emerging and largely based on soft law and multilateral agreements, such as the Paris Agreement) and the trade regime (more consolidated and normatively structured around the WTO). According to the General Agreement on Tariffs and Trade (GATT), the Agreement on Technical Barriers to Trade (TBT), and the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS), regulatory measures must: (i) be necessary and proportionate to the environmental objective they aim to achieve; (ii) be based on scientific evidence, to avoid excessive discretion; (iii) not be discriminatory, either directly or indirectly, based on the origin of the product; and (iv) avoid creating unjustified obstacles to international trade.

In this context, the aforementioned regulations may be subject to challenges within the WTO, especially if they continue to disregard alternative sustainability metrics, such as Brazil’s energy matrix—composed of more than 80% renewable sources. Ignoring this reality means applying homogeneous criteria to heterogeneous realities. By not recognizing biomes like the Cerrado and Caatinga, or by disregarding Brazil’s clean energy matrix, the European Union applies criteria that distort the ecological reality of tropical countries.

It is undeniable that combating greenwashing, deforestation, and carbon leakage is a legitimate priority, just as there is legitimate concern about the urgency and effectiveness of multilateral measures to address climate change in a context of weakened multilateralism. However, environmentally valid regulatory actions, which leverage the power of the European consumer market on the global stage, may produce harmful effects if not calibrated with socioeconomic sensitivity.

The paradox is clear: in the name of environmental protection, we risk excluding sustainable producers from international markets—especially those who lack the resources to demonstrate their sustainability in the required formats.

To prevent the European Union’s environmental regulations from becoming a tool of commercial exclusion disguised as regulatory virtue, a structured multilateral dialogue on sustainability standards is needed, based on the principle of common but differentiated responsibilities, which could include:

• Explicit recognition of regional sustainability metrics, such as the use of renewable energy in Brazil;

• Regulatory flexibility for SMEs and family farmers, including extended transition periods and leniency mechanisms;

• Incentives for technological and scientific cooperation between the European Union and exporting countries to facilitate the adoption of environmental compliance solutions;

• Implementation of regulatory impact assessments in third countries before the rules take effect;

• Prior submission of regulations like the GCD to the WTO Technical Barriers to Trade Committee, aiming for consensus-based, preventive dispute resolution.

Some adjustments have been acknowledged by the European Union—for instance, by delaying the entry into force of the EUDR for micro and small enterprises. However, deeper adaptations are necessary to ensure that unilateral environmental measures do not reproduce historical asymmetries and exacerbate environmental and commercial inequalities.

Sustainability, to be real, must also be equitable and attentive to local realities—otherwise, it will serve merely as an instrument of exclusion and global imbalance.

Brazil, for its part, cannot limit itself to a reactive stance toward foreign regulations that impact its exports. It must take an active role in international forums, advocating for sustainable standards that reflect its reality, while supporting its small producers in accessing green markets.