The EU’s agricultural sector depends heavily on fertilisers to improve yields and ensure food self-sufficiency. In 2022 alone, the EU-27 area imported around 7.5 million tonnes of fertilisers, predominantly from Egypt, Algeria, and the US.¹

However, this comes with significant emissions. Particularly the production of ammonia, a key component in nitrogenous fertilisers, accounts for roughly 1.8% of global CO₂ emissions.² Given the EU imports 30%, 68%, and 85% of its inorganic nitrogen, phosphates and potash nutrients respectively, addressing emissions from imported fertiliser is crucial to accelerate the move to a decarbonised future.³ Fertilisers are therefore among one of the first commodities subject to the EU’s CBAM (explore our briefing on EU CBAM).

Which industries will be impacted?

Any company that imports or exports fertilisers to the EU will be affected by CBAM, including:

• Agriculture and food, for example a producer in France that imports fertiliser from Algeria to maintain its agricultural productivity.
• Chemicals, for example a German manufacturer that procures ammonia from the US to create urea, nitric acid and synthetic fibres.
• Clothing and footwear, for example a clothing manufacturer in Greece who sources cotton from a supplier that imports their fertiliser used in their cotton growing.

CBAM's impact extends beyond individual companies, and it is ultimately expected to drive positive global sustainability outcomes in these sectors. By imposing a carbon tariff on imported fertilisers, CBAM could reward companies outside the EU that have already invested in decarbonisation initiatives in the production processes. The regulation is expected to promote further industry innovation, including research and development of lower-carbon alternatives.

Though many lower-carbon fertilisers already exist, the scale of the technology is often limited, and these lower-carbon products may represent only a small portion of a company's product portfolio. Since October 2024 until now, EU importers only had to report on the embedded emissions corresponding to the carbon content of imported fertilisers. From January 2026 however, as CBAM enters its definitive phase, they will have to start purchasing CBAM certificates. The definitive phase of CBAM is likely to increase demand for such lower-carbon fertilisers and alternatives, encouraging companies to push these existing solutions and to scale up their production. This scaling up of new technology and production methods will ultimately lower their costs, making them more accessible and reducing emissions in the entire sector’s value chain.

How will CBAM impact EU-based importers?

CBAM represents a significant step towards aligning the carbon price of imports with that of domestic production which already falls under the EU Trading Scheme (ETS). It is, above all, a tariff on carbon. By confirming that a price has been paid for the embedded carbon emissions generated in the production of certain goods imported into the EU, the CBAM aims to incentivise lower-carbon production worldwide and establish a level playing field that considers the carbon intensity of goods not produced within the EU.

From January 2026, EU companies will have to purchase CBAM certificates corresponding to the carbon content of imported fertilisers. The cost, which is expected to rise to 140 euros/tCO₂e by 2030, will mirror the pricing of the ETS, which businesses sourcing from EU suppliers are already subject to. As such, the immediate impact of CBAM on EU-based importers is a financial one.

In the mid- to longer-term CBAM also strengthens the business case for numerous opportunities to drive innovation and build strong, more resilient supply chains that emit lower carbon. These positive impacts will likely require additional investments and upfront costs. In certain sectors, such as agriculture, which have faced rising energy prices and market uncertainty over the past years this extra cost may require more careful management. EU farmers, for example, spent 6% of their input costs on fertiliser; a cost that may increase with the full implementation of CBAM.⁴ Despite a short-term financial impact, this sector also stands to benefit greatly from the long-term environmental advantages of reduced emissions.

Although CBAM requires more reporting, data capturing and supplier engagement from EU businesses, importers will also find opportunities arising from it. CBAM compliance can help you to:

• Build the cost-saving business case for transitioning to lower-carbon fertilisers.
• Strengthen your overall climate action plan. By putting a price on carbon, you quantify the direct risk of inaction. This incentivises supply chain emissions reductions, which is crucial to sectors such as agriculture, where farmers are more susceptible to climate-related risks.
• Improve supplier relationships. This is an opportunity to optimise your supply chain as you will have to engage more with one another. Additional benefits can arise from working with longer-term, stable and more resilient partners.
• Promote low carbon alternative solutions across the industry, including better fertilisers or more precise application. Reducing or precisely applying fertilisers can help mitigate your financial exposure to CBAM.

What do importers need to report?

The responsibility for reporting emissions associated with fertiliser imports lie with the EU-based importer. When submitting reports, the importer, or a nominated customs official, needs to:

• Declare the quantity of material imported.
• Declare emissions embedded in imports expressed in CO₂ plus nitrous oxide for some fertiliser products.
• From 2026: Report if goods are already carbon priced in the country of production or purchase. If so, report the carbon price that is due or has been paid for the embedded emissions in the country of origin to avoid double charges. Purchase the corresponding number of CBAM certificates.

CBAM favours reports of actual values, meaning as an importer, you should prioritise emissions data directly from your supplier. However, default values may be used. These are estimated figures to use if there is no primary data available to quantify the embedded emissions and if those values make up less than 20% of emissions of a complex good. It’s important to understand what these default values are, which the Commission updates on a regular basis.

Importers need to declare emissions from ‘simple’ and ‘complex’ goods. Importers will need to declare direct emissions from the goods production, and also indirect emissions from its energy input. In the case of ‘complex’ goods the embedded emissions of its relevant precursor goods will also need to be counted.

Example: Simple good (fertiliser)

From 1 January 2026, CBAM will take full effect and the purchasing of CBAM certificates begins.

How will exporters of fertilisers to the EU be impacted?

Though importers will bear the direct financial cost of CBAM, exporters will also need to prepare and adapt to reduce their indirect costs. By developing internal expertise and a CBAM-compliant reporting system, exporters can meet the rising demand for carbon data and enhance their competitiveness. In addition, decarbonising production processes will not only help prevent their products from becoming more expensive than EU-produced counterparts but also position them as leaders in sustainable practices.  Exporters to the EU should be ready to:

ENHANCE DATA REPORTING CAPABILITIES

Exporters will need to set up processes and systems for robust, timely and accurate data collection to meet EU customer demands. This could lead to further time and staffing costs, and may be done in collaboration with the importer.

Example: A chemical manufacturer from a non-EU country exporting nitric acid to the EU will need to ensure it can supply its customers with the necessary information on embedded emissions in its products.

Being prepared and ready to report on CBAM – ideally with verified embodied emissions – will help build stronger customer relationships. On top of that, footprinting products in line with EU CBAM requirements will give exporters a breakdown of their product’s emission hotspots, enabling a more directed approach to decarbonising embedded emissions for long-term competitiveness.

ENCOURAGE INNOVATION AND INVESTMENT IN SUSTAINABILITY AND CHEMICAL FERTILISER ALTERNATIVES

EU customers may prefer to source organic fertilisers or low carbon footprint fertilisers produced using renewable energy. Suppliers, in response, will likely need to work with their suppliers and/or cover the associated costs of investing in new technologies, processes and on-site renewables to meet the changing demands. If exporters don't innovate or adopt sustainable practices, they could lose or miss out on business opportunities.

Example: An EU business may implement stricter reporting and sustainability requirements in its contracts or tenders to encourage its suppliers to create more low-carbon products.

As carbon-intensive fertilisers become more expensive, all else being equal, exporters that invest in low-carbon solutions that require fewer CBAM certificates – such as green ammonia – can gain an advantage over their non-EU competitors. In doing so, exporters can cement their position in the EU single market, one of the largest single-market economies in the world. Having an open conversation and collaborating with key buyers in their value chain may help share the costs associated with such innovation.

STRENGTHEN THEIR MARKET POSITION

By aligning with CBAM standards, exporters can improve their market position and appeal to strategic and environmentally conscious EU customers. Suppliers that have lower-emission products, all other things being equal, are likely to gain a significant advantage as EU customers look to reduce costs. If exporters don't adopt sustainable practices or don’t share the emissions of their products, they could miss out.

Example: A non-EU nitric acid producer loses a tender with a previous customer in Germany as they find a competitor with lower emissions, meaning the customer in Germany can get the same product with fewer CBAM certificates.

Minimising emissions from fertiliser production will be critical to remaining competitive among CBAM implementation. As an exporter, you should look at reducing your Scope 1 and 2 emissions but also aim to reduce the more challenging areas within your value chain, including the emissions tied to the processing and production of precursor materials. Compliance with CBAM requires supply chain engagement and optimisation, which can lead to better customer relationships, longer-term contracts, shared resourcing of decarbonisation initiatives and supply chain stability.

How we can help

Out of 35 EU-based companies recently surveyed during a Carbon Trust webinar, 93% shared working with their non-EU suppliers to obtain the necessary information for CBAM was a major barrier when implementing CBAM⁵.

While CBAM may seem to pose additional costs and risks to value chains, ambitious climate action can help companies and governments gain new customers, strengthen supply chain resilience, ensure continued international competitiveness and enable wider sustainable economic development. From the business implications of CBAM to the processes needed to fulfil your CBAM obligations from start to finish, we can help you upskill your internal team, collect data from and work more broadly with your suppliers on decarbonisation, map emissions and make CBAM alignment easier for your business.

Find out more about how we help you obtain a clearer picture of your Scope 3 footprint, and how we helped clients like Velux and Glanbia, engage their suppliers and partners to support and accelerate the Net Zero journey.

To turn CBAM into a springboard, we help you with the following

¹ Fertilizers Europe, 'Industry Facts and Figures 2023', 2023.

² The Royal Society, 'Ammonia: zero-carbon fertiliser, fuel and energy store', 2020.

³ European Commission, 'Ensuring availability and affordability of fertilisers', 2022.

⁴ European Commission, 'Ensuring availability and affordability of fertilisers', 2022.

⁵ The Carbon Trust. Mastering EU CBAM: Building strong supplier relationships (2025).

Note: the information in this article is based on the current understanding of a rapidly evolving landscape. We will strive to keep the content updated as developments arise.