CBAM uncertainty stalls EU fertilizer trade ahead of spring demand

Uncertainty around costs and the staying power of the EU's Carbon Border Adjustment Mechanism have stifled European fertilizer trade leading into the spring planting season, market sources said Feb. 5.

At issue are misconceptions in the market that fertilizer has been removed from CBAM or is likely to be removed retroactively, said Pauline Miquel, policy and research lead of London-based CBAMBOO, a CBAM software company.

The confusion stems from public statements by senior EU officials that suggested fertilizers could be exempted under emergency provisions, despite no legal certainty that an exemption will occur, Miquel said.

In December, the European Commission proposed a new Article 27a for the CBAM law, an "emergency brake" aimed at addressing "serious and unforeseen circumstances" that could affect the price of goods. On Jan. 8, following discussions with French and Italian agriculture ministers, EU Commissioner Maros Sefcovic indicated Article 27a could be used to support the agricultural sector, and in a subsequent press conference, suggested it might be applied retroactively from Jan. 1.

"It's quite risky to bank on that as a business. There is really no guarantee that it will happen," Miquel said in a phone call. "It's a mistake from the commission that such a high-profile person came out and said publicly that it would happen when there is no certainty that it could even happen, legally speaking."

Miquel said the commission and some members of Parliament argue the cost increase would not be considered unforeseen because it was anticipated that CBAM would impact prices. "So it's not something that's out of the blue, surprising the market," she said.

Market impact visible

The prospect of retroactive policy changes has created uncertainty for the fertilizer market. While the Commission said no CBAM certificates need to be purchased until 2027, the mechanism is already shaping commercial negotiations and trade terms, sources said.

"There are not a lot of imports of urea at the moment, relative to normal years, and it has to do with CBAM," a Northwest European distributor source said. "As soon as we have a gap between inside and outside EU prices large enough to cover the CBAM costs, imports will run again."

Anything being sold in Europe is a pre-CBAM product, a Mediterranean-based trader source said. "By the beginning of March, the price will go up. The only question is how much."

Using S&P Global Energy pricing mechanisms, the CBAM cost for ammonia delivered into Northwest Europe was assessed at $72.67/mt on Jan. 30, assuming an average carbon intensity of 2.2 mt CO₂ per mt of ammonia, which is the most competitive realistic import option. That levy adds cost to imported nitrogen and, because imports frequently set the marginal price, it can lift broader EU pricing over time.

Nitrogen-based fertilizer traders are considering export options to non-EU countries as urea prices in Europe rise and nitrates prices are expected to follow suit. A non-EU Mediterranean source said he's finding "people can't make decisions because of uncertainty on CBAM. Non-EU demand remains solid, but CBAM is damaging European producers."

The Northwest European distributor source said UAN FCA Rouen remained stable this week, while FOB Egypt prices were dropping. The difference was roughly the calculated CBAM cost for UAN coming from Egypt, he said.

Cost debate continues

Mohammed Chahim, a Dutch Labour Party Member of Parliament and the CBAM rapporteur, published an article Feb. 4 which said CBAM effects on fertilizer prices were "backed by inflated numbers," leading to calls to suspend CBAM for fertilizers.

According to Chahim, CBAM will be around 7%-8% of total costs for fertilizer importers of Egyptian urea, a carbon-intensive source. "The 7-8% figure is not necessarily a direct price increase—it simply equalizes the competitive conditions," Chahim said. "CBAM makes CO₂-intensive products more expensive -- and that is precisely the goal."

A 30% increase in fertilizer prices would result in a 5%-8% negative economic impact, according to the S&P Global Agricultural Costs and Margins tool from S&P Global Energy CERA.

"Rising fertilizer costs may influence farmers' purchasing decisions, potentially leading to reduced fertilizer applications and negatively impacting crop yields," CERA said in its October 2025 Nitrates Outlook.