Farmers are facing another hike in fertiliser costs, due to a new EU-wide carbon tax on imports.

The new Carbon Border Adjustment Mechanism (CBAM) is the first international carbon tax and is due to come into force from 2026.

CBAM will apply additional charges that take account of the embedded carbon emissions in goods such as fertiliser and steel, which are imported into the EU from third countries.

Other goods impacted by CBAM include aluminum, cement and electricity.

With close to 500,000t of Ireland’s fertiliser coming from outside of the EU each year, importers face a significant hit from CBAM, which will inevitably be passed on to farmers. The charge on fertiliser will depend on the amount of carbon emitted to produce 1t of fertiliser.

The Commission has indicated that it will charge a flat rate of €50/t for unrecorded carbon emissions.

Fertiliser importers pointed out that while the new tax will not come into force for another two years, the move remains a worry for the industry.

It is unclear what additional charge this new tax will put on fertiliser for farmers, but it could vary from an extra €20 to €40/t.

Reporting obligations

From this year, importers will need to comply with demanding reporting obligations regarding the emissions resulting from the products they import. The first of these reports is for the three-month period from 1 October to the end of this year.

Industry insiders said the amount of carbon emitted when producing fertiliser varied from country to country and plant to plant, depending on the technology employed.

Industry studies show that 0.95t of carbon was emitted on average by EU fertiliser manufacturers when producing one tonne of CAN.

The comparable figures for non-EU manufacturers varied from 1.98t of carbon for every tonne of CAN produced in Russia, 1.99t for the Middle East, and 3.0t of carbon for every tonne of CAN produced by coal-burning plants in China.

The figures for urea (46%) are 1.6t of carbon per tonne of product for the EU, 1.55t for the Middle East, 1.84t for Russia and 3t for coal-burning plants in China.