The Carbon Border Adjustment Mechanism (CBAM) came into force on 1 January 2026. Since then, several media reports have announced potential suspensions of CBAM on fertilisers, causing huge confusion about whether or not CBAM remains in force. Here, we take a look at what the mechanism is, why it is being implemented and what it means for Irish farmers.
What is the Emissions Trading Scheme (ETS)?
To understand CBAM, it is useful to look back to the introduction of the European Emissions Trading Scheme (ETS) in 2005. The EU had set a long-term objective of becoming carbon neutral by 2050, and the ETS was designed as a key policy tool to help achieve this goal.
Under the ETS, companies operating in Europe that emit carbon during production processes are required to submit carbon credits, known as European Union allowances (EUAs), corresponding to the amount of carbon they emit. Each allowance permits the emission of one tonne of carbon dioxide or equivalent greenhouse gases (1t CO2e).
When the ETS was introduced, emissions limits were set for companies based on their historical production levels. Companies were initially provided with free allocations of carbon credits, broadly matching their historic emissions. If a company maintained or reduced its emissions in subsequent years, these free allocations would cover their compliance needs. However, if emissions exceeded their allocated amount, companies were required to purchase additional carbon credits for every extra tonne emitted.
It has since been decided that, from 2026 onwards, the number of free carbon allowances allocated to certain industries will gradually be reduced. The affected sectors include iron and steel, aluminium, cement, hydrogen, electricity, and fertilisers.
From 2026, free allocations for companies in these industries will decrease by 2.5%, increasing to a 5% reduction in 2027, and continuing to decline annually (see Table 1).
By 2034, free allowances will be completely phased out. At that point, companies will need to purchase allowances for every tonne of carbon emitted during production.
Why is CBAM being
implemented?
As the ETS developed and free allowances began to decline, European producers grew concerned that their products would become more expensive than similar goods imported from countries without comparable carbon pricing systems. To address this risk and maintain fair competition, the EU introduced CBAM.
The mechanism applies a carbon charge to certain goods produced outside the EU and imported into the EU, ensuring imported products face a carbon cost similar to that paid by EU producers.
Table 1:
Table 2:
What is a CBAM
certificate?
A CBAM certificate is the equivalent of EUA or carbon credit. Importers will need to purchase CBAM certificates to cover the cost of embedded emissions in the products they import while EU producers will need to purchase EUAs to cover the embedded emissions of the products they produce.
How is the CBAM cost calculated?
The EU has published a series of complex calculations that can be used to calculate the cost of CBAM. These calculations can be simplified into the following:
Carbon emissions embedded in product minus free allocations multiplied by number of tonnes imported gives the number of CBAM certificates required to be purchased.Importers bringing CBAM-covered goods into the EU must declare the embedded carbon emissions (carbon footprint) of those goods. These emissions can be reported using either independently verified actual emissions data or EU-published default values.In practice, however, the structure of the reporting system means verified emissions data is often unavailable until 12-18 months after production, making it impractical for pricing fast-moving products such as fertilisers. As a result, Irish importers are likely to rely primarily on default emissions values when calculating import costs.
In addition to declaring total embedded emissions, importers must also account for the proportion of emissions still covered by free allocations. These free allocations will decline annually and are scheduled to be fully phased out by 2034, at which point the full embedded emissions of imports will be subject to the CBAM charge.
Once the carbon liability is determined, importers must purchase CBAM certificates to cover the associated emissions. Each certificate corresponds to 1t CO2e.
How much does a CBAM certificate cost?
The price of a CBAM certificate will be updated weekly and is linked to the price of EUAs. EUA prices are volatile and have fluctuated significantly in recent years. For example, closing prices this year have ranged from €70.89 to €91.34 per tonne, compared with levels as low as €3.94/t in 2016 (see Figure 1).
Market analysts generally expect carbon prices to rise over the next five to 10 years. Current projections for EUA/CBAM prices in 2034 range from approximately €250/t (high estimate), €190/t (mid estimate) and €150/t (low estimate).
How much fertiliser is imported into the EU?
The EU is not self-sufficient in nitrogen fertiliser production. Approximately 45% of nitrogen fertiliser consumed in the EU is imported, typically in the form of urea, while around 15% of EU requirement is exported by EU producers, leaving the EU with a net supply deficit of roughly 30% relative to consumption.
Each year, the EU imports approximately six million tonnes of urea, compared with global production of around 180 million tonnes annually. This means the EU accounts for only about 3-4% of global urea trade.
Until the introduction of recent sanctions, roughly 30% of EU nitrogen fertiliser imports originated from Russia. The EU applied significant sanctions to Russian produced fertilisers in June 2025.
The key takeaway is that Europe represents a relatively small share of global nitrogen demand, meaning the EU farmers depend more on global producers than global producers depend on the EU market.
What fertilisers are
imported into Ireland
and from where?
In 2024, Ireland imported approximately 1.36 million tonnes of fertiliser. This included around 440,000t of CAN; 315,000t of urea; 145,000t of muriate of potash; and 100,000t of DAP, with the remainder comprising compound fertilisers and other products.
Of the imports (excluding MOP which doesn’t carry a CBAM cost), approximately 550,000t originated from outside the EU and would therefore fall within the scope of CBAM. A further 650,000t imported from EU producers contain nitrogen and are expected to face cost increases as free allocations under the ETS are reduced.
The main sources for CAN imported to Ireland from outside the EU are Turkey and Egypt, while around 80% of all urea imported to Ireland comes from Algeria and Egypt. Irish consumption accounts for just over 0.1% of global urea production and 2.5% of global CAN production.
How much carbon is embedded in fertiliser we use in Ireland?
Urea, CAN and DAP imports into Ireland will be the most affected fertilisers by CBAM. As actual verified emissions by producer are not yet available, Irish importers will be forced to use EU default values in their place. For fertilisers, the default values are set at both a product and country level and based on average actual production emissions from that country.
There is also a 1% markup added to these average country values for fertilisers for 2026, 2027 and 2028. In comparison, the other sectors which fall under CBAM (steel and iron, aluminium, concrete, hydrogen and electricity) will have a 10% markup added to average values in 2026, 20% added in 2027 and 30% added in 2028.
What is CBAM going to cost Irish farmers in 2026?
Example 1 – urea: An Irish fertiliser producer imports a 5,000t cargo of urea from Algeria in 2026. The embedded emissions in the product is 1.42t CO2e per tonne of urea. Free allocations amount to 0.87t CO2e per tonne of urea. The importer will need to purchase 2,750 CBAM certificates. At the average price for the year to date (circa €85/t), the CBAM price for the cargo would be €233,750, or €46.75/t.
Based on the most recent DAFM stats over 240,000t of urea and protected urea were used by farmers in the 2024/2025 season. Applying a €46.75 per increase to this volume means that Irish farmers would likely incur a CBAM cost of €11.2m if usage remains the same in the current season.
Example 2 – CAN: An Irish fertiliser producer imports a 5,000t cargo of CAN from Egypt in 2026. The embedded emissions in the product is 2.07t CO2e per tonne of CAN. Free allocations amount to 0.67t CO2e per tonne of CAN. The importer will need to purchase 7,000 CBAM certificates. At the average price for the year to date (circa €85/t), the CBAM price for the cargo would be €595,000, or €119./t.
For CAN the CBAM costs essentially close options to source product from outside the EU for Irish and other European importers. Demand for European produced CAN has increased and as the EU is already not self sufficient for nitrogen production, there is a real risk of product scarcity, particularly in countries with no domestic production, as the season continues.
Table 3:
Table 4:
What is CBAM going to cost Irish farmers in 2034?
As the quantity of free allocations will be reduced to zero by 2034 and the price of EUAs is expected to rise, it is expected that the cost of CBAM to Irish farmers will climb significantly over the next eight years.
Based on Climate Action Plan targets to achieve 90-100% of straight nitrogen sales as protected urea by 2030, it’s likely that the CBAM cost to Irish farmers would be between €84m and €140m per year. However, it is important to point out that a relative cost increase will be added to fertilisers produced in Europe also under the ETS.
For CAN, the cost of CBAM is far more significant. This is due in principal to the default values as assigned to countries. There are a number of decarbonisation measures that producers can implement during production to reduce emissions and many of the European producers have already implemented these measures in anticipation of the reduction of free allocations under ETS.
As actual emissions values become available and assuming producers adopt these decarbonisation measures, the additional cost to CAN due to CBAM may reduce from what’s outlined in the table. It is estimated that the ETS cost on CAN would be 30%-50% of the CBAM cost.
Did CBAM get suspended in January along with fertiliser tariffs?
No. CBAM on fertilisers is still in place. In January of this year, the European commission announced guidance on how a temporary suspension of CBAM for fertilisers could be implemented with retroactive implementation to 1 January.
There is a “CBAM handbrake” in the current proposed amendment to the CBAM legislation called Article 27a. In order to suspend CBAM on fertilisers by pulling this “handbrake”, this proposed amendment will have to be adopted to the CBAM legislation by a vote of approval from the commission and the parliament.
Market monitoring will then need to prove that serious and unforeseen circumstances have caused severe harm and impact to the price of goods. For context, the previous amendment to CBAM was proposed in February 2025 and took over seven months to be adopted so any likely adoption of this amendment will be too late for the 2026 growing season.
What are the outstanding challenges for fertiliser importers in dealing with CBAM?
In anticipation of CBAM coming into effect on 1 January, imports of urea and CAN from North Africa into Ireland were increased significantly in October, November and December 2025 however limits to storage, warehousing and capital means that there is still a significant amount of fertiliser to be imported to meet the crop demand for 2026.
Due to uncertainty on CBAM certificate price, the uncertainty caused by the European Commission announcements in early January, poor output prices and the significant cost increase on north African fertilisers, demand for fertilisers has been low across Europe with European production being able to satisfy demand.
EU importers have focussed on purchasing EU CAN and avoiding CBAM products. This shift in demand has seen the price of CAN in Europe increase considerably since January with supply being a concern.
There is concern that once demand picks up in Europe in spring 2026, supply of fertilisers could become limited with reduced early season imports and long lead times causing delays in fulfilling orders.
The Carbon Border Adjustment Mechanism (CBAM) came into force on 1 January 2026. Since then, several media reports have announced potential suspensions of CBAM on fertilisers, causing huge confusion about whether or not CBAM remains in force. Here, we take a look at what the mechanism is, why it is being implemented and what it means for Irish farmers.
What is the Emissions Trading Scheme (ETS)?
To understand CBAM, it is useful to look back to the introduction of the European Emissions Trading Scheme (ETS) in 2005. The EU had set a long-term objective of becoming carbon neutral by 2050, and the ETS was designed as a key policy tool to help achieve this goal.
Under the ETS, companies operating in Europe that emit carbon during production processes are required to submit carbon credits, known as European Union allowances (EUAs), corresponding to the amount of carbon they emit. Each allowance permits the emission of one tonne of carbon dioxide or equivalent greenhouse gases (1t CO2e).
When the ETS was introduced, emissions limits were set for companies based on their historical production levels. Companies were initially provided with free allocations of carbon credits, broadly matching their historic emissions. If a company maintained or reduced its emissions in subsequent years, these free allocations would cover their compliance needs. However, if emissions exceeded their allocated amount, companies were required to purchase additional carbon credits for every extra tonne emitted.
It has since been decided that, from 2026 onwards, the number of free carbon allowances allocated to certain industries will gradually be reduced. The affected sectors include iron and steel, aluminium, cement, hydrogen, electricity, and fertilisers.
From 2026, free allocations for companies in these industries will decrease by 2.5%, increasing to a 5% reduction in 2027, and continuing to decline annually (see Table 1).
By 2034, free allowances will be completely phased out. At that point, companies will need to purchase allowances for every tonne of carbon emitted during production.
Why is CBAM being
implemented?
As the ETS developed and free allowances began to decline, European producers grew concerned that their products would become more expensive than similar goods imported from countries without comparable carbon pricing systems. To address this risk and maintain fair competition, the EU introduced CBAM.
The mechanism applies a carbon charge to certain goods produced outside the EU and imported into the EU, ensuring imported products face a carbon cost similar to that paid by EU producers.
Table 1:
Table 2:
What is a CBAM
certificate?
A CBAM certificate is the equivalent of EUA or carbon credit. Importers will need to purchase CBAM certificates to cover the cost of embedded emissions in the products they import while EU producers will need to purchase EUAs to cover the embedded emissions of the products they produce.
How is the CBAM cost calculated?
The EU has published a series of complex calculations that can be used to calculate the cost of CBAM. These calculations can be simplified into the following:
Carbon emissions embedded in product minus free allocations multiplied by number of tonnes imported gives the number of CBAM certificates required to be purchased.Importers bringing CBAM-covered goods into the EU must declare the embedded carbon emissions (carbon footprint) of those goods. These emissions can be reported using either independently verified actual emissions data or EU-published default values.In practice, however, the structure of the reporting system means verified emissions data is often unavailable until 12-18 months after production, making it impractical for pricing fast-moving products such as fertilisers. As a result, Irish importers are likely to rely primarily on default emissions values when calculating import costs.
In addition to declaring total embedded emissions, importers must also account for the proportion of emissions still covered by free allocations. These free allocations will decline annually and are scheduled to be fully phased out by 2034, at which point the full embedded emissions of imports will be subject to the CBAM charge.
Once the carbon liability is determined, importers must purchase CBAM certificates to cover the associated emissions. Each certificate corresponds to 1t CO2e.
How much does a CBAM certificate cost?
The price of a CBAM certificate will be updated weekly and is linked to the price of EUAs. EUA prices are volatile and have fluctuated significantly in recent years. For example, closing prices this year have ranged from €70.89 to €91.34 per tonne, compared with levels as low as €3.94/t in 2016 (see Figure 1).
Market analysts generally expect carbon prices to rise over the next five to 10 years. Current projections for EUA/CBAM prices in 2034 range from approximately €250/t (high estimate), €190/t (mid estimate) and €150/t (low estimate).
How much fertiliser is imported into the EU?
The EU is not self-sufficient in nitrogen fertiliser production. Approximately 45% of nitrogen fertiliser consumed in the EU is imported, typically in the form of urea, while around 15% of EU requirement is exported by EU producers, leaving the EU with a net supply deficit of roughly 30% relative to consumption.
Each year, the EU imports approximately six million tonnes of urea, compared with global production of around 180 million tonnes annually. This means the EU accounts for only about 3-4% of global urea trade.
Until the introduction of recent sanctions, roughly 30% of EU nitrogen fertiliser imports originated from Russia. The EU applied significant sanctions to Russian produced fertilisers in June 2025.
The key takeaway is that Europe represents a relatively small share of global nitrogen demand, meaning the EU farmers depend more on global producers than global producers depend on the EU market.
What fertilisers are
imported into Ireland
and from where?
In 2024, Ireland imported approximately 1.36 million tonnes of fertiliser. This included around 440,000t of CAN; 315,000t of urea; 145,000t of muriate of potash; and 100,000t of DAP, with the remainder comprising compound fertilisers and other products.
Of the imports (excluding MOP which doesn’t carry a CBAM cost), approximately 550,000t originated from outside the EU and would therefore fall within the scope of CBAM. A further 650,000t imported from EU producers contain nitrogen and are expected to face cost increases as free allocations under the ETS are reduced.
The main sources for CAN imported to Ireland from outside the EU are Turkey and Egypt, while around 80% of all urea imported to Ireland comes from Algeria and Egypt. Irish consumption accounts for just over 0.1% of global urea production and 2.5% of global CAN production.
How much carbon is embedded in fertiliser we use in Ireland?
Urea, CAN and DAP imports into Ireland will be the most affected fertilisers by CBAM. As actual verified emissions by producer are not yet available, Irish importers will be forced to use EU default values in their place. For fertilisers, the default values are set at both a product and country level and based on average actual production emissions from that country.
There is also a 1% markup added to these average country values for fertilisers for 2026, 2027 and 2028. In comparison, the other sectors which fall under CBAM (steel and iron, aluminium, concrete, hydrogen and electricity) will have a 10% markup added to average values in 2026, 20% added in 2027 and 30% added in 2028.
What is CBAM going to cost Irish farmers in 2026?
Example 1 – urea: An Irish fertiliser producer imports a 5,000t cargo of urea from Algeria in 2026. The embedded emissions in the product is 1.42t CO2e per tonne of urea. Free allocations amount to 0.87t CO2e per tonne of urea. The importer will need to purchase 2,750 CBAM certificates. At the average price for the year to date (circa €85/t), the CBAM price for the cargo would be €233,750, or €46.75/t.
Based on the most recent DAFM stats over 240,000t of urea and protected urea were used by farmers in the 2024/2025 season. Applying a €46.75 per increase to this volume means that Irish farmers would likely incur a CBAM cost of €11.2m if usage remains the same in the current season.
Example 2 – CAN: An Irish fertiliser producer imports a 5,000t cargo of CAN from Egypt in 2026. The embedded emissions in the product is 2.07t CO2e per tonne of CAN. Free allocations amount to 0.67t CO2e per tonne of CAN. The importer will need to purchase 7,000 CBAM certificates. At the average price for the year to date (circa €85/t), the CBAM price for the cargo would be €595,000, or €119./t.
For CAN the CBAM costs essentially close options to source product from outside the EU for Irish and other European importers. Demand for European produced CAN has increased and as the EU is already not self sufficient for nitrogen production, there is a real risk of product scarcity, particularly in countries with no domestic production, as the season continues.
Table 3:
Table 4:
What is CBAM going to cost Irish farmers in 2034?
As the quantity of free allocations will be reduced to zero by 2034 and the price of EUAs is expected to rise, it is expected that the cost of CBAM to Irish farmers will climb significantly over the next eight years.
Based on Climate Action Plan targets to achieve 90-100% of straight nitrogen sales as protected urea by 2030, it’s likely that the CBAM cost to Irish farmers would be between €84m and €140m per year. However, it is important to point out that a relative cost increase will be added to fertilisers produced in Europe also under the ETS.
For CAN, the cost of CBAM is far more significant. This is due in principal to the default values as assigned to countries. There are a number of decarbonisation measures that producers can implement during production to reduce emissions and many of the European producers have already implemented these measures in anticipation of the reduction of free allocations under ETS.
As actual emissions values become available and assuming producers adopt these decarbonisation measures, the additional cost to CAN due to CBAM may reduce from what’s outlined in the table. It is estimated that the ETS cost on CAN would be 30%-50% of the CBAM cost.
Did CBAM get suspended in January along with fertiliser tariffs?
No. CBAM on fertilisers is still in place. In January of this year, the European commission announced guidance on how a temporary suspension of CBAM for fertilisers could be implemented with retroactive implementation to 1 January.
There is a “CBAM handbrake” in the current proposed amendment to the CBAM legislation called Article 27a. In order to suspend CBAM on fertilisers by pulling this “handbrake”, this proposed amendment will have to be adopted to the CBAM legislation by a vote of approval from the commission and the parliament.
Market monitoring will then need to prove that serious and unforeseen circumstances have caused severe harm and impact to the price of goods. For context, the previous amendment to CBAM was proposed in February 2025 and took over seven months to be adopted so any likely adoption of this amendment will be too late for the 2026 growing season.
What are the outstanding challenges for fertiliser importers in dealing with CBAM?
In anticipation of CBAM coming into effect on 1 January, imports of urea and CAN from North Africa into Ireland were increased significantly in October, November and December 2025 however limits to storage, warehousing and capital means that there is still a significant amount of fertiliser to be imported to meet the crop demand for 2026.
Due to uncertainty on CBAM certificate price, the uncertainty caused by the European Commission announcements in early January, poor output prices and the significant cost increase on north African fertilisers, demand for fertilisers has been low across Europe with European production being able to satisfy demand.
EU importers have focussed on purchasing EU CAN and avoiding CBAM products. This shift in demand has seen the price of CAN in Europe increase considerably since January with supply being a concern.
There is concern that once demand picks up in Europe in spring 2026, supply of fertilisers could become limited with reduced early season imports and long lead times causing delays in fulfilling orders.
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