EU Halts CBAM Fees and Fertiliser Tariffs to Ease Soaring Costs

The European Union has recently announced two trade-friendly measures aimed at easing cost pressures linked to its Carbon Border Adjustment Mechanism (CBAM) and supporting the agricultural sector, particularly farmers facing high fertiliser prices.

First, the EU will temporarily suspend carbon tariffs on certain products. According to the EU Trade Commissioner, the European Commission will issue guidance allowing the temporary suspension of carbon tariffs on selected goods, with fertilisers such as urea and ammonia being the primary focus. The suspension will apply retroactively from 1 January 2026 and is intended to provide a full exemption from the carbon tariff component, rather than a partial reduction. This pause is positioned as a temporary response to the EU's agricultural crisis, including protests by farmers over elevated fertiliser costs.

Second, the EU confirmed the suspension of existing import tariffs. The Trade Commissioner announced that the EU will suspend the 6.5% tariff on nitrogen fertilisers under HS code 3102, including urea, and the 5.5% tariff on ammonia under HS code 2814, both of which fall under the Most Favoured Nation (MFN) tariff regime. This initiative is designed to further reduce import expenses and enhance the effectiveness of the relief package.

Together, these measures aim to fully offset the additional costs generated by the CBAM and ease fertiliser price pressures faced by European farmers. Given the EU's reliance on imported fertilisers, the decision is widely viewed as a temporary form of price relief for the agricultural industry.

The CBAM, formally known as the Carbon Border Adjustment Mechanism, is the EU's framework for imposing carbon costs on certain high-emission goods imported into the bloc. It officially enters full implementation on 1 January 2026, following a transitional period from 2023 to 2025 during which companies were primarily required to submit emissions data. From 2026 onward, importers must make actual carbon-related payments.

Under the mechanism, importers must purchase CBAM certificates based on the embedded carbon emissions of the imported product, with prices linked to EU carbon market allowance levels. With EU carbon prices estimated at approximately €80–100 per tonne, businesses are expected to face additional financial burdens that may compress profit margins.

Currently, CBAM covers high-emission sectors including steel, aluminium, cement, fertilisers, electricity, and hydrogen. The EU plans to expand the scheme from 2028 to include around 180 downstream products with high steel and aluminium content, such as machinery, automotive components, and household appliances.