Navigating CBAM Compliance in the Fertilizer Industry

A Practical Guide for 2025

Understanding CBAM: What It Means for Fertilizer

The CBAM regulation targets sectors with high carbon footprints—where the risk of “carbon leakage” is highest. Carbon leakage refers to the situation where companies might otherwise relocate production to countries with less stringent environmental policies, thereby undermining global decarbonization efforts. Companies might relocate production to countries with less stringent environmental policies in these sectors, undermining global decarbonization efforts.

Fertilizers, especially those containing synthetic nitrogen compounds, are a prime target. Their energy-intensive production typically relies on natural gas or coal as feedstock. This means:

• High Scope 1 emissions (direct emissions from chemical processes).
• Significant Scope 2 emissions (from purchased electricity).
• Additional Scope 3 emissions (from the supply chain, especially for ammonia and phosphate inputs).

Under CBAM, EU fertilizer importers must report these emissions and pay a carbon cost equal to EU-based producers’ obligations under the Emissions Trading System (ETS).

Fertilizer Products Covered by CBAM

CBAM currently applies to:

• Urea (46%N) – Used extensively in cereal and cash crop production.
• Ammonia (NH₃) – A base product for all nitrogen fertilizers.
• Ammonium Nitrate (AN) – High-nitrogen fertilizer for temperate climates.
• Other nitrogen-phosphate fertilizers depend on the carbon intensity of their inputs.

CBAM Timeline: Where Are We Now?

In 2025, fertilizer companies must ensure:

• Complete reporting of embedded emissions (kg CO₂e per ton of fertilizer).
• An EU-accredited verifier verifies all emissions data.
• Importers are trained and aligned with CBAM procedures.

Significant Challenges Facing Fertilizer Exporters

1.Complex Carbon Footprint Calculations

• The production of urea, ammonia, and ammonium nitrate involves multiple chemical reactions with varying emission factors.
• Exporters must implement Life Cycle Assessment (LCA) or GHG Protocol methodologies to track emissions from raw materials to finished products.
• This complexity often overwhelms smaller producers or regions with limited, which raises infrastructure.

2. Verification & Compliance Costs

• External verification must be completed before shipments are accepted at EU customs.
• Verifiers require access to operational data, production records, and supply chain information, raising costs and administrative burdens.

3. CBAM Certificate Costs

• Based on 2025 projections, the EU carbon price is expected to range between €85 and € 100 per metric ton of CO₂.
• For urea (producing roughly 1.5–2.0 tons of CO₂/ton), this translates into an additional €130–200/ton of cost, significantly affecting margins unless carbon emissions are reduced.

4. Disadvantage Against EU Producers

• European fertilizer producers already operate under ETS. Many are upgrading to low-carbon ammonia, renewable energy, and carbon capture.
• Exporters relying on coal-based ammonia, particularly from Asia or Russia, will be at a pricing disadvantage.

What Fertilizer Exporters Must Do in 2025

Step 1: Conduct a Carbon Audit

• Begin with a comprehensive audit of production facilities.
• Identify emissions from raw materials, energy usage, chemical reactions, and transportation.
• Use recognized tools such as ISO 14064, GHG Protocol, or the EU CBAM calculator.

Step 2: Partner with Certified Verifiers

• Find an EU-accredited verifier to review your emissions reports.
• Establish a digital reporting mechanism that meets EU customs requirements.
• Set up an internal compliance team or hire consultants with experience in carbon regulation.

Step 3: Decarbonize Fertilizer Production

• Shift from gray ammonia (fossil-based) to blue (CCS-supported) or green ammonia (renewable hydrogen).
• Incorporate urease inhibitors, biofertilizers, or enhanced efficiency fertilizers to reduce carbon intensity.
• Explore partnerships with green technology firms or access climate finance support.

Step 4: Update Pricing Models

• Include CBAM-related costs in FOB/CIF quotations.
• Collaborate with buyers in the EU to ensure transparency in carbon-adjusted pricing.
• Consider carbon credit offsets where permissible under bilateral trade agreements.

Alternative Strategy: Diversify Markets

If CBAM compliance proves too costly or complex, geographic diversification becomes essential. Markets in Africa, Southeast Asia, South America, and the Middle East offer robust demand for fertilizers without the regulatory burden of CBAM.

Companies may also:

• Offer CBAM-compliant and non-compliant product lines.
• Create sustainability certifications for fertilizer shipments to appeal to ESG-conscious buyers globally.

The Long-Term Shift: Green Fertilizer is the Future

CBAM is not a stand-alone policy but part of a more significant movement toward climate-aligned trade. Over the next decade:

• Green ammonia will replace fossil-based nitrogen.
• Fertilizer producers will integrate carbon capture and storage (CCS) or direct air capture (DAC) into operations.
• Digital carbon ledgers will become standard tools for reporting embedded emissions.

First movers—companies that prepare now—stand to benefit from:

• Preferential market access.
• Stronger ESG ratings.
• Strategic partnerships with EU buyers and institutions.

Conclusion

The implementation of CBAM is a defining moment for the fertilizer industry. Fertilizer exporters to the EU must act decisively in 2025 to align with the regulation’s stringent carbon reporting and verification requirements. Although challenging, this shift opens a path to modernizing production, building sustainability credentials, and securing long-term competitiveness.

Green Gubre Group is committed to supporting our global partners in navigating CBAM compliance. We offer compliant sourcing, sustainability integration, and customized advisory support. Let’s embrace the future of fertilizer trade together—clean, transparent, and carbon-responsible.

References

• European Commission – CBAM Official Regulation
• International Fertilizer Association – CBAM and Fertilizers
• Carbon Market Watch – Understanding CBAM
• ICIS – CBAM Compliance and Chemical Trade
• IEA – Green Ammonia and Low-Carbon Fertilizer Production
• S&P Global – Fertilizer Industry Outlook & CBAM Impact