Norwegian fertilizer giant Yara is not expecting a suspension of the European Union's Carbon Border Adjustment Mechanism (CBAM) for fertilizer products, despite recent confusion.
The Commission is set to issue further guidance around provisions that could allow for the temporary suspension of the CBAM with retroactive application from 1 January 2026, according to a statement issued on 7 January, which created some confusion as to whether the carbon levy will remain in place.
"To remove [CBAM] 7 days after implementing it… would undermine what it was meant to do" Yara said during the firm's Capital Markets Day presentation.
Article 27a, included within proposals issued last month, stipulates a temporary suspension could be issued if CBAM causes "severe harm to the Union internal market due to serious and unforeseen circumstances related to the impact on the prices of goods".
But the impact to prices of carbon intensive goods has always been expected, Yara pointed out.
"It's been crystal clear that the carbon cost will be reflected in the cost of the product. The additional carbon cost is based on the commission's own methodology and default values, so this cannot be a surprise or an emergency, this is exactly what it was supposed to do", Yara chief executive Svein Tore Holsether said. A suspension on the grounds of increased cost would therefore be surprising, he indicated.
CBAM has also been designed to coincide with the phasing out of free allowances for domestic industry emitters under the EU's emission trading system (ETS). "Suspending CBAM, while continuing the reduction of EU ETS allowances, will reduce the competitiveness of EU producers," Holsether said. "The intention of CBAM was to... mirror the cost that the European industry has been subject to for a number of years", he added.
Yara has built a ‘quota bank' of 6mn EU ETS quotas through its emission efficiency investments which it can use against its own emissions or sell back into the market, equating to a value of around $500mn, according to the firm. Yara also plans to limit its CBAM exposure through investments or supply agreements with low-carbon ammonia production assets outside of Europe, such as the firms proposed partnership with Air Products
But a suspension of CBAM would mean "we likely wouldn't have the return required on a US blue [low-carbon] project", Holsether said. Any weakening of CBAM instead "risks opening the door to carbon-intensive imports, eroding Europe's industrial base, and jeopardising food security".
CBAM revenues should instead be used to create incentives to help farmers while making emitters pay, Holsether said.
The Commission's 7 January statement also proposed a removal of duties on imports of ammonia and urea to help offset some of the additional costs associated with CBAM, and included details on a €48bn package of measures to aid farmers. But critics say the measures are not sufficient to support Europe's agri-food industry with additional costs, particularly while fertilizer prices are already 60pc higher than in 2020.
The EU's CBAM took full effect on 1 January, imposing a carbon levy for certain goods imported into the EU. Ammonia and all fertilizers containing nitrogen from countries that are not already subject to the EU emissions trading system (ETS) or a system fully linked to the EU ETS are within scope.
