Ammonia Europe opposes tariff removal, CBAM weakening

Industry body Ammonia Europe has denounced the European Commission's proposal to remove most-favoured nation (MFN) import tariffs on ammonia to mitigate the impact of the EU's carbon border adjustment mechanism (CBAM) on fertilizers.

The EU announced plans to suspend standard import tariffs on ammonia and urea following a meeting of EU agriculture ministers on 7 January, with extensions to other fertilizer products not ruled out. At the same time, the commission's reference to Article 27a created a backlash of confusion around whether CBAM could be suspended for fertilizers.

In reality, Article 27a could allow for a temporary and retroactive suspension of CBAM in cases where it has caused "severe harm to the union internal market due to serious and unforeseen circumstances related to the impact on the prices of goods". The clause was included within CBAM amendment proposals issued last month but still needs to be formally approved by both the European Parliament and the Council of the EU.

Ammonia Europe is calling on policy makers to "reject short-term fixes which fail to address the root causes of Europe's competitiveness crisis".

The industry body highlighted that solutions need to address Europe's energy cost crisis and ensure effective carbon leakage protection.

In its 7 January statement, the commission highlighted that fertilizer prices remain 60pc above their 2020 average. But this figure fails to recognise that feedstock natural gas prices have not returned to 2020 levels. European benchmark gas prices averaged $3.20/mn Btu on the front month contract in 2020. The same contract was assessed at $12.50/mn Btu on 19 January.

"Removing MFN tariffs does nothing to address this structural issue but rewards imports produced with cheaper energy and greater carbon intensity, ultimately further weakening the EU's industrial base," the statement said.

Ammonia is not limited to use in fertilizers. Applications also include pharmaceuticals, plastics, resins, glues, explosives and novel uses within the energy transition, which are all caused further injury by the tariff removal, the industry body said. The commission in July named ammonia as one of a few "critical" chemicals to the EU economy, which require additional support under its own Critical Chemicals Alliance. But removing import tariffs undermines efforts to address capacity closure risks in the chemical sector, and to ensure fair competition with non-EU producers who do not face equivalent carbon costs to those paid by European producers under the EU's emission trading scheme.

"MFN tariffs have nothing to do with CBAM. It would be completely wrong to remove them," Ammonia Europe chief executive Stephen Jackson told Argus. "This approach doesn't address root causes and risks further exacerbating Europe's lack of competitiveness."

By Lizzy Lancaster