Australia needs to consider CBAM impact on agriculture

Australia needs to consider the associated impacts a carbon border adjustment mechanism (CBAM) would have on the cost of critical inputs for the country's agriculture sector, specifically fertilizers ammonia and derivatives like urea and ammonium phosphate, key farming group the National Farmers' Federation (NFF) told Argus on 18 February.

Australian agricultural representatives GrainGrowers and NFF are against a CBAM and said that it would negatively impact local farmers.

"A CBAM for Australia risks extreme harm and in no way ensures or encourages a transition to lower emissions farming," GrainGrowers chair Rhys Turton said in a statement in October 2025.

There is very little domestic fertilizer production in Australia, and farmers rely on imports of urea, the country's most used fertilizer (see table). Urea and ammonium phosphates are the products most exposed to import competition and price changes in the chemical and fertilizer manufacturing industry, Australia's Department of Climate Change, Energy, the Environment and Water (DCCEEW) said in its Carbon Leakage Review last week.

A proposed CBAM could begin with imports of cement and clinker and may expand to include hydrogen, steel and ammonia and derivatives like urea and ammonium phosphate.

Fertilizer is used by local farmers for broadacre crops including wheat, canola and barley.

Rising imports

Australia's urea imports have risen since 2018, data from the Australian Bureau of Statistics (ABS) show, and the country's last domestic production shut down in 2023.

Australian fertilizer producer Perdaman's 2.3mn t/yr Project Ceres in Western Australia is expected to come on line in 2027, making it the country's only urea production facility. The plant will use natural gas as a feedstock under a 20-year agreement with Woodside's Scarborough Gas Project.

Dyno Nobel's 769,000 t/yr Phosphate Hill and Impact's 170,000 t/yr Hobart facility are Australia's only MAP/DAP and single superphosphate production facilities, respectively. MAP/DAP and superphosphates imports were 1.6mn t and 27,000t in 2025 respectively, ABS data show.

Incentivising domestic production

Views on a CBAM differ across different sectors, although most stakeholders agree on the need for domestic investment to drive production.

Australia needs to incentivise local fertilizer production, NFF said in its December 2024 submission to the carbon leakage review. The government should provide financial assistance for new technologies aimed at reducing emissions, it added.

The Australian Hydrogen Council also supports investment and financial support, but said in its submission that a CBAM would incentivise local production and reduce Australia's reliance on urea imports.

A potential CBAM might represent 1-3pc of ammonium nitrate import costs in 2030, DCCEEW said. Australia produces 1.9mn t/yr of ammonium nitrate, according to the department. The country imported 147,000t in 2025, ABS data show.

Ammonium nitrate is a byproduct of ammonia, which is a byproduct of hydrogen. Australia introduced its National Hydrogen Strategy in 2024. The strategy sets a green hydrogen production target of 15mn t/yr by 2050.

The European Union's (EU) CBAM came into effect from 1 January 2026. The policy has caused confusion and uncertainty for the fertilizer industry and several EU countries supported suspending application on fertilizers.

Australian chemicals and explosives firm Orica declined to comment, while firms CSBP, Yara and Dyno Nobel did not respond for comment at the time of writing.

By Susannah Cornford