Brussels plans to solve the problem with revenues from the bloc’s carbon market, the Emissions Trading System (ETS), that is – by reinvesting them in agriculture to curb price increases associated with the closure of the Strait of Hormuz, through which about 30% of the world’s fertilizer exports pass.
“The Commission will propose a targeted financial support mechanism whereby a portion of the revenues associated with the ETS will be channeled to farmers to rapidly increase the use of bio-based (organic fertilizers) and low-carbon fertilizers,” the draft document, which has come into Euronews’ possession, said.
Nitrogen fertilizers are produced using natural gas, which accounts for up to 80% of production costs. Fertilizer production in Europe is under pressure due to Russia’s invasion of Ukraine and the conflict in the Middle East: farming costs have risen sharply, as have consumer costs.
However, the move could trigger a backlash from energy-intensive industries, which are obliged to pay for the carbon dioxide emissions associated with production. While agriculture is exempt from the ETS, it now appears that it will benefit from the system.
The proposal, which can still be amended before the Commission presents it on May 19, reflects Brussels’ recognition of the difficulties of farmers as well as the strategic importance of food security.
The trend towards “organics”
Even before the conflict in the Middle East, farmers across the EU were protesting against soaring fertilizer prices associated with the EU’s 50% duty on Belarusian and Russian fertilizers, which will be introduced in June 2025.
Poland, France, Germany, Spain and Italy were among the largest importers of Russian fertilizers before the new tariffs went into effect. Despite the war in Ukraine, Russia accounts for about 30% of EU fertilizer imports, according to Eurostat data for the period from 2024 to 2025.
The Commission recently announced plans to stall the phasing out of free carbon credits under the ETS for the fertilizer sector and other industries, effectively allowing companies to emit pollutants for longer. The decision is expected to generate €4 billion in additional revenues for the bloc’s carbon market. However, the measure will depend on the sector investing in more sustainable alternatives.
“Options will be assessed for a slower trajectory of phasing out free allowances for the fertilizer sector, subject to increased production of organic, circular or low-carbon fertilizers,” the draft said.
The EU executive is also considering the use of a Carbon Border Adjustment Mechanism (CBAM) to protect European producers from cheaper, high-emission imports.
“The Commission will assess the impact of the costs associated with CBAM and ETS on fertilizer prices paid by farmers and update the database on price developments at farm level in general,” the document, which has come into Euronews’ possession, also said.
In January, France and Italy called on the European Commission to exempt carbon tariffs on imported fertilizers from the border carbon tax, which came into force on January 1. They argued that the measure would help preserve European competitiveness for local farmers.
Creating “leading markets for green fertilizers”
The creation of “green ammonia corridors” with countries in Africa and the Middle East is also proposed to reduce dependency and diversify supply chains. This shows that measures related to the fertilizer sector are included in the EU’s new energy strategy.
Calls for divestment from fossil fuel-based fertilizers
In an open letter (source in English) sent to six European Commissioners, a coalition of environmental NGOs called on EU leaders to use the new fertilizer plan to signal the end of fossil fuel dependency in Europe’s food system.
The groups argue that the bloc’s food security remains vulnerable amid volatile fossil fuel markets, exacerbated by tensions in the Middle East.
“The EU Fertilizer Action Plan should be a turning point where we stop trying to ‘fix’ a broken fossil-dependent model and instead start scaling up the agroecological solutions already in place to ensure real sustainability and food sovereignty,” says Lisa Tostado, an agrochemical and fossil fuel specialist at the Center for International Environmental Law.
