top of page
Search

UK CBAM for Fertiliser Importers: Nitrogen-Based Products, Embodied Emissions & 2027 Compliance Guide

A Practical Compliance Intelligence Report for UK Importers, Compliance Managers and Carbon Trade Professionals


Published by CBAM Journal | Sekason Research Limited, London


Executive Summary


UK CBAM applies to nitrogen-based fertiliser imports from 1 January 2027, and 2026 is the operational preparation year. Any business importing £50,000 or more of CBAM goods over a rolling 12-month period — or forecast to cross that threshold within the next 30 days — must register with HMRC under Finance Act 2026, Schedule 17. For fertiliser importers specifically, the regime introduces a scope point that distinguishes it from other CBAM sectors: alongside carbon dioxide, UK CBAM covers nitrous oxide (N₂O) emissions, and calculates liability against tonnes of nitrogen contained in the imported good rather than tonnes of product.


The single most consequential divergence for any business trading across both jurisdictions is scope of emissions coverage. UK CBAM covers direct emissions only at launch, with indirect emissions deferred to 2029 at the earliest; EU CBAM already covers both direct and indirect emissions for fertilisers, a distinction that has applied since the EU's definitive regime began on 1 January 2026. A Compliance Manager running a single emissions-tracking process across both regimes risks either under-reporting to HMRC or over-collecting data the UK does not yet require.


Financially, fertilisers sit apart from every other CBAM sector. The European Commission has fixed the fertiliser default-value mark-up at a flat 1%, against 10% rising to 30% for steel, aluminium, cement and hydrogen. This materially reduces the near-term cost penalty for relying on Commission defaults rather than verified supplier data — but it does not remove the underlying certificate cost, and the Commission itself has signalled this setting may not persist. On the UK side, HM Treasury has stated it does not expect UK CBAM to have a significant impact on UK farmers, citing existing free-allowance surpluses held by UK fertiliser manufacturers; independent industry modelling from the Agricultural Industries Confederation (AIC) supports a materially lower cost outcome (under £10/t) than the £50/t figures discussed in 2024.


Three structural risks require immediate attention. First, the UK's default emissions values, illustrative CBAM rate, and finalised penalty figures remain unpublished, with HMRC targeting late 2026 — leaving importers unable to model exact liability with certainty before the regime commences. Second, the UK has no significant domestic ammonia production capacity following the permanent closure of CF Fertilisers' Billingham plant in July 2023, meaning the overwhelming majority of UK nitrogen fertiliser demand is imported and therefore CBAM-exposed. Third, supply-side disruption is already visible in the EU market, where CBAM's definitive-phase entry combined with escalating tariffs on Russian and Belarusian fertiliser produced an 85% collapse in EU nitrogen fertiliser imports in January 2026 — a live precedent for how quickly compliance and trade-policy shocks can compound.


UK CBAM for Fertiliser Importers poster with nitrogen fertiliser sack, factory, CO2 icon, world map, and 2027 compliance text.

This report translates the regulatory framework into an operational programme: product scope determination, commodity code classification, embodied emissions methodology, supplier engagement and verification, documentation and governance, financial exposure modelling, and a structured 2026 action plan. It is designed to move a Compliance Manager from regulatory awareness to audit-ready operational readiness before UK CBAM's first accounting period opens on 1 January 2027.


1. Regulatory Context


1.1 Why the UK Introduced CBAM

The UK CBAM exists to close a gap in the UK's existing carbon pricing architecture. UK-based manufacturers already face a carbon cost on their emissions under the UK Emissions Trading Scheme (UK ETS); imported goods have faced no equivalent cost. UK CBAM addresses this by applying a comparable carbon price to specified imports from the aluminium, cement, fertiliser, hydrogen, and iron and steel sectors — the same five sectors judged most exposed to carbon leakage risk, meaning production could otherwise relocate to jurisdictions without a comparable carbon price rather than genuinely decarbonising.


Fertilisers were included in this initial sector list on the basis of high emissions intensity and significant trade exposure — the sector's reliance on the gas-intensive Haber-Bosch process for ammonia synthesis makes it one of the most carbon-intensive categories of traded industrial good. The specific weighting the government applied when selecting fertilisers ahead of other candidate sectors (such as glass and ceramics, which were excluded from the 2027 scope) is not detailed in publicly available regulatory guidance beyond this general carbon-leakage-risk rationale.


1.2 Legislative Framework

UK CBAM's legal architecture separates primary legislation, which establishes the tax and its core mechanics, from secondary legislation, which will supply the operational detail importers need to actually calculate and report liability.

Legal Instrument

Purpose

Status

Impact on Importers

Finance Act 2026, Schedule 17

Establishes the UK CBAM tax, registration threshold, liable person definition, return and payment framework, and penalty framework by amendment to existing tax schedules

In force

Legal basis for the entire regime; confirms £50,000 threshold and 1 January 2027 commencement

Draft Carbon Border Adjustment Mechanism (Administrative Provisions) Regulations 2026

Registration and administrative mechanics

Consultation closed 24 March 2026

Determines the practical registration process

Draft Carbon Border Adjustment Mechanism (Emissions and Verification) Regulations 2026

Emissions monitoring methodology, verifier accreditation standards, system boundaries

Consultation closed 21 May 2026

Governs how importers must calculate and evidence embodied emissions

Draft Carbon Border Adjustment Mechanism (Transitory Provision) Regulations 2026

Not detailed in published guidance

Under consultation

Not detailed in published guidance

Every substantive obligation covered in this report — registration threshold, scope, functional unit, verification standard, six-year record retention — is confirmed in Finance Act 2026 or HMRC's published Policy Summary. Default emissions values, the illustrative CBAM rate, and finalised penalty amounts remain in secondary legislation not yet laid.


1.3 Fertilisers Within UK CBAM Scope

UK CBAM's fertiliser coverage is defined product-by-product through Combined Nomenclature (CN) commodity codes, not by a general "fertiliser" category. A product is in scope only if its specific CN code appears in the Annex to HMRC's CBAM Policy Summary.

Commodity Code

Product

Included?

Exclusions

Compliance Notes

CN 2808

Nitric acid; sulphonitric acids

Yes

None identified

Precursor for downstream nitrate-based products

CN 2814

Ammonia, anhydrous or in aqueous solution

Yes

None identified

Primary precursor good for the entire fertiliser sector

CN 2834 21 00

Nitrates of potassium

Yes

None identified

Single-nutrient nitrogen product

CN 3102

Mineral or chemical fertilisers, nitrogenous

Yes

None identified

Includes urea (CN 3102 10)

CN 3105

Mineral or chemical fertilisers containing two or three of nitrogen, phosphorus and potassium; other fertilisers

Yes

CN 3105 60 00 excluded (phosphorus + potassium fertilisers, no nitrogen content)

The exclusion is nitrogen-specific: a two-element PK fertiliser with no nitrogen falls outside scope; an NPK product with any nitrogen content is in scope

The functional unit for fertilisers is tonnes of CO₂e per tonne of nitrogen contained in the imported good — not tonnes of product. This means two shipments of identical tonnage but different nitrogen concentration carry different CBAM liability, and importers of blended or mixed-concentration products must calculate nitrogen content per shipment rather than applying a single rate across their fertiliser import book.


1.4 UK vs EU CBAM for Fertilisers

The UK and EU regimes share the same core commodity code scope for fertilisers — importers trading across both markets are classifying against effectively the same product list. Where they diverge sharply is emissions scope, mechanism, and timeline.

Topic

UK CBAM

EU CBAM

Practical Business Impact

Commencement

1 January 2027

1 January 2026 (definitive phase)

EU compliance obligations are already live; UK preparation window closes at end of 2026

Mechanism

Tax administered by HMRC

Certificate purchase and surrender

Different finance and treasury processes required in each jurisdiction

GHG scope for fertilisers

Direct CO₂ + N₂O only; indirect deferred to 2029 at the earliest

CO₂ + N₂O, direct and indirect (Scope 1 + Scope 2)

A dual UK/EU emissions dataset cannot be built once for both regimes — the EU dataset must be a superset of the UK one

Precursor emissions treatment

Counts all embedded precursor emissions in a CBAM good

Counts precursor emissions only where explicitly named in Annex II to Regulation (EU) 2023/956

UK importers may face a broader emissions calculation obligation than EU counterparts for the same physical product

Registration threshold

£50,000 of CBAM goods over rolling 12 months

50 tonnes of CBAM goods per calendar year

Value-based vs mass-based thresholds mean a business could clear one threshold without clearing the other

Default value mark-up (fertilisers)

Not yet published

Flat 1% (vs 10–30% for other sectors)

EU importers have a materially lower cost penalty for using defaults on fertilisers than on any other CBAM good

First reporting/return deadline

31 May 2028 (covering full-year 2027)

30 September 2027 (covering calendar-year 2026)

EU obligation falls due first — multinational importers face the EU deadline more than seven months before their UK equivalent

Certificate/carbon price

UK CBAM rate, sector-specific, set quarterly from 2027, linked to UK ETS

€75.36/tCO₂e (Q1 2026), €75.28/tCO₂e (Q2 2026), quarterly average in 2026, weekly from 2027

EU cost is already quantifiable; UK cost is not yet quantifiable pending the illustrative rate

No formal mechanism for mutual recognition or shared verified-data exchange between the UK and EU regimes has been published. Importers should treat the two compliance programmes as operationally separate unless and until such an arrangement is confirmed.


Infographic timeline of UK CBAM for fertiliser importers, 2026–2028, with red icons and milestones for guidance, reporting, and payment.

2. Compliance Obligations


2.1 Who Must Comply?

The liable person under UK CBAM is the importer of the CBAM good — specifically, the person named on the customs declaration, or the person on whose behalf the declaration is made where no customs controls apply. A tax agent may be appointed to submit CBAM returns on the liable person's behalf, but the agent cannot register in place of the liable person and carries no liability itself.


Registration is triggered by either of two tests:

  1. Backward-looking test — the cumulative value of CBAM goods imported over the preceding rolling 12-month period reaches or exceeds £50,000.

  2. Forward-looking test — the value of CBAM goods expected to be imported over the next 30 days is itself expected to reach or exceed £50,000.


A business only needs to meet one of these two tests to trigger a registration obligation. Compliance Managers should treat the forward-looking test as the operationally relevant one for procurement planning: a single large shipment can trigger registration even where the preceding 12 months' trading history would not have done so.


Infographic on UK CBAM for nitrogen fertilisers, with coverage table and compliance triggers in red and black on white background.

2.2 Determining Product Scope

Classification for fertilisers is more demanding than for single-product sectors because the CN 3105 category covers a wide range of mixed formulations, only some of which are in scope. The starting question for every product line is not "is this a fertiliser?" but "does this specific CN code appear on the Annex list, and does it contain nitrogen?"


For borderline products, apply this sequence:

  1. Confirm the product's full CN code against the confirmed in-scope list in Section 1.3.

  2. If the product falls under CN 3105, confirm it is not classified under the excluded subheading CN 3105 60 00 (phosphorus and potassium only, zero nitrogen content).

  3. For blended or custom formulations manufactured to a specific nutrient ratio, obtain the supplier's declared CN classification in writing — do not self-classify a bespoke blend without documented confirmation, since misclassification risk sits with the liable person, not the supplier.

  4. Where a product's nitrogen content varies between shipments (common in bulk agricultural blends), the nitrogen content must be assessed per shipment, not applied as a fixed annual average.


2.3 Embodied Emissions Requirements

This is the technical core of UK CBAM compliance for fertilisers, and the area where existing government guidance provides the least operational detail.


Direct emissions. UK CBAM's embodied emissions calculation for fertilisers covers direct CO₂ emissions from the production process, plus nitrous oxide (N₂O) — a gas associated with nitric acid production and, more broadly, with ammonia-based fertiliser manufacturing. N₂O has a global warming potential roughly 300 times that of CO₂ over a 100-year horizon, meaning even a small mass of N₂O emissions converts to a materially larger CO₂-equivalent figure. Indirect emissions — those associated with the electricity consumed during production — are not currently included in UK CBAM and will not be included before 2029 at the earliest.


Functional unit. Emissions intensity is expressed in tonnes of CO₂e per tonne of nitrogen contained in the imported good, not per tonne of product mass. This is a deliberate design choice reflecting the fact that fertiliser products vary widely in nitrogen concentration.


Worked illustration of the functional unit principle (mechanism only — figures are illustrative placeholders, not confirmed values, pending the UK's own default emissions data): if a nitrogenous fertiliser shipment weighs X tonnes and has an assumed nitrogen content of Y%, the relevant CBAM calculation base is the resulting tonnage of nitrogen contained, not the tonnage of product.

The applicable emissions intensity (tCO₂e per tonne of nitrogen) is then applied against that nitrogen tonnage — meaning that two shipments of identical mass but different nitrogen concentration will carry materially different CBAM liability. The UK's specific default emissions intensity values for ammonia, urea, nitric acid, and mixed fertiliser production routes have not yet been published; HMRC guidance on this point is expected in late 2026.


Precursor emissions. Ammonia (CN 2814) functions as a precursor good across the entire sector — it is the direct input to nitric acid (CN 2808), urea (CN 3102 10), and mixed NPK fertilisers (CN 3105).

An importer of a complex nitrogen product manufactured using precursor ammonia that was itself a CBAM good must account for the precursor's embedded emissions within the total embodied emissions calculation for the final good.


Infographic comparing UK CBAM and EU CBAM for fertilisers, with red-and-black table of dates, emissions, reporting, and verification.

This is where the UK methodology diverges materially from the EU's: UK CBAM counts all embedded precursor emissions within a CBAM good, whereas EU CBAM under Implementing Regulation (EU) 2025/2547 counts precursor emissions only where the specific precursor is explicitly named in Annex II to Regulation (EU) 2023/956. In practice, this means the UK calculation obligation for a complex nitrogen product may be broader than the equivalent EU obligation for the identical physical shipment — a divergence UK importers running parallel UK/EU compliance programmes must build into their data model, not assume away.


2.4 Supplier Data & Verification

Where a UK importer chooses to use actual, verified emissions data rather than a government default value, that data must be verified by an independent verifier meeting a specific accreditation standard: the verifier's accreditation body must be a full member of Global Accreditation Cooperation Incorporated (GACI), and the verifier itself must hold accreditation against ISO/IEC 17011:2017, ISO/IEC 17029:2019, and ISO 14065:2020.


Verifier accreditation is scope-specific, not sector-generic. A verifier accredited for the activity group covering urea and mixed fertiliser production is not automatically eligible to verify emissions data for a different fertiliser production route, or for a different sector entirely such as steel.

Compliance Managers should confirm the precise accreditation scope held by any prospective verifier against the specific product category being imported — a generic "CBAM-accredited" claim from a verifier is not sufficient assurance on its own. No final published list of UK-accredited CBAM verifiers exists at the time of writing; verifiers currently accredited under equivalent EU ETS or EU CBAM standards represent the most plausible near-term candidate pool, though this has not been confirmed in UK guidance.


The genuine friction point in this area is what happens where an overseas supplier cannot, or will not, provide verified emissions data. Given that fertiliser production is concentrated among a relatively small number of large exporting countries — several of which have limited domestic carbon-pricing or verification infrastructure — importers should expect this to be a live operational problem rather than an edge case.

Where verified data is unavailable, the liable person falls back to government default values, which are expected to be set conservatively (i.e. above the average actual emissions intensity for an efficient facility) to preserve the incentive to collect real data. Importers with concentrated supplier bases in countries where third-party verification capacity is limited should build supplier engagement timelines that assume verification readiness will take longer than the supplier claims, and should not treat "the supplier says they can provide data" as equivalent to having a verified figure in hand.


2.5 Documentation & Record Keeping

Records relevant to a CBAM declaration must be retained for at least six years after the end of the accounting period to which they relate. This retention period applies regardless of whether the importer used actual verified data or a default value — evidence supporting whichever methodology was used must be retrievable for the full period.

A defensible internal governance structure should assign clear ownership across functions:

Function

Responsible For

Accountable

Consulted

Informed

Compliance

Overall CBAM registration and return submission

✓

—

—

Procurement

Supplier data requests, contract terms on emissions data provision

—

✓

✓

Finance

CBAM liability forecasting, budget allocation

—

✓

✓

Legal

Contract review, penalty risk assessment

—

✓

✓


3. Key Dates & Deadlines

Date

Regime

Milestone

Required Business Action

1 January 2026

EU

EU CBAM definitive phase begins; certificates apply to embedded emissions

EU-facing importers already under a live financial obligation

24 March 2026

UK

Consultation closed on draft Administrative Provisions Regulations 2026

Monitor for finalised registration mechanics

7 April 2026

EU

Q1 2026 CBAM certificate price published: €75.36/tCO₂e

Reference price for 2026 EU-side cost modelling

21 May 2026

UK

Consultation closed on draft Emissions and Verification Regulations 2026

Monitor for finalised verifier accreditation and methodology detail

6 July 2026

EU

Q2 2026 CBAM certificate price published: €75.28/tCO₂e

Update EU cost model

Autumn 2026

UK

Illustrative UK CBAM rate expected to be published

First reliable basis for UK liability forecasting

Late 2026

UK

Final secondary legislation, default emissions values, and finalised penalty amounts expected

Complete internal readiness programme against confirmed rules

1 January 2027

UK

UK CBAM commences — no transitional, reporting-only phase

Registration obligation active for any business already meeting the threshold

1 February 2027

EU

Certificate purchase window opens for 2026 EU imports

EU-side finance function must have certificate-purchasing process operational

30 September 2027

EU

First annual EU CBAM declaration due (covering 2026 imports)

Deadline for EU-facing importers, falls before the equivalent UK deadline

31 May 2028

UK

First UK CBAM return and payment due (covering full-year 2027)

UK-side finance function must have payment process operational

From 1 January 2028

UK

Reporting shifts to quarterly cycle

Update internal reporting cadence and resourcing

2029

UK

Earliest point at which indirect emissions could be added to UK CBAM scope

Monitor for scope-expansion consultation

HMRC has not confirmed an exact publication date within the late 2026 window for finalised secondary legislation, default values, and penalty amounts; Compliance Managers should treat this as an open monitoring item through the remainder of the year.


4. Financial Exposure & Risk


4.1 Understanding UK CBAM Liability

The UK CBAM liability formula is: CBAM liability = (imported embodied emissions × CBAM rate) − Carbon Price Relief (CPR)

The CBAM rate is sector-specific, set quarterly from 1 January 2027, and derived from the UK ETS quarterly average auction clearing price, adjusted for free allocation and a reduction factor reflecting the phase-out of free allowances over time. An illustrative UK CBAM rate is expected to be published in Autumn 2026 — until then, precise UK liability forecasting is not possible; only structural modelling against illustrative assumptions is available.


Carbon Price Relief (CPR) reduces liability where the liable person can evidence that a carbon price has already been paid on the imported good in its country of production — for example, under an equivalent third-country carbon pricing scheme. The specific reduction factor methodology and free allocation baseline period applicable to the fertiliser sector's CBAM rate calculation have not been published; this detail is expected in forthcoming secondary legislation.


4.2 Financial Exposure

Total CBAM-related cost exposure for a fertiliser importer spans several distinct categories, not all of which are direct carbon liability. No UK-Government-published blended cost-per-tonne figure exists at the time of writing; the industry estimates below are illustrative and sector-modelled, not official projections.

Cost Category

Nature

Available Reference Point

Carbon liability

Direct CBAM charge on embodied emissions

Not yet quantifiable for UK (illustrative rate pending); EU reference: Q2 2026 certificate price €75.28/tCO₂e

Verification cost

Third-party accredited verifier engagement

Illustrative EU-context range: €5,000 to €50,000 per installation, depending on complexity — treat as a proxy, not a confirmed UK figure

Internal implementation

Compliance, legal and finance staff time for programme build-out

Not quantified in available research

IT systems

Emissions tracking, supplier data management platforms

Not quantified in available research

Supplier engagement

Time and resource cost of obtaining verified data from overseas producers

Not quantified in available research

External consultants

Advisory support for classification, calculation, or audit readiness

Not quantified in available research

Illustrative industry modelling for the UK fertiliser sector: AIC modelling, based on an assumed 80% free allowance retention and an assumed £36/t CBAM rate, projects an actual cost impact of less than £10/t. Separate modelling by consultancy Andersons, based on a nominal £35/t UK ETS carbon price, projects a figure closer to £23–24/t on urea. Both figures sit materially below earlier autumn 2024 industry estimates of approximately £50/t on urea, now regarded within the sector as an overstatement.


HM Treasury's own position — set out in a written parliamentary response — is that it does not expect UK CBAM to have a significant impact on UK farmers, on the basis that UK fertiliser manufacturers have historically received free allowances in excess of their UK ETS surrender obligations, and that the CBAM rate will reflect this net-of-free-allowances position.


EU reference point. For comparison, a worked EU example using illustrative figures shows the scale of exposure where default values apply without verified data: a shipment of Egyptian-origin urea, assessed against the EU's country-specific default value of 1.404 tCO₂e per tonne of urea, produces an estimated CBAM certificate cost of approximately €39.49 per tonne of urea at the Q2 2026 certificate price of €75.28/tCO₂e (or approximately €41.96/t under an illustrative €80/tCO₂e assumption). This example illustrates the mechanism, not a confirmed UK-equivalent figure — the UK's own default values and rate are not yet published.


Sector-wide EU cost estimates diverge significantly depending on the source. Copa-Cogeca (the EU farmers' association) estimates the direct cost of CBAM to EU farmers for fertilisers at approximately €820 million in 2026, rising to €3.4 billion by 2034, with a cumulative cost of approximately €12 billion over seven years on a direct pass-through basis — or as much as €39 billion over seven years if EU-based producers align domestic pricing with import parity. Copa-Cogeca projects an average ~15% price increase in 2026 on nitrogen fertilisers as a result.


Fertilizers Europe and independent think tank Sandbag dispute the scale of this estimate, projecting a market-wide CBAM-driven urea price increase of only €1.40 to €1.79 per tonne, equivalent to roughly €45/t on urea cost but only an ~8% effect on the farm-delivered price. Compliance Managers modelling downstream cost pass-through should treat this range — not a single point estimate — as the credible envelope, and should note that neither figure is a UK-specific government projection.


4.3 Penalties & Compliance Risks

UK CBAM's penalty framework is established in Finance Act 2026, Schedule 17, Part 4, which imposes penalties by amendment to existing tax penalty schedules rather than creating an entirely new penalty code:

Failure Type

Statutory Basis

Status

Failure to register with, or provide information to, HMRC

Amends Schedule 41, Finance Act 2008

Framework confirmed; flat-rate figures pending

Failure to make a return

Amends Schedule 24, Finance Act 2021

Framework confirmed; flat-rate figures pending

Errors in returns and other documents

Amends Schedule 24, Finance Act 2007

Framework confirmed; flat-rate figures pending

Failure to pay CBAM

Amends Schedule 26, Finance Act 2021

Framework confirmed; flat-rate figures pending

Failure to notify changed or incorrect registration information

Standalone penalty provision, paragraph 38

Framework confirmed; flat-rate figures pending

Specific flat-rate penalty amounts for each failure category have not been published; HMRC secondary legislation is expected to finalise these figures in late 2026.


Infographic titled UK CBAM Compliance Workflow for Nitrogen-Based Fertiliser Imports, with 10 numbered steps and maroon-and-black tables and icons.

For comparison, the EU penalty regime is already confirmed and in force: failure to surrender the required number of CBAM certificates carries a penalty of €100 per tonne of CO₂e for which certificates were not surrendered, under Article 26 of Regulation (EU) 2023/956 — and the declarant remains obliged to surrender the outstanding certificates in addition to paying the penalty.

During the EU's transitional period, penalties for missed reporting ranged €10–50 per tCO₂e under Implementing Regulation (EU) 2023/1773. Compliance Managers should treat the EU penalty structure as an indicator of regulatory intent — a per-tonne penalty layered on top of the underlying obligation, not a substitute for it — while recognising the UK's specific figures have not yet been confirmed.


4.4 Strategic Business Risks

Beyond direct compliance mechanics, three commercial risks warrant board-level attention.


Supplier readiness and market concentration. UK fertiliser demand is structurally import-dependent: the UK's last major domestic ammonia producer, CF Fertilisers' Billingham plant, ceased ammonia production permanently in July 2023 after being temporarily idled in August 2022, and CF Fertilisers' Ince site — which had manufactured two- and three-element mixed fertilisers under CN 3105 — closed in 2022. As a result, the UK now produces less than 30% of the fertiliser it consumes annually, and imported 3.22 million tonnes of CBAM-scope fertiliser products in 2024. This means virtually the entire UK nitrogen fertiliser supply chain is CBAM-exposed by default, with no meaningful domestic substitution option available to buyers seeking to reduce CBAM exposure through reshoring.


Third-country supply disruption is a live, not hypothetical, risk. Major Russian fertiliser producers — Uralchem Group, PhosAgro, Acron, EuroChem, and KuybyshevAzot — face a stacked set of EU trade barriers: an EU additional tariff on Russian and Belarusian fertilisers of €40–45/t rising to €315–430/t by July 2028, on top of the standard 6.5% ad valorem customs duty, on top of the CBAM certificate obligation itself from 1 January 2026. Russia's WTO challenge (DS639, filed 12 May 2025) does not suspend any EU importer's CBAM obligation. The practical effect has been dramatic: Russian urea imports to the EU dropped approximately two-thirds following the July 2025 tariff, and total EU nitrogen fertiliser imports collapsed to 179,877 tonnes in January 2026, down from 1,183,728 tonnes in January 2025 — an 85% year-on-year decline reflecting the combined effect of tariffs and CBAM's definitive-phase entry. On 24 March 2026, Russia's Ministry of Agriculture separately halted ammonium nitrate exports for one month, citing drone strikes on production facilities and spring planting demand. UK importers with supply chains exposed to Russian-origin material, or to redirected volumes from other origins absorbing the demand shock, should treat this as a live precedent for supply volatility rather than a settled market condition.


Infographic titled Supplier Emissions Data Collection and Verification Process Under UK CBAM, showing 6 compliance steps with icons and bullet lists.

Contract allocation of carbon cost liability. As CBAM liability sits with the importer as the liable person, procurement contracts that are silent on which party bears the cost of verified emissions data collection, or the cost consequence of a supplier's inability to provide it, leave the importer exposed by default. Procurement functions renegotiating fertiliser supply contracts ahead of 2027 should treat emissions data provision and verification cost allocation as a standard contractual term, not an afterthought.

The extent to which the EU's January 2026 import collapse reflects genuine long-term supply reduction, as opposed to temporary pre-CBAM stockpiling in late 2025, remains disputed between industry bodies. This report does not resolve that dispute to a single figure; Compliance Managers should treat both interpretations as live until further trade data clarifies the trend.



5. Sector-Specific Impact Analysis


Infographic on embodied emissions in nitrogen fertiliser production, showing gas-to-ammonia, nitric acid, transport, and UK CBAM.

Nitrogen fertiliser emissions originate almost entirely in a single production step: the Haber-Bosch process, which synthesises ammonia from atmospheric nitrogen and hydrogen derived from natural gas via steam methane reforming. Each tonne of ammonia produced this way releases approximately 1.6 to 2.0 tonnes of CO₂. Globally, fertiliser production is responsible for approximately 1.4 gigatonnes of CO₂e annually, roughly 1.8% of global CO₂ emissions.

Because ammonia is the precursor to virtually every downstream nitrogen product, this single process step drives the emissions profile of urea, nitric acid, ammonium nitrate and NPK blends alike — with nitric acid production carrying an additional, sector-specific emissions source in the form of N₂O, a gas roughly 300 times more potent than CO₂ over a 100-year horizon.


This concentration has a direct compliance implication: because ammonia's carbon intensity is the dominant driver of the entire sector's embedded emissions, an importer's single most valuable piece of supplier data is not the finished-product emissions figure but the ammonia production route underlying it — natural gas feedstock, energy efficiency of the specific plant, and whether any carbon capture is applied.


Import dependency underpins the entire sector's exposure to CBAM. The EU imports approximately 30% of its nitrogen fertiliser consumption, 68% of phosphates, and 85% of potash. Nitrogen fertilisers alone represent approximately 46% of total EU fertiliser use, more than 30% of which is traditionally imported. On the UK side, the domestic production gap following the CF Fertilisers plant closures means the UK's import dependency for nitrogen products is functionally comparable, if not higher, though the precise UK-specific percentage figure is not confirmed beyond the 3.22 million tonne 2024 import figure already cited.


The EU's 1% default-value mark-up for fertilisers is a deliberate policy divergence, and it carries a stated cost. Unlike the escalating 10–30% mark-up applied to steel, aluminium, cement and hydrogen — designed specifically to make default values progressively less attractive than verified actual data — the fertiliser sector's flat 1% mark-up was set in recognition of the practical difficulty of obtaining verified data across complex, fragmented chemical supply chains.

Antoine Hoxha, Director General of Fertilizers Europe, has warned that extending this low mark-up indefinitely "will discourage the reporting of real emissions by overseas producers, particularly those with a higher footprint than their country's average."

The practical implication for a Compliance Manager is direct: the financial incentive to chase verified supplier data for fertilisers is structurally weaker than for any other CBAM sector, which means the case for pursuing verification will more often rest on cost avoidance at the shipment level — where a specific supplier's actual emissions are genuinely below the country default — rather than on the sector-wide policy pressure that applies elsewhere.


6. Practical Action Framework

The following sequence converts the obligations set out above into a 2026 implementation programme.


  • Step 1 — Confirm registration status. Run both the backward-looking (12-month rolling value) and forward-looking (30-day forecast) tests against current and projected fertiliser import volumes. Repeat this check quarterly through 2026, since a single large procurement decision can trigger the forward-looking test independently of trading history.

  • Step 2 — Classify the full product portfolio. Map every fertiliser SKU imported against the confirmed CN code list in Section 1.3, with particular attention to CN 3105 products and the CN 3105 60 00 exclusion. Document the classification basis for each product line in writing, sourced from supplier-confirmed CN declarations rather than internal assumption.

  • Step 3 — Map the supplier base by production route and verification readiness. For each supplier of ammonia, nitric acid, urea, or NPK products, identify the underlying production route (natural gas feedstock, plant efficiency, any carbon capture) and assess whether the supplier currently holds, or could plausibly obtain, third-party verification against the ISO 17029:2019 / ISO 14065:2020 standard within the relevant accreditation scope.

  • Step 4 — Build the supplier data request process now, not in late 2026. Given the confirmed friction point around verification capacity in fragmented chemical supply chains (Section 2.4), initiate formal data requests to key suppliers during 2026 rather than waiting for finalised UK secondary legislation — the underlying emissions calculation exercise does not depend on the UK rate being published, only the final liability figure does.

  • Step 5 — Establish internal governance and documentation processes. Implement the RACI structure set out in Section 2.5, and build record-keeping processes to the confirmed six-year retention standard from the outset, rather than retrofitting documentation discipline once the regime is live.

  • Step 6 — Model financial exposure using the illustrative ranges available. Use the AIC/Andersons UK illustrative range (under £10/t to £23–24/t on urea) alongside the EU worked-example mechanism (Section 4.2) to build a preliminary budget envelope, and commit to revising this model immediately once HMRC publishes the illustrative UK CBAM rate in Autumn 2026.

  • Step 7 — Review procurement contracts for carbon cost and data provision terms. Ensure new and renewed fertiliser supply contracts explicitly allocate responsibility for emissions data provision and verification cost, given that CBAM liability sits with the importer regardless of contractual silence on the point.

  • Step 8 — Monitor the three confirmed late-2026 publication points. Track HMRC's publication of default emissions values, the illustrative CBAM rate, and finalised penalty amounts as the trigger for finalising — rather than merely drafting — the compliance programme.


7. Strategic Outlook

The most significant confirmed forward development is the potential extension of UK CBAM to indirect emissions from 2029 at the earliest. Importers building emissions-tracking infrastructure now should design systems capable of capturing indirect (electricity-related) emissions data from suppliers even though this is not yet a UK requirement, both to avoid a second data-collection exercise later and because EU-facing importers already require this data under the current EU regime.


HMRC has stated that the sectoral and product scope of UK CBAM will be kept under review beyond 2027 to reflect evolving carbon leakage risk and methodological developments — meaning the current five-sector, direct-emissions-only scope should be treated as the 2027 starting position, not a fixed long-term state.


On the EU side, the political volatility visible in the fertiliser sector through the first half of 2026 — competing pressure from Copa-Cogeca for suspension against Fertilizers Europe and the Commission's position that fertilisers remain in scope, mediated through the Article 27a emergency-brake mechanism — indicates that EU fertiliser CBAM policy should not be treated as fully settled even though it is legally in force. No confirmed timeline exists for UK-EU mutual recognition or linked emissions trading arrangements specific to the fertiliser sector.


For the Compliance Manager, the immediate priority is this: build the 2026 classification and supplier-engagement programme set out in Section 6 now, on the confirmed obligations already in force, rather than waiting for the UK's illustrative rate and default values in Autumn 2026 — those figures will finalise the cost model, but they are not a precondition for starting the underlying compliance work, and businesses that wait will compress a multi-month supplier verification process into the final quarter before commencement.


8. Frequently Asked Questions


When does UK CBAM start applying to fertiliser imports?

UK CBAM commences on 1 January 2027. There is no transitional, reporting-only phase — the tax applies from day one of the first accounting period, which runs to 31 December 2027.


What is the UK CBAM registration threshold for fertiliser importers?

A business must register with HMRC once it imports £50,000 or more of CBAM goods over a rolling 12-month period, or expects to reach that value within the next 30 days.


Which fertiliser products are covered by UK CBAM?

Nitric acid and sulphonitric acids (CN 2808), ammonia (CN 2814), potassium nitrate (CN 2834 21 00), nitrogenous fertilisers (CN 3102), and mixed fertilisers containing nitrogen alongside phosphorus and/or potassium (CN 3105), excluding phosphorus-potassium-only fertilisers under CN 3105 60 00.


Does UK CBAM cover indirect emissions from electricity use?

No. UK CBAM covers direct emissions only at launch, including nitrous oxide for fertilisers. Indirect emissions will not be included before 2029 at the earliest.


How does the UK CBAM emissions calculation differ from the EU's for fertilisers?

The UK calculates liability against tonnes of nitrogen contained in the good and counts all embedded precursor emissions. The EU covers both direct and indirect emissions for fertilisers and counts precursor emissions only where explicitly named in its regulation — a narrower precursor scope than the UK's.


What happens if an overseas supplier cannot provide verified emissions data?

The importer falls back to government default values, which are expected to be set conservatively relative to actual emissions from an efficient facility, in order to preserve the financial incentive to obtain real supplier data. The UK's specific default values for fertilisers have not yet been published.


How long must CBAM-related records be retained?

At least six years after the end of the accounting period to which the record relates, regardless of whether actual verified data or a default value was used.


When is the first UK CBAM return and payment due?

31 May 2028, covering the full first accounting period (1 January to 31 December 2027).


Scope & Disclaimer:

This report provides regulatory intelligence for informational purposes and does not constitute legal, financial, tax, or engineering advice. It does not endorse, certify, or make any representation regarding the compliance status of any named company. Figures attributed to named organisations (including AIC, Andersons, Copa-Cogeca, and Fertilizers Europe) are that organisation's own published claims or estimates, not independently verified by CBAM Journal. Readers should not rely on this report as a substitute for professional advice or for HMRC's own published guidance, and should verify all figures against primary sources before making compliance or financial decisions.

Full terms apply — see CBAM Journal's Disclaimer and Terms of Use at cbamjournal.com.


Sources Used in this Report:

The following authoritative government publications, legislation, regulatory guidance, industry resources, and research publications were used in preparing this report:

Comments

bottom of page