EU Plans to Redirect €4bn in Carbon Market Revenues to Offset Fertiliser Costs for Farmers

The European Commission is preparing to use carbon taxes collected from industry to subsidise farmers struggling with rising fertiliser costs, according to a leaked draft document seen by Euronews. Nitrogen fertilisers are produced using natural gas, which accounts for up to 80% of production costs. European fertiliser production came under pressure following Russia’s invasion of Ukraine.

Ongoing disruption in the Middle East has driven up costs for farmers. Brussels plans to recycle revenues from the Emissions Trading System (ETS) back into agriculture. Around 30% of the global fertiliser trade passes through the Strait of Hormuz.

The move is intended to curb rising prices linked to the closure of that waterway. The Commission recently announced plans to slow the phase-out of free carbon allowances under the ETS for the fertiliser sector and other industries. The decision is expected to generate an estimated additional €4 billion in revenues for the bloc’s carbon market.

“The Commission will carry out an in-depth evaluation of the pass-through of CBAM- and ETS-related costs into fertiliser prices paid by farmers and will improve the evidence base on farm-level price developments more broadly,” the draft document seen by Euronews reads.

The EU's carbon border tax came into force on 1 January. In January, France and Italy called on the Commission to exempt carbon tariffs on imported fertilisers from the bloc's carbon border tax.

Poland, France, Germany, Spain and Italy were among the largest importers of Russian fertilisers before the tariffs were fully implemented. Despite the war in Ukraine, Russia accounted for around 30% of EU fertiliser imports between 2024 and 2025, according to Eurostat data.

The plan could provoke backlash from energy-intensive industries required to pay for the carbon emissions linked to their production.

Euronews reported that the Commission will address the problem by recycling revenues from the bloc’s carbon market back into agriculture. Environmental groups have criticised continued reliance on fossil-fuel-based fertilisers. “The EU Fertiliser Action Plan must be the turning point where we stop trying to ‘fix’ a broken, fossil-dependent model and instead begin scaling the agroecological solutions that already exist to provide real resilience and food sovereignty,” said Lisa Tostado, Agrochemicals and Fossil Fuels Campaigner at Center for International Environmental Law.

European reliance on fossil-fuel-based fertilisers has impacts including water pollution and eutrophication, declining water quality and biodiversity, soil degradation, greenhouse gas emissions, ozone depletion and air pollution, according to the Center for International Environmental Law, European Environment Bureau and IFOAM Organics Europe.

Euronews reported that these consequences affect both public health and the environment.