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EU Plans to Redirect €4bn in Carbon Market Revenues to Offset Fertiliser Costs for Farmers
A leaked draft shows Brussels intends to recycle Emissions Trading System revenues into agriculture to offset rising fertiliser prices triggered by the Russia-Ukraine war and Middle East disruptions. The plan accompanies a decision to slow the phase-out of free carbon allowances, expected to generate an extra €4 billion.
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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.
