Following the recent meeting of EU agriculture ministers, the European Commission has signaled a strategic shift toward protecting the agricultural sector from the potential economic impacts of the Carbon Border Adjustment Mechanism (CBAM).
This shift follows targeted advocacy from member states—most notably France and Italy—who argue that the new carbon levy, combined with fertilizer prices that remain approximately 60% higher than 2020 levels, threatens both farmers' incomes and regional food security. While the fertilizer sector is not yet permanently exempt, the Commission is prioritizing a "safety valve" mechanism to address rising food and input costs.
The Proposed Measures: Article 27a
The primary instrument for this flexibility is the proposed Article 27a of the CBAM Regulation. This provision would grant the Commission the authority to:
- Temporarily remove goods from the CBAM scope if their inclusion causes "severe harm" to the Union's internal market due to "serious and unforeseen circumstances" regarding price.
- Apply these exclusions retroactively to 1 January, 2026, provided the criteria for market harm are met.
- Provide reimbursement for CBAM certificates purchased during the period of suspension, ensuring that declarants are not financially penalized by unforeseen price spikes.
Immediate Mitigation Strategies
To address current pressures, Commissioner Maroš Šefčovič announced that the Commission will propose a temporary suspension of Most-Favoured Nation (MFN) tariffs on ammonia, urea, and other essential fertilizers. This measure aims to offset the costs associated with the carbon levy that took effect this January. The urgency of these actions is underscored by the fact that fertilizer prices remain approximately 60% higher than in 2020, a level deemed unsustainable for farmers' incomes.
Future Outlook
The Commission intends to present a comprehensive Fertiliser Action Plan in the second quarter of 2026. This plan will focus on market transparency and the scaling of recycled nutrients, further reinforcing European food sovereignty.
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