Farmers demand halt to fertiliser carbon tax plans

The UK government is facing mounting pressure to delay or scrap a planned carbon tax on imported fertiliser, as higher input costs linked to global energy markets and Middle East tensions raise concerns over next autumn’s wheat plantings.

The UK relies heavily on imported fertiliser, producing only a minority of its nitrogen fertiliser needs domestically.

Industry output has also become increasingly dependent on imported ammonia, following the closure of key UK production facilities in recent years.

See also: How the carbon tax on fertiliser will impact farm businesses

The levy will be introduced under the UK’s Carbon Border Adjustment Mechanism (Cbam) from 1 January 2027.

It is designed to place a carbon tax on certain imported goods, including fertiliser, so that overseas producers face similar environmental costs to UK manufacturers.

Ministers say the policy is intended to prevent foreign firms from undercutting domestic industry on price while also helping to reduce global emissions.

However, farmers and industry leaders warn the timing could prove damaging for an already stretched sector, with fertiliser prices having risen sharply in recent weeks.

Natural gas, which accounts for up to 80% of nitrogen fertiliser production costs, has become more expensive amid disruption to global energy markets and shipping routes linked to conflict in the Middle East.

Around one-fifth of global ammonia and urea trade passes through the Strait of Hormuz.

Ammonium nitrate fertiliser prices have increased from around £300/t to an average of £514/t in recent weeks, with industry groups warning the Cbam levy could add a further 7-30% to costs.

With cereal margins already tight, some arable farmers say the pressure could influence planting decisions this autumn.

‘Twisting the knife’

Staffordshire arable farmer Clive Bailye warned that the combined impact of higher fertiliser prices, marginal rises in crop prices and a new carbon levy could cripple the sector.

“The almost doubling of fertiliser prices is bad enough, but then adding a carbon tax on it as well in January is twisting the knife,” he said.

He warned that some farms could reduce wheat plantings because production no longer makes economic sense.

“We’ve never really had a situation in living memory where you plant some wheat with a negative margin before you even start,” he said.

“It’s better to make nothing than to lose money.”

The NFU has called for the fertiliser element of Cbam to be delayed by government for at least 12 months and reviewed, warning it could undermine domestic food production.

NFU deputy president Paul Tompkins said: “Without that pause, Cbam risks having a material impact on growers’ and farmers’ ability to produce food at a time when we must grow domestic food production.”

European umbrella farming organisation Copa-Cogeca has also stepped up pressure ahead of the European Commission’s Fertiliser Action Plan, due to be published on Tuesday (19 May).

It estimates that the Cbam levy on imported fertilisers could ultimately cost EU farmers up to €39bn (£33.9bn) over seven years.

Government response

However, a UK government spokesman insisted the policy would not significantly increase costs for farmers.

“We are supporting farmers to plant crops through a record £11.8bn investment [this Parliament] to support sustainable farming and food production.

“The Carbon Border Adjustment Mechanism is not expected to add large costs.

“Instead, it will stop overseas producers undercutting British firms and help cut global emissions.”