Government presses on with fertiliser import tax

Farmer hopes that the planned carbon tax on fertiliser imports could be abandoned or delayed in next week’s Budget appear to have been dashed, as the government ploughs on with preparations to introduce the charge.

Known as the Carbon Border Adjustment Mechanism (Cbam), the tax is scheduled to come into effect from 1 January 2027.

The charge is designed to address the risk of so-called “carbon leakage” or “offshoring” as the UK takes steps to “decarbonise” the economy.

It does this by applying a tax to imported goods in certain sectors (such as fertiliser, aluminium and cement), to try to put them on an equal footing with domestic goods that face stiffer carbon restrictions and associated costs.

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

Brussels introduced an equivalent mechanism at the start of 2026, and the UK government is keen to move the same way as it seeks to meet its international carbon commitments.

Under the plan, UK importers will have a year to declare their Cbam liability based on the volume of their imports and five more months to pay it. Thereafter, the tax will be levied quarterly.

The NFU has been calling for a 12-month postponement amid fears that a new tax on imported fertiliser will drive up costs even more, so jeopardising food production.

Fertiliser has already increased by about 35% on year-ago values, with ammonium nitrate and urea quoted at £480-£485/t delivered, according to AHDB data.

HMRC statements

However, on Friday, 16 October HMRC issued a series of statements, including a policy summary, carbon emission estimates for individual products and the likely charges importers will have to pay.

HMRC is quick to add that these rates are illustrative only “based on current and preliminary data”.

“The first Cbam rates will be published before the end of the year, with rates updated and published on a quarterly basis thereafter,” it says.

On this basis, HMRC is suggesting an initial charge of £1.45/t of carbon dioxide equivalent (CO2e) for fertiliser.

Applying this to the default emissions estimate for ammonium nitrate (AN) of 2.6t of CO2e/t of AN, that would suggest an actual charge of £3.77/t AN.

Relief short-lived

Farmers and traders have expressed some relief that the rate is not higher.

Earlier estimates by consultants, levy bodies and traders had suggested it could be anywhere between £10/t and £50/t – depending on the allowances being built in to soften the blow.

However, Herefordshire farmer Martin Williams says this is likely to be just a temporary reprieve.  

“The price is only so low for the first year because of the allowances,” he said.

“Each year thereafter, the emissions adjustment increases on a tapered scale. It really starts to hit from 2030-2035, when the actual Cbam rate will climb from about £13/t to £58/t.

“It may not be a big number in 2027, but it gets worse quite quickly.”