Adding a CBAM to imported products when there is no alternative domestic supplier, such as ammonia for fertiliser production, will necessarily increase agricultural production prices.

The UK produces less than 30% of the fertiliser it uses each year, but even this production relies on imported ingredients, most importantly, ammonia.  CF Fertilisers’ Billingham plant ceased ammonia production in July 2023. This was the UK’s last major ammonia producer.

In 2024, the UK imported 3.22 million tonnes of the fertiliser products that will be covered by the UK’s proposed CBAM. Almost all of which will be charged for both CO2 and nitrous oxide emissions – making the CBAM doubly expensive. Increased costs for UK fertiliser mixers will be passed on to farmers, eventually raising the price of domestically produced food.

Most of the UK’s ammonia now comes from the US, but it is not cheaper due to differences in carbon taxes that a CBAM is meant to levelize. The price differential when the UK still made ammonia was due to the difference in natural gas prices between the US and the UK. US natural gas prices are a third to a quarter of those in the UK.

Instead of adding a CBAM to imported fertiliser that the UK doesn’t make any more, the UK should encourage UK gas production and exploration in the North Sea; allow hydraulic fracturing for gas; and remove the additional 38% ‘Windfall’ tax on North Sea gas production, thereby lowering the cost of the UK’s domestic natural gas feedstock for fertiliser production.