Brussels is considering using revenues from the EU’s carbon market, the Emissions Trading System to cushion farmers from soaring energy and fertiliser prices, according to a document seen by Euronews.
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.
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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 and ongoing disruption in the Middle East, both of which have driven up costs for farmers and increased inflationary pressure on consumers.
Brussels plans to address the problem by recycling revenues from the bloc’s carbon market, the Emissions Trading System (ETS), back into agriculture in an effort to curb rising prices linked to the closure of the Strait of Hormuz, through which around 30% of the global fertiliser trade passes.
However, the move could provoke backlash from energy-intensive industries, which are required to pay for the carbon emissions linked to their production. Agriculture, by contrast, has so far been exempt from the ETS and now appears set to benefit from its revenues.
The proposal, which could still change before the Commission unveils it on 19 May, reflects Brussels’ recognition of farmers’ difficulties as well as the strategic importance of food security.
Even before the conflict in the Middle East, EU farmers had protested against soaring fertiliser prices linked to the EU’s 50% tariffs on Belarusian and Russian fertilisers introduced in June 2025.
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.
The Commission recently announced plans to slow the phase-out of free carbon allowances under the ETS for the fertiliser sector and other industries — effectively allowing them to emit more pollution for longer. The decision is expected to generate an estimated additional €4 billion in revenues for the bloc’s carbon market. However, the measure would be conditional on the sector investing in more sustainable alternatives.
“Options will be assessed for a slower trajectory for phasing out free allowances for the fertiliser sector, conditional on increased production of bio-based (organic), circular or low-carbon fertilisers,” the draft document states.
The EU executive is also considering using the bloc’s carbon border tax, the Carbon Border Adjustment Mechanism (CBAM), to protect European producers from cheaper high-emission imports.
“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.
In January, France and Italy called on the Commission to exempt carbon tariffs on imported fertilisers from the bloc's carbon border tax, which came into force on 1 January. They argued that the measure would help preserve European competitiveness for local farmers.
Promoting “lead markets” for green fertilisers
In an effort to reduce dependencies and diversify supply chains, the leaked draft also proposes the creation of “green ammonia corridors” with countries in Africa and the Middle East, highlighting how fertiliser policy is becoming part of Europe’s broader geopolitical energy strategy.
The document also shows that the Commission plans to introduce stronger market monitoring, possible strategic stockpiling, carbon Contracts for Difference (CfDs), and regulatory mandates designed to create “lead markets” for green fertilisers.
The Commission acknowledges that Europe’s energy vulnerability has exposed a dangerous dependency in fertiliser production, viewing the transition away from fossil-fuel-based fertilisers as essential both for climate policy and for the bloc’s strategic autonomy.
Green push to shift away from fossil-based fertilisers
In an open letter sent to six European Commissioners, a coalition of environmental NGOs urged EU leaders to use the upcoming fertiliser strategy to signal the end of fossil fuel dependency in Europe’s food system.
The groups argue that the bloc’s food security remains vulnerable to volatile fossil fuel markets, a situation worsened by tensions stemming from the Iran conflict.
“The EU Fertiliser Action Plan must be the turning point where we stop trying to ‘fix’ a broken, fossil-dependent model and instead begin scaling the agroecological solutions that already exist to provide real resilience and food sovereignty,” said Lisa Tostado, Agrochemicals and Fossil Fuels Campaigner at Center for International Environmental Law.
Beyond food security concerns, environmental groups argue that the EU’s reliance on fossil-fuel-based fertilisers has serious consequences for both public health and the environment.
According to Center for International Environmental Law, European Environment Bureau and IFOAM Organics Europe, these impacts include water pollution and eutrophication, declining water quality and biodiversity, soil degradation, greenhouse gas emissions, ozone depletion and air pollution.