Fertilising Climate Policy: The Dual Impact of CBAM on EU Agricultural Emissions and Regional Disparities

Abstract
The Carbon Border Adjustment Mechanism (CBAM), scheduled to become fully operational in 2026, is designed to complement the EU Emissions Trading System (ETS) by replacing free emission allowances and preventing carbon leakage to non-EU regions. CBAM initially covers energy-intensive sectors, including mineral nitrogen (N) fertiliser production. Although mineral N fertiliser production is already included in the EU ETS, it is currently exempt from carbon charges owing to full compensation through free allowances. The phase-out of these allowances and the introduction of CBAM are expected to increase the prices of both imported and domestically produced fertilisers, indirectly affecting the EU agricultural sector. This study quantitatively assesses the impacts of the expected fertiliser price changes on the EU agricultural sector and related environmental outcomes using the Modular Applied GeNeral Equilibrium Tool (MAGNET) and the Common Agricultural Policy Regionalised Impact (CAPRI) model. The results indicate that the combined effect of phasing out free allowances and implementing CBAM will double mineral N fertiliser prices. Higher prices are projected to reduce demand, leading to a 21.4% decline in domestic production and a 37% reduction in imports. Overall mineral N fertiliser use in the EU is expected to decrease by 22%, partially replaced by manure. Consequently, EU agricultural factor income is projected to fall by 7.7%, primarily affecting high-input regions. Meanwhile, non-EU agricultural income is projected to rise slightly by 0.05%, driven by higher exports. EU agricultural greenhouse gas emissions are expected to decrease by 22 megatons of CO2-equivalent, with no significant increase globally.

Acknowledgements & funding
The authors thank Ekaterina Iovleva for her valuable input throughout the preparation of the paper. Open Access funding enabled and organized by Projekt DEAL. 
This work was funded by the European Union Horizon Europe Grant Agreement No. 101134874: Advancing capacity and analytic Tools for supporting Common Agricultural Policies post 2027.
Partially funded by the German Federal Ministry of Agriculture, Food and Regional Identity (BMLEH) No. 2823 FuI01: Assessment of possible carbon leakage effects of the German Climate Protection Act and related EU legislation and evaluation of proposals for their avoidance.

Cite as: Stepanyan, D., O. Zamani, C. Heidecke, et al. (2026) Fertilising Climate Policy: The Dual Impact of CBAM on EU Agricultural Emissions and Regional Disparities. Journal of Agricultural Economics 1–17. https://doi.org/10.1111/1477-9552.70060

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ACT4CAP27 Further information

ACT4CAP27: Advancing Capacity and analytical Tools for supporting Common Agricultural Policies post 2027

ACT4CAP27 Project coordination: Wageningen Social & Economic Research, The Hague, NL
Contact: act4cap27@wur.nl  | Website: https://act4cap27.eu/ | https://cordis.europa.eu/project/id/101134874

Project duration: 1 March 2024 – 28 February 2029

Funding acknowledgement

ACT4CAP27 is funded by the European Union. Horizon Europe Grant Agreement No. 101134874. Views and opinions expressed are however those of the authors only and do not necessarily reflect those of the European Union or the European Commission. Neither the European Union nor the granting authority can be held responsible for them.