The definitive phase of the EU Carbon Border Adjustment Mechanism began on 1 January. For the agricultural supply chain the important word in the covered sector list is fertilizers, and for Gulf and North African producers shipping urea and ammonia into Europe, the commercial arithmetic changed a week ago.

What changed on 1 January

CBAM has existed since Regulation (EU) 2023/956 was adopted in May 2023, but until last week it had no financial consequence. The transitional phase, which ran from 1 October 2023 to 31 December 2025, required importers to report the greenhouse gas emissions embedded in covered goods and nothing more. No certificates, no payments.

That ended on 31 December. From 1 January 2026, the definitive regime applies, and three things are now true that were not true a month ago.

Authorisation is mandatory. To import CBAM goods into the EU customs territory, a company must have applied for and obtained the status of authorised CBAM declarant. Without it, the goods cannot legally be imported.

Customs declarations must carry CBAM codes. From 1 January, specific CBAM related codes must be declared on EU import declarations. Declare the wrong code, or omit it, and the customs declaration is rejected outright.

Imports now create a financial liability. Reporting shifts from quarterly to an annual declaration, reported emissions must be verified by an accredited verifier, and 2026 imports generate CBAM certificate obligations.

The sectors covered, and why fertilizer is the one that matters here

CBAM currently applies to six sectors: cement, iron and steel, aluminium, fertilizers, electricity and hydrogen, along with selected precursors such as cement clinker, nitric acid, ferrosilicon and unwrought aluminium.

Fertilizer is the line that reaches into agriculture. Nitrogen fertilizer production is gas intensive, embedded emissions per tonne are high, and the EU is a significant net importer. The principal external suppliers into Europe are Russian, North African and Gulf producers. Every one of them now sells into a market where the European buyer carries a carbon cost that did not exist in December.

This does not appear immediately in the urea price, because of a timing feature of the regulation that many importers have not fully absorbed.

The cash timing gap

The liability and the payment are separated by more than a year, and that gap is where balance sheet surprises get made.

Imports made during 2026 create the obligation. But CBAM certificates only become purchasable from February 2027, via the common central platform in the CBAM registry, and the first surrender covering 2026 imports takes place in 2027, with surrender due by 30 September each year.

So a company importing covered goods through 2026 accrues a liability all year, pays nothing during that year, and then faces a settlement in 2027 based on verified emissions from imports it may have already sold on at a price that did not reflect the cost.

The certificate price is not fixed either. It is calculated from EU Emissions Trading System allowance auction prices, using quarterly averages during 2026 and weekly averages from 2027 onward. An importer accruing liability today does not know what it will cost to discharge it.

The penalty for failing to surrender is 100 euros per excess tonne of embedded emissions.

The de minimis threshold, and its trap

The Omnibus simplification package, adopted on 29 September 2025 and published in the Official Journal on 17 October as Regulation (EU) 2025/2083, introduced a mass based exemption that removes a large number of small importers from the regime entirely.

Importers whose total annual net imports of CBAM goods in the cement, fertilizer, iron and steel and aluminium sectors do not exceed 50 tonnes in a calendar year are exempt from all CBAM obligations, including reporting, authorisation and certificate surrender. The threshold does not apply to hydrogen or electricity, where obligations begin from the first import.

The trap is in how the threshold operates. It is cumulative across all CN codes, aggregated per importer per calendar year. If a company crosses 50 tonnes at any point during the year, all of its imports for that year fall into scope, not just the tonnes above the line. For an importer who has planned on being exempt and then takes one opportunistic cargo in November, that is an unpleasant discovery.

For those who begin the year exempt and later exceed the threshold, the obligation applies for the first time at the end of the quarter following the one in which the threshold was crossed.

The Commission has committed to reviewing the threshold annually to confirm that at least 99 percent of embedded emissions remain within scope, and can adjust it by delegated act with effect from 1 January of the following year. In other words, the exemption is not a permanent feature to build a business model around.

Why non EU producers are affected even though they owe nothing

CBAM obligations sit on the EU importer. That is the legal position and it is worth stating plainly, because it is widely misunderstood at origin.

The commercial position is different. The importer must declare verified embedded emissions for the goods it brings in, and it can only do that if the producer supplies product specific carbon data of sufficient quality, calculated and documented in line with CBAM's own boundary and verification rules.

A producer who can supply that data is a viable supplier into Europe. A producer who cannot will find European buyers defaulting to conservative estimated values, which are generally punitive, or simply sourcing elsewhere. The compliance burden is legally European and commercially global.

For Gulf ammonia and urea producers with meaningful European offtake, building the emissions data infrastructure is now a market access question rather than a sustainability initiative.

What this means for clients

If you import covered goods into the EU: confirm your authorised CBAM declarant application is filed. Without the status you cannot import legally, and this is not a defect that can be corrected retrospectively at the border.

If you are near the 50 tonne line: track cumulative net mass across all CN codes continuously, not at year end. Crossing the threshold retroactively pulls the entire year into scope.

If you sell into the EU from outside it: expect emissions data requests from your European buyers to become a standard condition of purchase during 2026. Contracts should address who provides the data, in what format, to what verification standard, and who bears the cost if it proves inadequate.

If you trade fertilizer physically: the accrual and settlement mismatch is a real working capital and pricing issue. Any 2026 sale of covered goods into Europe at a price that ignores the CBAM liability is a sale at an unknown loss.

Everyone else: watch this scope. CBAM is designed to expand, with full implementation running to 2034 and proposals already circulating to extend coverage to downstream products. The current list of six sectors is a starting position, not a settled one.

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