Labour’s carbon tax could raise fertiliser costs by £50/t

The tax, part of Labour’s newly announced Carbon Border Adjustment Mechanism (CBAM), will take effect on January 1, 2027, targeting imports of fertiliser, hydrogen, aluminium, and steel – though it will not apply to glass or ceramics.

Industry experts have warned that the measure could increase fertiliser costs by up to £50/t, which would, in turn, raise food prices and place additional pressure on farms at the grassroots level.

There are also fears that this 'unwarranted' tax increase could have serious ramifications for the UK food supply chain, potentially pricing many farm businesses out of global markets.

While the goal of CBAM is to address 'carbon leakage,' industry experts are left puzzled by its application. In the UK, fertiliser production relies heavily on imported ammonia, with little domestic production.

Proponents of the tax argue that it will drive long-term sustainability in UK farming, pushing producers toward more eco-friendly practices and reducing the carbon footprint of agricultural imports.

However, because the tax will be applied uniformly, without considering the carbon emissions of individual producers, it could inadvertently benefit major polluters by levelling the playing field.

Head of supply chain at Origin Soil Nutrition, James Alcorn, said: “The aim of CBAM is to encourage producers to reduce carbon emissions from manufacturing processes, ensuring companies with high environmental standards are not disadvantaged compared to those that haven’t invested in reducing their emissions.

“However, CBAM is likely to significantly increase the cost of imported nitrogen. Origin Soil Nutrition will continue working with our suppliers to bring cost-effective, lower-impact products to the GB market.”

This new tax will drive up the cost of imported fertiliser, meaning British farmers could face a competitive disadvantage of up to 90% compared to their EU counterparts during the first two years.