The EU Carbon Border Adjustment Mechanism (CBAM) has officially entered its imposition phase, with fertilizers, hydrogen and other sectors bearing the brunt first. EU nitrogen fertilizer imports soared 156% year-on-year at the end of 2025, only to plummet 80% in early 2026. Behind such “panic hoarding” and “cliff-like collapse” lies the severe disruption of global trade order caused by the EU’s unilateral carbon rules. Meanwhile, more than ten EU member states have publicly called for a moratorium on the levy, intensifying internal frictions. Faced with escalating green trade barriers, a clear path has emerged for Chinese exporters: rely on precise carbon accounting in the short term to cut compliance costs, and achieve low-carbon transition through green ammonia substitution in the long run. This article offers an in-depth analysis.

Entering May 2026, new CBAM rules have been rolled out at an accelerated pace. On May 13, the European Commission published a draft implementing regulation on third-country carbon price crediting under CBAM and launched a four-week public consultation. At the same time, the EU plans to introduce a special action plan for the fertilizer sector in May to ease the dual pressure of rising food prices and shrinking fertilizer supply. Rooted in all these adjustments are the drastic market volatilities and regulatory controversies across global trade since fertilizers were formally included in the CBAM scope.

Looking back at key milestones of CBAM, the period from 2023 to 2025 served as the transition phase, during which EU importers only needed to report carbon emissions data without any payments. In December 2025, EU nitrogen fertilizer imports jumped 156% year-on-year to a record high, a typical move by importers to stockpile before carbon tariffs took effect. On January 1, 2026, CBAM officially entered the imposition phase, covering fertilizers and hydrogen, alongside the launch of certificate purchasing. In March 2026, 12 EU member states publicly called for suspending CBAM levies on fertilizers. In April, the CBAM certificate price was set at €75 per tonne. In May, the draft carbon price crediting rules were released and a new fertilizer package was put on the agenda. According to plans, CBAM will expand to roughly 180 downstream products starting from 2028, covering automobiles, machinery, home appliances and many other sectors, showing a clear trend of tightening rules, widening coverage and growing disputes.

The fertilizer industry has been hit hardest by the latest CBAM enforcement, marked by extreme market turbulence. At the end of 2025, importers rushed to stock up to avoid upcoming carbon costs, driving nitrogen fertilizer imports up 156% year-on-year. Once CBAM took effect in January 2026, imports crashed by over 80% year-on-year; in countries like Ireland, January imports were 90% lower than the five-year average. Regulatory unfairness has further aggravated the industry’s compliance burden. Tan Luyue, senior carbon analyst at LSEG Refinitiv, noted that fertilizers are highly sensitive to CBAM carbon costs due to three core factors: high emissions, strong seasonal supply and limited substitution flexibility. Worse still, CBAM accounting rules are structurally unfair: unlike steel and aluminum, which only cover core direct emissions, fertilizers are forced to include indirect emissions such as electricity consumption, resulting in a much broader accounting boundary. The EU also adopts the average emission intensity of the top 10% of the sector as the default value, with default emission intensity for synthetic ammonia and urea reaching 2–4 tonnes of CO₂ equivalent per tonne of product, far higher than that of steel and aluminum, further pushing up compliance costs for enterprises.

CBAM application in fertilizers has also sparked sharp internal divisions within the EU. Led by Austria, more than ten EU member states jointly called for a halt to CBAM charges on fertilizers in March 2026, with a straightforward and practical concern: the mechanism would raise agricultural production costs and end-user food prices, running counter to the goals of people’s livelihood and sound industrial development. European farmers and cooperative organizations also plan to hold a “flash action” in Strasbourg on May 19, when the EU is set to unveil its fertilizer action plan, to voice grave concerns over the fertilizer supply and cost crisis.

Tan Luyue also pointed out the paradox of “carbon leakage” emerging from CBAM implementation, an ironic outcome completely at odds with the mechanism’s original purpose. Most EU domestic fertilizer producers boast lower carbon emission intensity than the global average, representing efficient low-carbon capacity. Yet CBAM-related cost pressures have forced these low-carbon local producers to exit the market, leaving supply gaps to be filled by high-carbon imported products. The result is emission reductions within the EU but a possible rise in overall global emissions—entirely defeating the goal of climate governance.

Faced with the EU’s ever-tightening unilateral carbon rules, industry expert Qu Sixiao holds that the overall impact of CBAM on Chinese export enterprises is manageable and resolvable, with the core lying in a combined strategy of green raw material substitution and refined carbon accounting. Among them, green ammonia, as a key path for long-term low-carbon transition, has gained unprecedented momentum under the CBAM framework. Green ammonia is produced by synthesizing hydrogen from renewable-powered water electrolysis, with nearly zero carbon emissions throughout the process. Although it lacks economic competitiveness in current commercial applications, CBAM-related carbon costs have offset the cost disadvantage of green products and reshaped their market competitiveness.

Envision Group and other enterprises have already lowered green hydrogen costs to around $2 per kilogram, only half of the global average. Multiple institutions forecast that green ammonia will reach full parity with conventional products when green electricity costs drop to ¥0.15 per kWh. The global green ammonia market is also poised for explosive growth, projected to surge from $137 million in 2024 to $19.55 billion by 2031, representing a compound annual growth rate of 90.8%. It will thus become a core strategy for Chinese exporters to break through EU green barriers and achieve long-term sustainable development.