Question to the HM Treasury:

To ask His Majesty's Government what assessment they have made of the expected impact of carbon pricing for fertilisers on the cost of business for farmers.

The UK Emissions Trading Scheme (ETS) is the UK’s principal carbon pricing mechanism and covers the manufacturing of fertiliser. However, in recent years, UK-based fertiliser manufacturers have received more free allowances than they needed to surrender to cover their emissions.

The government will introduce the UK Carbon Border Adjustment Mechanism (CBAM) on 1 January 2027, as first announced in December 2023, meaning imported fertiliser will also be covered by a carbon price. The UK CBAM rate charged on imports will reflect the carbon price paid by domestic industries after support mechanisms (such as free allowances) have been taken into account. As a result, we expect initial liabilities arising from the UK CBAM to be relatively low whilst encouraging the supply and use of fertiliser with lower levels of embodied carbon than would otherwise have been the case.