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CBAM and Indian Fertilisers: Green Ammonia and What Comes Next

The fertiliser sector's CBAM story is decidedly more complicated than that of steel or aluminium. India's direct fertiliser exports to Europe are smaller in volume, and the cost per tonne under CBAM is often lower than headline analyses suggest. However, there is an intense, ongoing political debate within the EU about whether to temporarily exempt fertilisers entirely. Despite the uncertainty, the mechanism matters immensely because it effectively assigns a zero-exposure status to green ammonia, creating a massive, quantifiable trade premium for the green transition.

By Reclimatize.in 29 March 2026 CBAM  ·  Fertilisers  ·  Green Hydrogen  ·  Policy Analysis

The overarching fertiliser sector's CBAM story is infinitely more complicated than that of steel or aluminium. India's direct fertiliser exports heading to Europe are noticeably smaller in total volume, the true cost per tonne safely under CBAM is noticeably lower than most scary headline analyses blindly suggest, and there remains a wildly live political debate heavily within the EU regarding whether to temporarily exempt fertilisers from the demanding mechanism altogether. However, absolutely none of that makes CBAM irrelevant for determined Indian fertiliser producers. The complex mechanism deeply matters here for a specific reason completely unique to this sector. For pure green ammonia, the actual CBAM exposure is effectively zero. That wonderful fact beautifully creates a highly direct, easily financially quantifiable trade premium specifically for the ongoing green transition, at exactly the pivotal moment when India's National Green Hydrogen Mission is desperately trying to successfully make that vital transition commercially viable.

This article carefully works through exactly what CBAM actually costs for urea and ammonia, why the messy fertiliser exemption debate erupted almost immediately after the definitive phase officially began, exactly how India's complex fertiliser exports sent to Europe are structured, precisely what the massive green ammonia projects currently underway in India truly mean directly in the context of CBAM, and finally what the upcoming Hydrogen Purchase Obligation vividly adds to the overall picture. For the broader, comprehensive CBAM framework, please see our related piece: Carbon Border Adjustment Mechanism and Its Impact on Indian Industry. For the nitty-gritty operational compliance process, check out: How the Carbon Border Adjustment Mechanism Works.

What fertiliser products are covered and why both Scope 1 and Scope 2 matter here

CBAM's exact fertiliser coverage is meticulously defined by highly specific EU Combined Nomenclature codes. The absolutely key products fully covered include: common urea (CN 3102 10), tricky ammonia anhydrous or safely in aqueous solution (CN 2814), harsh nitric acid and related sulphonitric acids (CN 2808 00 00), and complex compound fertilisers containing nitrogen, phosphorus and potassium (CN 3105, strictly subject to some highly specific exclusions). Broadly speaking, these are exactly the nitrogen-based products that completely dominate India's fertiliser export portfolio.

A totally critical difference from the massive steel sector applies right here. For all fertilisers, CBAM strictly includes both Scope 1 direct process emissions and Scope 2 indirect emissions generated from the electricity heavily used during production. Interestingly, this is the exact same strict treatment applied to cement, and it is vastly different from steel, where surprisingly only direct emissions are currently covered. For the power-hungry fertiliser sector, nasty indirect electricity emissions stemming from the electrolysis of water, huge plant utilities, and vital auxiliary operations are all fully included directly within the embedded emissions calculation. This forcefully makes the actual electricity source incredibly relevant right from day one, absolutely not waiting for some future scope expansion as we see currently in aluminium.

The absolute most careful, highly quantitative analysis of actual fertiliser CBAM costs currently available is arguably Sandbag's brilliant February 2026 note, which specifically and deeply examines urea, neatly correcting several incredibly widespread misconceptions regarding the mechanism's true price impact. Carefully using a solid EU carbon price securely at €80 per tonne and heavily embedded emissions specifically for urea from a typical, fully integrated ammonia-urea plant running at approximately 1.1 tCO₂ per tonne, the carefully estimated CBAM cost for totally average plants sits at €16.19 per tonne of urea, and beautifully drops to €7.39 per tonne specifically for highly efficient plants happily equipped with N₂O abatement. This occurs simply because the truly relevant market price effect is rightfully determined squarely by the marginal supplier, absolutely not by the messy average cost spread across all importers.

These surprisingly modest numbers are substantially lower than the terrifying headline costs that frequently and alarmingly appear in casual commentary regarding the fertiliser CBAM. The core reason is the vital, often-missed distinction exactly between the direct cost heavily faced by a specific individual plant and the broader, overall effect securely on EU market prices. In a fiercely competitive market, overall prices are strictly set by the marginal supplier. If the vast majority of suppliers face highly modest CBAM costs simply because their actual emission intensity is incredibly close to the benchmark, the total price effect on the massive EU market remains quite small. It is truly only the unlucky producers painfully using EU default values (which are unfortunately set straight at the highest observed emission intensity) who truly face the terrifying costs hovering in the €430,000 per 10,000 tonne range that CarbonChain frequently cites. A simple 10,000-tonne urea shipment foolishly using default values could effortlessly trigger €430,000 or more in ugly CBAM costs. Conversely, highly verified data from a sparkling modern gas-fed plant fully equipped with smart N₂O abatement could quickly slash this nasty bill by an impressive 40 to 50%. This brilliant fact effectively turns any necessary investment in vital emissions measurement and tight verification into a highly direct, beautifully financially productive asset, absolutely not just another annoying compliance exercise.

The fertiliser exemption debate: a political wildcard that matters for India

Barely a week after CBAM's definitive phase began, a significant political complication quickly emerged. On 8 January 2026, EU Trade Commissioner Maroš Šefčovič openly stated that the European Commission might seriously assess the actual feasibility of temporarily pulling fertilisers entirely out of CBAM. This would happen if there was clear, undeniable evidence the policy was actively leading to significant, painful inflationary pressure specifically on food prices, following massive pressure from highly organized European farming ministers. In fact, twelve EU member states had already frantically written straight to Brussels practically begging for a rapid, temporary fertiliser exemption.

The vast agricultural sector's deep concern is solidly grounded in very real, painful economics. EU farmers already miserably faced historically low or completely negative margins, with essential fertiliser brutally making up 15 to 30% of their total overall production costs. Fertiliser prices had incredibly already risen sharply since 2020, and heavy tariffs placed on Russian and Belarusian fertilisers had already predictably caused painful 10 to 15% price increases. Panicked industry groups loudly warned that CBAM could easily and ruthlessly raise total costs by yet another 10 to 30%, depending heavily on exactly how the complex emission calculations were finally finalised.

Interesting seaborne trade data gathered in early January 2026 happily did not show any strong, undeniable evidence of massive front-loading simply to cleverly avoid CBAM costs specifically for fertilisers. Massive EU steel and fertiliser imports unsurprisingly dropped slightly in week one but wonderfully appeared to successfully recover in week two of 2026. The immediate, messy trade disruption was ultimately quite modest. However, the much larger, highly complex longer-term structural question of whether natural gas-based fertiliser production truly remains cost-competitive specifically in tight EU markets is absolutely not resolved simply by a messy, temporary exemption debate. It is gracefully resolved entirely by the promising trajectory of green ammonia costs and the blistering pace of India's rapid transition.

India's fertiliser exports to Europe: what is actually at stake

India stands tall as the world's absolute second-largest urea producer, churning out approximately 31 million tonnes per year, and acts as a massively significant producer of ammonia, DAP, and various complex fertilisers. However, India's specific fertiliser export relationship with Europe is wonderfully far more nuanced than its incredibly direct steel or aluminium position. A highly substantial share of India's massive fertiliser production is safely consumed domestically. The government's massive fertiliser subsidy regime brilliantly keeps strict domestic prices sitting well below the painful cost-of-production levels, actively creating a highly complex price environment that cleverly makes exports commercially variable depending entirely on wildly fluctuating global price cycles.

India's specific ammonia exports heading to Europe act as the vastly more commercially significant CBAM exposure because precious anhydrous ammonia is increasingly beautifully traded not just as a simple fertiliser precursor, but as an incredibly vital green energy carrier. This is particularly highly relevant as Europe frantically builds massive infrastructure specifically to eagerly import green hydrogen neatly in the brilliant form of easily transportable ammonia for quick reconversion or rapid direct use. For pure green ammonia, the actual CO₂ intensity is wonderfully zero, meaning it is effectively brilliantly exempted completely from the heavy CBAM import duty. This beautifully means that the feared CBAM has wonderfully provided a massive competitive advantage perfectly to green ammonia directly over dirty grey. A country exactly like India, fully blessed with incredibly abundant renewable resources, heavily armed with the National Green Hydrogen Mission proudly providing the perfect policy framework, and enjoying the lucrative SIGHT programme generously providing deep financial incentives, is perfectly positioned to ruthlessly exploit that massive competitive advantage. That is, provided its green ammonia production rapidly scales successfully in time.

The emissions calculation: why fertiliser CBAM is more technical than it looks

Fertiliser emissions sadly rank comfortably among the absolute most technically complex tightly within the entire CBAM framework because standard ammonia production wildly generates two totally distinct types of nasty greenhouse gas emissions. You have CO₂ aggressively from the intense steam methane reforming of natural gas, and horrible nitrous oxide (N₂O) specifically from the messy downstream oxidation of ammonia specifically during complex nitric acid production. N₂O unfortunately holds a terrifying global warming potential of a massive 265 to 298 times that of CO₂, meaning that even incredibly small quantities of N₂O emissions rapidly translate directly into heavily substantial CO₂-equivalent CBAM costs.

The brilliant implication here is that smart plants heavily equipped with clever N₂O abatement technology (which are essentially cool catalytic reduction units that wonderfully convert nasty N₂O harmlessly straight into pure nitrogen and water directly inside nitric acid plants) can beautifully and dramatically reduce their heavy embedded emission intensity, and therefore magically slash their final CBAM obligation. The massive difference safely between an unabated and a properly abated nitric acid plant can easily reach an insane 1 to 3 tCO₂e specifically per tonne of nitric acid, which effortlessly translates immediately and directly into massive CBAM cost differences. For smart Indian producers moving heavy EU export volumes, the incredibly lucrative investment economics of N₂O abatement are highly worth calculating incredibly specifically directly against safely avoided CBAM costs. The glorious payback period may be wonderfully substantially shorter than the brilliant technology's general environmental case alone would casually suggest.

The strict embedded emission calculation specifically for all fertilisers rigidly follows the tight methodology perfectly detailed in Annex III of the CBAM Regulation. This actively requires the careful measurement of: nasty direct CO₂ emissions coming from intense fossil fuel combustion deeply in the reforming process; messy CO₂ coming from process chemistry (the unavoidable inherent CO₂ release happening from steam methane reforming); horrible N₂O emissions from messy nitric acid production processes; and finally indirect electricity emissions generated from massive utilities and heavy auxiliary operations. This deeply complex, multi-component calculation is vastly more complicated than the simpler rules for steel or aluminium. This is exactly why bringing in brilliant third-party verifiers fully armed with highly specific fertiliser sector expertise is absolutely incredibly important perfectly for Indian producers.

The product-level cost comparison

The table effortlessly makes a beautifully critical point wonderfully visible. For basic grey ammonia, ugly CBAM costs safely sitting at roughly €128 to 152 per tonne specifically at an €80 carbon price are highly material, representing a painful 10 to 15% of highly typical grey ammonia spot prices seen in recent years. For glorious green ammonia, the actual CBAM cost is proudly zero. This is absolutely not a minor, small price differential. It is exactly the powerful mechanism aggressively creating a highly direct, highly lucrative carbon price reward precisely for brilliant green production, a reward that delightfully grows every single year as heavy EU ETS prices steadily rise eagerly toward the massive €140 per tonne level excitedly projected by 2030. As dirty, carbon-intensive fertilisers steadily become painfully more expensive, incredibly smart exporters that aggressively invest deeply in cool low-carbon solutions, exactly like green ammonia, can effortlessly gain a massive advantage securely over their struggling non-EU competitors. Clever suppliers safely armed with beautiful lower-emission products are incredibly highly likely to effortlessly gain a highly significant advantage as desperate EU customers frantically look everywhere to safely reduce their painful costs.

India's green ammonia projects: the transition taking shape

The Hydrogen Purchase Obligation: the domestic demand signal that completes the picture

While CBAM brilliantly creates massive demand specifically from the EU side exactly for low-carbon ammonia, India's upcoming Hydrogen Purchase Obligation will beautifully create incredibly heavy mandatory demand specifically from the domestic side. Happily together, these two powerful mechanisms cleanly provide the incredibly vital bilateral demand signal (both from Europe and beautifully from tough domestic regulation) that brilliantly gives eager green ammonia project developers the wonderfully sweet revenue visibility heavily needed to confidently raise the incredibly massive long-term capital that huge electrolysis and massive ammonia synthesis plants absolutely require.

The HPO, which MNRE is currently eagerly developing carefully in close consultation safely with the Department of Fertilisers and the Ministry of Petroleum and Natural Gas, will firmly mandate a strict minimum percentage specifically for green hydrogen procurement heavily applied to large fertiliser plants safely sitting above highly specified capacity thresholds. The initial tough obligation level and the exact timeline specifically for notification sadly have not yet been finalised. But the general direction is beautifully clear: India's massive fertiliser sector, which currently hungrily consumes massive amounts of grey hydrogen sadly produced strictly from natural gas aggressively imported largely as expensive LNG, will be strictly required to progressively and heavily substitute beautiful green hydrogen safely over the entire coming decade.

The massive energy security dimension of this beautiful transition is incredibly significant and sadly wildly underweighted strictly in purely CBAM-focused analysis. India acts as the world's absolute second-largest ravenous consumer of all fertilisers. Around an insane 86% of India's entire ammonia requirement was highly import-dependent safely back in FY 2022-23, and over an unbelievable 60% of all gas heavily consumed directly in the massive fertiliser sector stubbornly comes strictly from expensive imported LNG. Glorious green hydrogen beautifully produced domestically entirely from pure renewable electricity magically eliminates both the dangerous import dependency and the horrific LNG price volatility that painfully translated into a massive Rs 2.25 lakh crore specifically in heavy government fertiliser subsidies sadly in FY 2022-23. The magnificent HPO is therefore beautifully and simultaneously an incredible climate policy, a brilliant energy security policy, and an excellent fiscal policy instrument, which wonderfully gives it an impressive breadth of heavy political support that purely boring environmental obligations sadly often completely lack.

The decarbonisation pathways for Indian fertiliser producers

What India's major fertiliser producers need to do now

The immediate, highly urgent priorities strictly for ambitious Indian urea and busy ammonia producers shipping serious EU export volumes are beautifully clear and smartly sequenced. First, immediately confirm exactly which highly specific products are safely covered by CBAM's incredibly specific CN codes. Typical urea, ammonia, harsh nitric acid, and complex compound fertilisers act as the absolute primary categories. Second, rapidly establish highly verified production-level emissions data perfectly using the strict EU CBAM methodology completely rather than vaguely using simple GHG Protocol or messy domestic reporting standards. The brilliant Sandbag analysis terrifyingly demonstrates that the incredible difference safely between lazily using default values and carefully using highly verified actual data is absolutely not minor. It literally determines exactly whether a massive 10,000-tonne shipment painfully costs €43 per tonne or delightfully just €7 per tonne strictly in nasty CBAM obligations. Third, aggressively assess N₂O abatement investment economics heavily against wonderfully avoided CBAM costs. This remains a deeply vital calculation that sadly most Indian nitric acid producers surprisingly have not yet made properly using current and aggressively projected EU ETS prices. Fourth, nervously monitor the messy EU fertiliser exemption debate incredibly closely. If a lucky temporary exemption is unexpectedly granted, it will highly likely remain extremely time-limited, and the eventual, painful full application of strict CBAM to all fertilisers remains infinitely more probable than a lazy, permanent exclusion.

For eager producers happily planning massive new capacity or aggressive export expansion, the core strategic question is incredibly straightforward: absolutely any new ammonia or massive urea capacity that will actively be online directly by 2030 and heavily targeting strict EU markets should absolutely be rigorously evaluated directly against brilliant green ammonia economics, absolutely not just safely using tired grey ammonia economics. At current, generous SIGHT incentive levels and beautifully armed with the glorious zero-CBAM-cost advantage, the absolute break-even directly between green and grey ammonia safely for EU-bound production is currently much closer than the simple, headline cost-per-kg comparison vaguely suggests.

For a wonderfully full view of exactly how CBAM, the upcoming Hydrogen Purchase Obligation, the lucrative SIGHT programme, and the older PAT Scheme beautifully interact strictly for the massive fertiliser sector, safely see the Fertilisers sector page and the complete Green Hydrogen regulatory repository. For a deeper look at India's broader, highly ambitious NDC targets that beautifully frame the ultimate long-term direction, absolutely see the India Decarbonisation page.