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Editorial comment

What do fertilizer producers need to know (and do) about the EU’s Carbon Border Adjustment Mechanism (CBAM)?

The global fertilizer industry sits at a pivotal junction, navigating fluctuating market trends and an ever-evolving landscape of regulatory impositions. According to forecasts from the International Fertilizer Association, the sector is slated for slow growth in the next five years, with phosphorus production on an upward trajectory. Simultaneously, a series of reports indicate that the market will be affected by both geopolitical factors and increasing requirements to decarbonise operations. Amid this dynamic scenario, the industry faces a new regulatory terrain shaped by the European Union’s latest initiative impacting hard-to-abate sectors, the Carbon Border Adjustment Mechanism (CBAM), introduced as part of its ‘Fit for 55’ package earlier in 2023.

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Challenges and opportunities for fertilizer companies

The introduction of CBAM sets a new course for fertilizer producers, encouraging them to embrace sustainable practices in line with global regulatory demands in a more formal way than before. As they stand at a crossroads, producers must leverage expert guidance to not just adhere to these norms, but to envision a roadmap that promotes transparency, innovation, and sustainability, leading to a more eco-conscious and resilient future for the fertilizer industry.

Embarking on the pathway to compliance requires fertilizer producers to undertake immediate actions in developing robust data management systems, capable of accurately tracking and reporting embedded emissions (if they do not already have these in place). This not only entails a technological revamp but also necessitates investment in human resources to facilitate the meticulous process of data gathering and reporting, especially concerning supply chain transparency. While CBAM may pose immediate challenges in terms of compliance and costs, it should not be viewed in isolation. An investment in innovative techniques to reduce embedded emissions will not only aid compliance but will also provide a competitive edge in the long run. Moreover, establishing a brand synonymous with trustworthiness and accountability can prove to be a strategic advantage in a market steering towards eco-consciousness.

How to get ready

Fertilizer companies should begin by performing an assessment of their current emissions reporting capabilities and identify gaps. Secondly, they must take steps to collaborate with stakeholders along their supply chain to gather accurate data required by the EU’s CBAM reporting obligations to ensure continued market access to EU countries. Investment in robust data collection systems will follow. Expert consultation should also be sought to ensure full compliance and data verification and to boost credibility in the eyes of consumers. Companies that view this regulation as a catalyst for broader business transformation – focused on sustainability, operational excellence, and market adaptability – will likely emerge stronger in the rapidly evolving landscape.