Parliament opens the door on CBAM revenues, fails on providing safeguard to farmers

Farm Europe regrets today’s plenary vote on the extension of the Carbon Border Adjustment Mechanism to downstream goods, which confirmed the deletion of Article 27a. Farm Europe counts on the Council and the Commission to defend this provision in the course of the interinstitutional negotiations, and beyond to urgently set a new decarbonation strategy for fertilisers that better reflect the specificities of agricultural value chains.

The European Parliament today confirmed the approach of ComENVI of deleting the emergency break that was proposed by the European Commission to allow suspending temporarily the carbon tax in case of Serious and unforeseen circumstances (Article 27a). The CBAM covers nitrogenous fertilisers, and farmers are the downstream users of those products. Unlike industrial operators, they receive no free allowances, they most often sell into price-taking markets and cannot pass costs downstream. Whatever happens to fertiliser prices lands at the farm gate, in a Union that remains heavily dependent on imports. Fertiliser prices are already at levels many farms cannot sustain.

The Commission’s original proposal recognises this risk proposing a conditional, evidence-based and reversible instrument, and not a weakening of the mechanism’s environmental integrity or its anti-circumvention architecture.

However, the European Parliament keeps a general provision under which the Commission may, “as appropriate”, redirect CBAM revenues to affected sectors. Where a policy structurally raises the price of an input that farmers cannot substitute and whose cost they cannot pass on, the revenue it generates should not bypass them. That principle now has to be made operative rather than left to the Commission’s discretionary power.