With COP28 pushing climate change up the news agenda, we untangle the mysteries of the EU’s Carbon Border Adjustment Mechanism (CBAM) and explain what it means for chemicals and fertilisers.

- CBAM puts price on carbon for imports to Europe

- Potential cost of €3.2bn for fertiliser importers, based on 2022 imports, prices

- Covers iron, steel, aluminium, fertilisers, electricity, hydrogen

- Price will be same as existing European Trading System (ETS)

- Importers will pay for the cost of carbon

- Transitional reporting ends 2025, charging phased in 2026-2034 (2.5%-100%)

- Designed to ensure level playing field for imports and local production

- Chemicals get around 75% free allowances for CO2

- Could fall to zero if chemicals added to CBAM likely after 2030

- EU allowance currently €75-80/tonne

- European Commission aims for all imports to be covered by CBAM

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