According to media reports citing a draft proposal due to be presented today, the EU executive is considering granting more free carbon allowances to the fertiliser industry — a move that could be viewed as a step back from the bloc’s strict climate ambitions as Brussels prioritises industrial competitiveness and energy security amid soaring fertiliser and gas costs.

A recent World Bank report showed that the fertiliser price index climbed in April to its highest level since October 2022, when global markets were shaken by supply disruptions from Russia and Belarus — two major fertiliser exporters — during a period of heightened geopolitical tensions similar to today’s concerns surrounding the Strait of Hormuz.

“The fertilizer price index is projected to rise by more than 30 percent in 2026,” the World Bank warned, adding that “risks remain tilted to the upside if elevated energy prices persist and shipping and production disruptions linked to the Strait of Hormuz continue beyond 2026Q3.”

Today, Agriculture Commissioner Christophe Hansen is set to present the European Commission’s new fertiliser action plan. Among the measures being explored in the draft proposal is a plan to “give the fertiliser industry more free CO2 emissions permits to reduce companies’ bills for complying with the EU carbon market,” according to Reuters.

However, any additional free allowances would be “conditional on an increased production of bio-based (organic), circular or low-carbon fertilisers, securing the availability of home-grown fertilisers in Europe.” The measure forms part of a broader overhaul of the EU carbon market that the Commission is expected to unveil in July.

The proposal could nevertheless weigh on European carbon prices if traders interpret the move as a sign that Brussels is willing to ease pressure on energy-intensive industries amid mounting economic and geopolitical strains.

However, market reaction has so far remained muted, with carbon prices showing only limited fluctuations in recent weeks despite sharp volatility across energy markets, suggesting that traders are reacting primarily to confirmed policy decisions and concrete market developments rather than to media reports or unconfirmed proposals.