The NFU has raised concerns over the relatively unnoticed 'tax on carbon emissions', which was announced in the budget and due to roll out in 2027.
The introduction of this could create an 'unequal playing field' for British farmers and growers, the union warned.
Many of the announcements in the recent autumn budget have created significant headlines for British agriculture.
But one point that has gone relatively unnoticed was the announcement a carbon border adjustment mechanism (CBAM) from 1 January 2027.
This is, in essence, a tax on the carbon emissions produced during the manufacture of certain imported goods.
It aims to ensure that domestic carbon reduction policies do not result in the export of carbon-intensive industries to countries with less stringent emissions legislation, a phenomenon known as ‘carbon leakage’.
Materials currently expected to fall under the scope of the CBAM when imported to the UK include aluminium, cement, hydrogen, steel products, and – crucially for agriculture – fertiliser.
The NFU said the government's proposal could put British businesses at a commercial disadvantage due to higher costs.
The introduction of the CBAM follows a consultation in March 2024 conducted under the previous Conservative government.
At the time, the NFU expressed concern that the CBAM would push up the cost of fertiliser in the UK, at a time when farmer confidence was at an all-time low in part due to the impact of rising input costs.
It will be of particular concern for the arable sector, where fertiliser currently makes up 38% of crop-specific expenditure and 12% of total farm costs.
The NFU said: "With British production acting as a baseline for CBAM levies despite the UK not producing ammonium nitrate on any significant scale, this will expose UK farmers to a wholesale increase in fertiliser prices.
"It is also likely that the CBAM will lead to inflation in the costs of other agricultural inputs such as the steel and cement used in the construction of farm buildings."
The union also raised concerns that the introduction of a fertiliser tax would create an unequal playing field for British farmers and growers.
There was a 'significant risk' that it may undermine the competitiveness of UK agricultural production and result in increased imports of food and feed from countries where fertiliser wasn't subject to a carbon tax.
This would 'essentially undermine' the goal of the CBAM by simply transferring carbon leakage from the manufacturing of inputs to a position further down the supply chain.
The NFU warned this would both undermine British producers and weaken national food security.
Consequently, the union said tit would be working to develop an impact assessment to understand the full impact of this tax policy on the industry.
"We will also be lobbying government to ensure British producers are given a fair playing field in regard to food, feed, and fertiliser imports," the NFU concluded.
