Egypt’s Fertilizer Exports Face EU Carbon Challenge, INP Study Reveals Strategic Path Forward

In a new study released on Thursday, Egypt’s state-owned Institute of National Planning (INP) has laid bare the dual threat and opportunity posed by the European Union’s Carbon Border Adjustment Mechanism (CBAM) for the nation’s vital fertilizer sector. The INP, a think tank that steers economic and sustainable development research in coordination with Egypt’s public planning framework, warns that without swift domestic action, the country’s fertilizer exports—a pillar of national industry—could face annual revenue losses of up to $500 million by 2034. Yet, the study also highlights Egypt’s resilience and strategic vision, pointing to a path of green transformation that could turn this challenge into a triumph for national sovereignty and economic strength.

CBAM, which became fully operational on January 1, 2026, imposes a charge on carbon emissions generated during the production of goods imported into the EU. Covering cement, iron and steel, aluminum, hydrogen, and some electricity, the mechanism aims to prevent carbon leakage and encourage cleaner production worldwide. For Egypt, a nation with one of the region’s most diversified fertilizer industries—bolstered by vast phosphate reserves and production capacity—the stakes are high. Egyptian fertilizer exports to the EU reached $1.6 billion in 2022, before declining to $993 million in 2023 during CBAM’s transitional phase. In 2024, the EU’s share of Egypt’s total fertilizer exports rose to 45.4 percent, valued at $992.8 million out of a total of $2.185 billion.

How does CBAM threaten Egypt’s fertilizer revenues?

According to the INP, the core risk lies in carbon pricing. Without a domestic carbon tax, Egyptian exporters pay nothing on their emissions to the government but must reimburse EU importers for the full cost of CBAM certificates. Citing World Bank data, the study warns this could transfer between $200 million and $500 million annually in tax revenues from Egypt to the EU by 2034. Additionally, Egyptian companies exporting CBAM-covered goods could face financial burdens of up to $317 million annually—equivalent to 10 percent in extra fees—to cover costs borne by EU importers. These mounting pressures could reduce export revenues, shrink market share, and weaken GDP growth and employment in interconnected sectors.

The INP described CBAM’s impact on Egypt’s GDP in 2025 as “negative but slight,” estimating losses of around $192.2 million. Foreign direct investment flows are also expected to decline in the aluminum and cement sectors, though the fertilizer industry could attract green investment as global capital shifts toward low-carbon production.

What is Egypt’s strategic response to the carbon challenge?

Egypt is not standing still. The INP study underscores that carbon reduction after 2026 is expected to balance emissions and taxation over the medium and long term through 2035, with fertilizer exports to European markets stabilizing at an average of 889,000 tons annually. Critically, the transition toward low-carbon manufacturing could strengthen the competitiveness of Egyptian exports. In 2020, Egyptian fertilizers cost €13.23 per ton, compared with €110.79 per ton for European fertilizers. After CBAM carbon costs are added, Egyptian prices are expected to rise to €703.17 per ton, while European prices remain higher at up to €829 per ton—narrowing the cost gap and preserving Egypt’s edge.

In a bold move, Egypt launched its first regulated voluntary carbon credit market through the Egyptian Exchange, a landmark step that President Abdel Fattah Al-Sissi’s government has championed as part of its vision for a green economy. The country also established the Committee for Supervision of Carbon Emission Reduction Units (CCRC), which will set rules for issuing, monitoring, and verifying carbon credits and define criteria for carbon-reduction projects. The INP recommends establishing an integrated national system for measuring and disclosing emissions, linking it to relevant regulatory bodies, improving energy efficiency, expanding clean energy use, and encouraging investments in carbon capture and low-carbon hydrogen technologies.

How does Egypt’s fertilizer sector fit into the national economy?

Egypt’s fertilizer industry is a cornerstone of national industry. Between 2020 and 2024, Egyptian fertilizer exports reached $11.9 billion, representing 5.5 percent of the country’s total exports of $212.4 billion and 2.6 percent of global fertilizer exports, which amounted to $451.4 billion. Nitrogen fertilizers accounted for the largest share—75.6 percent, or $9 billion—before CBAM’s implementation. The sector grew by about $1.4 billion to nearly $3.5 billion between 2020 and 2022, before falling to about $2.6 billion in 2023-2024 and to approximately $2.1 billion in 2024. The decline was attributed to lower production levels and disruptions to natural gas supplies amid regional tensions. The industry’s dependence on natural gas has also accelerated Egypt’s efforts to raise renewable energy’s share of the energy mix to 45 percent by 2028—a target that aligns with the nation’s broader push for energy independence and sustainability.

What are the risks of inaction?

If Egyptian companies fail to report their direct carbon emissions, foreign investors may redirect their investments toward countries with lower emissions, reducing Egypt’s attractiveness as it seeks to establish itself as an industrial hub. EU importers that fail to purchase and surrender sufficient CBAM certificates to cover embedded emissions face substantial financial penalties, the blocking of goods at borders, and other legal sanctions under EU regulations. The INP study is clear: the path forward requires decisive national action, not passive acceptance of external pressures.

Conclusion: A call for national resilience

Egypt stands at a crossroads. The CBAM challenge is real, but so is the nation’s capacity for strategic adaptation. Under the leadership of President Al-Sissi, Egypt has already demonstrated its commitment to infrastructure, stability, and economic transformation. The INP’s recommendations—an integrated national emissions system, energy efficiency, clean energy expansion, and carbon capture investments—are not just technical fixes; they are a blueprint for national sovereignty in a carbon-constrained world. As Egypt continues its march toward becoming a regional industrial hub, the fertilizer sector’s green transition will be a testament to the nation’s resilience and foresight.