The INP is a state-owned think tank that conducts economic and sustainable development research and provides policy training in coordination with Egypt’s public planning framework and ministries.
CBAM became fully operational on 1 January 2026, imposing a charge on carbon emissions generated during the production of goods imported into the EU.
The average carbon price in 2024 stood at $70.07 per ton. The mechanism covers products including cement, iron and steel, aluminium, hydrogen and some electricity, and aims to prevent carbon leakage and encourage cleaner production worldwide.
According to an INP study released on Thursday on the impact of CBAM, Egyptian fertilizer exports are heavily dependent on the European market and are therefore vulnerable to external shocks, including the mechanism’s implementation.
During CBAM’s transitional phase, which ran from October 2023 to December 2025, Egyptian fertilizer exports to EU countries had reached $1.6 billion in 2022 before declining to $993 million in 2023.
The value of Egyptian fertilizer exports to the EU stood at around $409 million in 2020, representing 28.5 percent of the sector’s exports. The EU’s share rose to 45.4 percent in 2024, valued at $992.8 million out of a total of $2.185 billion.
CBAM risks revenue loss
If Egypt introduces a domestic carbon tax on exporters, EU importers will pay for CBAM certificates after deducting the carbon price already paid by exporters to the Egyptian government, thereby avoiding double taxation.
According to the INP, without a domestic carbon tax, Egyptian exporters pay nothing on their carbon emissions to the government but must reimburse EU importers for the full cost of CBAM certificates. Citing the World Bank, the study said this could transfer between $200 million and $500 million annually in tax revenues from Egypt to the EU by 2034.
Egyptian companies exporting goods covered by CBAM could also face financial burdens of up to $317 million annually, equivalent to 10 percent in additional fees, to cover costs borne by EU importers.
The increasing financial and regulatory burdens could lead to lower export revenues, reduced market share and adverse effects on interconnected sectors, potentially weakening GDP growth and employment in the Egyptian economy.
The report 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 aluminium and cement sectors, although the fertilizer industry could attract green investment.
Egypt has one of the region’s most diversified fertilizer industries, supported by its phosphate reserves and phosphate fertilizer production capacity.
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 fertilizer 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.
Egyptian fertilizer exports reached $11.9 billion between 2020 and 2024, 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 of Egyptian fertilizer exports before CBAM’s implementation, representing 75.6 percent, or $9 billion, between 2020 and 2024.
Carbon reduction maintains export stability
If Egyptian companies fail to report their direct carbon emissions, foreign investors may redirect their investments towards 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.
Carbon reduction after 2026 is expected to balance the impact of 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.
It is also expected to narrow the cost gap between Egyptian and European fertilizers. In 2020, Egyptian fertilizers cost €13.23 per ton, compared with €110.79 per ton for European fertilizers. After the addition of CBAM carbon costs, Egyptian fertilizer prices are expected to rise to €703.17 per ton, while European prices will remain higher at up to €829 per ton.
The transition towards low-carbon manufacturing could strengthen the competitiveness of Egyptian exports and mitigate CBAM’s negative impact on fertilizer exports.
In preparation, Egypt launched its first regulated voluntary carbon credit market through the Egyptian Exchange. 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 recommended establishing an integrated national system for measuring and disclosing emissions and linking it to the relevant regulatory bodies. It also called for improving energy efficiency, expanding the use of clean energy sources and encouraging investments in carbon capture and low-carbon hydrogen technologies.
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