From Fertiliser to Steel: How EU’s Carbon Border Tax Forces a Rethink in Gulf and ASEAN Agri-Trade

The European Union’s carbon border adjustment mechanism (CBAM) moved into its definitive phase on January 1, 2026, and while headlines focus on steel and cement, the implications for agriculture and fertiliser trade across the Gulf and ASEAN are just beginning to sink in. Exporters in countries such as Saudi Arabia, Qatar, Oman and Indonesia now face a future in which carbon intensity increasingly determines market access and margins.​

Gulf Business reports that CBAM now imposes financial charges—rather than just reporting requirements—on imports of cement, iron and steel, aluminium, fertilisers, electricity and hydrogen, based on their embedded CO₂ emissions. For GCC producers, that means ammonia‑based fertilisers and related agro‑chemicals shipping to Europe will gradually face a carbon price unless production can be decarbonised or offset. The same applies to steel used in farm machinery, storage and infrastructure built with EU‑bound components.​

Argus Media notes that EU climate and fuel regulations are also driving up demand for biofuels and renewable feedstocks, many sourced from Southeast Asia. Palm‑oil derivatives, used cooking oil and other vegetable‑oil‑based inputs feed into Europe’s hydrotreated vegetable oil (HVO) and sustainable aviation fuel (SAF) supply chains. However, these flows are subject to strict sustainability and traceability rules, with deforestation‑linked or high‑emission feedstocks facing both regulatory and reputational barriers.​

For agribusinesses in Indonesia, Malaysia and Thailand, the twin pressures of CBAM‑style measures and deforestation‑free‑supply rules mean that “cheap at all costs” is no longer a viable export model. Companies must invest in emissions measurement, certification, and in some cases, replanting and land‑use change to maintain EU market share. That requires capital and know‑how that many smallholders and SMEs currently lack, raising the stakes for blended‑finance and technical‑assistance programmes.​

Pakistan’s widening trade deficit with the Middle East, partly driven by higher fertiliser and energy import bills, underscores how vulnerable many food‑importing countries are to input‑cost shifts. CBAM could indirectly influence these dynamics by altering price and availability patterns in global fertiliser markets: if Gulf producers divert more low‑carbon product to premium markets like the EU, other buyers may face tighter supply or higher prices. That in turn could affect farm economics from Egypt to the Philippines.​

Governments in the GCC and ASEAN are beginning to respond. Some Gulf states are exploring green‑ammonia and blue‑ammonia projects, hoping to retain fertiliser competitiveness in a carbon‑priced world while also exporting low‑carbon fuels. ASEAN economies are updating tax and accounting frameworks to better capture climate‑related costs and incentives, as seen in Vietnam’s 2026 tax and accounting updates that integrate carbon‑pricing and environmental‑provision rules. Regional trade agreements, such as the upgraded China–ASEAN free trade pact that now covers digital and green‑economy provisions, could offer alternative demand for climate‑aligned agri‑products.​

For agritech and fintech startups in markets like Vietnam, Indonesia and the Philippines, the shift creates both risk and opportunity. Platforms that help farmers measure emissions, optimise fertiliser use, access green credit or prove compliance with sustainability standards could become critical infrastructure. But they will need to scale quickly and work closely with banks, insurers and commodity traders to translate carbon data into better financing and pricing terms.​

The transition will not be smooth. Argus warns that 2026 may be a “rocky year for global trade,” with shipping, energy and manufacturing all adjusting to overlapping climate, tariff and security shocks. For food and fertiliser flows between the Gulf, ASEAN and Europe, that means more volatility in routes, costs and regulatory obligations. Yet over the medium term, firms that can genuinely cut emissions and prove it may find themselves with a structural edge in markets that increasingly put a price on carbon.