One minor but important detail: fertilizers are made with hydrogen that is currently coming from natural gas. But it could be exchanged to some other source, or the superfluous carbon could be stored in solid form etc.
But those options don't exist at the moment due to their cost, so it's pretty foolish to raise the price of something now because in theory, a replacement might become cost effective in the future. A rich nation can take a hit like that but a poor nation can't -- they will just have a famine.
In other words, have that replacement in place and available before you start messing with the price of fossil fuels.
I really want to push against this neoliberal "carbon credit" mentality where we think market solutions will somehow provide replacements as needed. If you want to shut down a coal plant, fine first build the nuclear plant, and then switch over to the coal plant. If you want solar and are convinced batteries will work, then fine, build the batteries first and then switch over. Don't just rely on "the market" to allow you to shut something down and assume replacements will just appear.
Sure, there are effects like you describe. But also, the new alternatives can't compete if the old polluting alternatives don't have to pay anything for their pollution.
In other words, have that replacement in place and available before you start messing with the price of fossil fuels.
I really want to push against this neoliberal "carbon credit" mentality where we think market solutions will somehow provide replacements as needed. If you want to shut down a coal plant, fine first build the nuclear plant, and then switch over to the coal plant. If you want solar and are convinced batteries will work, then fine, build the batteries first and then switch over. Don't just rely on "the market" to allow you to shut something down and assume replacements will just appear.