Ammonia Technology Roadmap	Chapter 3. Enabling more sustainable ammonia production
Towards more sustainable nitrogen fertiliser production

Framework fundamentals

Establishing plans and policy for long-term CO2 emission reductions

A clear vision of the path ahead, and a commitment to following it, is imperative to accelerate the transition. Governments will be instrumental in providing clarity, certainty and a business case for investing in near-zero-emission technologies. They can help establish a strong and stable market signal for emission reductions by incorporating Paris Agreement-aligned mediumand long-term plans and targets for the ammonia industry within climate, energy, and industrial strategies. The industry should be actively involved in the planning process.

Planning for the ammonia industry’s energy transition should take careful consideration of broader strategies to achieve the UN SDGs, including the role of the ammonia industry in addressing climate change (SDG 13), responsible production and consumption (SDG 12), affordable and clean energy (SDG 7), sustainable industrialisation (SDG 9) and zero hunger (SDG 2). Care should be taken that plans and policies are designed in such a way that addressing one objective does not jeopardise another. In particular, given the importance of nitrogen fertilisers in food production, governments should have in place safeguards to ensure the energy transition does not negatively impact the affordability of agricultural production and food. Measures may include monitoring prices, maintaining dialogue with farmers and, if necessary, using carefully designed support mechanisms (perhaps attached to NUE targets, in order to protect affordability but disincentivise inefficient fertiliser use). Additionally, just transition provisions should be incorporated into plans to minimise potential employment and other social impacts, and ensure an orderly transition.

Strategies should be backed by mandatory long-term emission reduction policies, with stringency increasing over time in a predictable manner. This may include carbon pricing in the form of carbon taxes or an ETS, or a tradeable emissions performance standard that would require a decreasing average emission intensity of ammonia production. As discussed above, a number of jurisdictions are already adopting carbon pricing, but increased stringency is needed in those regions, as is coverage of a greater number of countries. For low-cost measures such as N2O abatement from nitric acid plants, governments could mandate the use of abatement technologies to accelerate near-term progress. While an integral part of the overall strategy, mandatory policies are likely to be insufficient on their own to enable the full sustainable transition, and must be complemented by other components discussed in subsequent sections.

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Ammonia Technology Roadmap	Chapter 3. Enabling more sustainable ammonia production
Towards more sustainable nitrogen fertiliser production

The ammonia industry should also establish corporate strategies for the energy transition and climate governance plans, recognising that transitioning to sustainable production methods will be important for staying competitive in the long run. Such strategies should include long-term targets aligned with the Paris Agreement and a plan for how investment, plant retrofitting and R&D will enable those targets to be achieved. Such planning would help facilitate long-term business planning, bring shareholders and employees together behind a common vision and show commitment to shareholders. Industry support for and input into government policy design and planning processes are also important.

Key actions

Governments: in consultation with industry, develop sustainable transition plans for the ammonia industry; establish long-term emission reduction policies such as carbon pricing or emissions standards.

Ammonia industry: establish long-term corporate strategies for the energy transition; engage in road-mapping exercises and support government policy design.

Researchers and non-governmental organisations: contribute to roadmapping exercises and policy design; galvanise support for industry transition plans.

Mobilising finance and investment

A massive redirection of capital investment will be required for the sustainable energy transition, away from incumbent technologies and towards R&D, demonstration and deployment of near-zero-emission technologies at existing and new plants, and in supporting infrastructure. As discussed in the previous chapter, 80% of cumulative capital investments in the Sustainable Development Scenario are in near-zero-emission capacity. Governments have a role to play in providing funding through direct grants and other subsidies, most likely targeting areas with the highest risk or other barriers to overcome, such as R&D, first-of-a-kind commercial projects and perhaps shared infrastructure. They should also lead the development and application of sustainable finance taxonomies that set a clear standard for sustainable investment in the fertiliser sector, as is being done at the EU level.

Private-sector investment will also be crucial for the full rollout of sustainable technologies. The public sector can help mobilise private investment through mechanisms that take on some of the financial risk of early projects or provide other incentives for investment. Such mechanisms may include concessional and subordinated loans, debt guarantees, early-stage equity investment, tax

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Ammonia Technology Roadmap	Chapter 3. Enabling more sustainable ammonia production
Towards more sustainable nitrogen fertiliser production

incentives and blended finance. Removing fossil fuel subsidies would also shorten the timeline for new near-zero-emission technologies to reach cost parity and thus help redirect existing sources of finance to sustainable technologies. Furthermore, governments can help mobilise private investment by ensuring they have a strong policy framework for CO2 emission reductions in place, via the other policy pillar discussed in this chapter.

The case for governments and banks to provide direct funding and finance mechanisms within their countries is clear, as it enables domestic projects. But there is also a critical need for international finance, particularly to enable a timely transition in emerging markets and developing economies, as well as in other countries where sufficient private-sector finance is not accessible. This could take various forms, including contributions to funds administered by multilateral institutions and development banks, bilateral agreements and official development aid. When adequately backed by their member governments, financing through multilateral development banks is likely to play a key role. While a number of funds that could finance ammonia industry projects already exist, as discussed above, a successful global transition will require advanced economies to massively scale up international finance. There is also a case for more targeted funds focusing on the industrial sector, perhaps with funding allocated specifically to ammonia production to ensure adequate coverage.

The financial sector has a valuable role to play in facilitating access to finance for the energy transition, and it can leverage this finance to push the private sector towards new, more sustainable business models. Financial institutions can help bring sustainability criteria, climate and stranded asset risks, and other environmental, social and governance (ESG) considerations to the forefront of investment decisions among both investors and companies seeking finance. This can be done through products and incentives such as responsible investment schemes, ESG factors incorporated into credit ratings, and financial risk disclosures. Financial institutions should also embed consideration of stranded assets and other ESG risks into their own core risk evaluations. They can also directly help raise capital by issuing green bonds and transition bonds that include opportunities to fund emission reduction projects in the ammonia industry. The financial sector should also work with the public sector in developing sustainable finance taxonomies and delivering blended finance.

Producers in the ammonia industry can take steps to position themselves for access to green and transitional finance, which may include developing clear energy transition strategies, integrating climate risks into their financial planning, and disclosing information on their environmental performance and climate risks.

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