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

Key actions

Governments: set policies such as limitations, mandatory reporting and taxes to reduce inefficient use of fertilisers; develop and fund training and evaluation programmes on fertiliser application efficiency; create incentives to promote more efficient use of fertilisers and alternative cropping practices; reform, and phase out where possible, subsidies for fertiliser production and use; ensure robust safety regulations are in place for transport, handling and storage of all fertiliser types, and implement safety training programmes as needed.

Farmers: adopt best management practices for more efficient fertiliser use, including the 4Rs and other conservation measures; monitor soil and crops to aid decision-making; share knowledge and learnings with other farmers.

Agronomists: assist farmers in understanding site-specific crop nutrient requirements and in adopting best management practices.

Agricultural technology industry, including plant breeders and crop equipment suppliers: continue R&D on crop varieties that produce high yields and make efficient use of fertiliser, on equipment and digital tools that facilitate efficient fertiliser application and on other plant nutrition technologies.

Fertiliser industry: increase the market availability of alternative fertiliser options that facilitate NUE, include those suitable to siteand crop-specific conditions.

Consumers and other supply chain actors: reduce post-harvest losses and food waste; reduce overuse and wastage of other ammonia-based products.

Researchers: generate knowledge on efficient nutrient use under varying conditions; help create decision support tools and models for efficient fertiliser application.

Necessary enabling conditions

Enhancing international co-operation and creating a level playing field

Nitrogen fertilisers and other ammonia-based products are traded in large volumes in competitive global markets. This means it will be important for policy makers to design emission reduction measures carefully to ensure that uneven policy ambition in different regions does not lead to the relocation of production to countries with lower ambition. Ideally, governments around the world would work together to develop a policy framework that provides a level playing field for fertiliser producers as production increasingly shifts to lower-emission technologies. A least-cost solution from a purely economic perspective would be a uniform international carbon price, although in practice this may be very challenging to achieve (at least in the short to medium term) and may not be the best approach given the diversity of regional circumstances.

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

Another option could be an international ammonia industry agreement, in which governments and/or producers make a formal commitment to ambitious, commonly agreed-upon – although not necessarily uniform – CO2 emission reduction objectives. This may also be challenging given the competitive nature of the sector. However, an advantage of a sectoral approach is that a comparatively small number of actors – namely the largest producing countries and companies

– would be required to create a critical mass sufficient for a relatively effective agreement. Existing collaborative structures, such as the frameworks for international co-operation under the Paris Agreement or co-ordination by international associations, might provide a helpful starting point for an agreement.

While actors continue to work towards increasing global ambition and co-ordination, a lack of uniform ambition should not be reason to delay action. Initially governments may be able to adopt policies with lower levels of ambition that begin to incentivise change but do not have major impacts on competitiveness. Special provisions for trade-exposed industries may help, such as free allowances for emissions below a benchmark in a cap-and-trade system. As policy ambitions increase, however, other measures will likely be needed.

Some regions are considering adopting carbon border tariffs on imports based on their CO2 footprint, such as the EU CBAM described above. This would account for both explicit carbon prices and implicit carbon prices applied through other regulations, such that domestic and imported production would face the same CO2 emission reduction requirements. Robust methods would be needed to certify and track the CO2 intensities of products, which may entail considerable technical and logistical complexities. “Climate clubs” have also been posited by the research community as an alternative formulation, in which a coalition of willing countries agrees to a common policy ambition and places a blanket tariff on all imports from countries outside the club. Careful design of such tariff policies would be imperative to ensure compliance with international law, notably World Trade Organization requirements. It should also be noted that exports would still face competitiveness challenges, and export subsidies to address this would likely be costly and challenging to apply while remaining compliant with international trade law.

Consumption-based policies could present an alternative and potentially less politically challenging solution than tariffs. Such an approach would place emission requirements on fertiliser users rather than producers, through policies such as a consumption-based CO2 tax or a regulation specifying a declining average CO2 intensity for fertilisers sold in the jurisdiction. Since the requirement is on domestic fertiliser use, both domestic and imported product would face the

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

same CO2 requirements. This approach would also face challenges, including the large numbers of actors (i.e. fertiliser retailers or users) that would need to be regulated, the need for CO2 intensity tracking and certification systems, and the continued competitiveness challenge for fertiliser exporters, the latter two of which also pertain to tariff-based policies. Consumption-based fertiliser requirements could also lead to increased domestic crop prices relative to imports, although the competitiveness impact for farmers of such as policy would likely be smaller than the competitiveness impact on fertiliser producers of having no policy in place, given that fertilisers account for only a proportion of crop prices.

Increased international co-operation will be an important facilitator of the nitrogen industry’s transition, offering benefits both from further emission reductions and by raising global ambition and coherence in approach towards establishing an increasingly level playing field. Important aspects of this are international technology transfer and capacity building, and international climate finance to help emerging and developing economies deploy near-zero-emission technologies. While its rulebook has proved contentious and remains to be agreed upon within the United Nations Framework Convention on Climate Change (UNFCCC) negotiations, Article 6 of the Paris Agreement could provide a valuable framework for various aspects of voluntary international co-operation. Direct bilateral co-operation under Article 6.2 could enable countries leading in near-zero- emission fertiliser production technologies to deploy their technologies in other countries, particular emerging economies. The international carbon market proposed until Article 6.4 could enable fertiliser companies to put their own mitigation measures on the market for international support. Finally, the rulebook for non-market-based co-operation in Article 6.8 could provide a formal basis for initiatives such as an international ammonia industry agreement and technology transfer.

In addition to global co-operation on reducing emissions from producing nitrogenbased products, increased collaboration is needed at the international level on managing the nitrogen cycle. As described above, a number of initiatives, such as the International Nitrogen Management System, are working towards improved co-ordination. Given the scale of the challenges involved, governments would do well to increase their participation and accelerate action.

Key actions

Governments: introduce provisions or mechanisms in CO2 emission reduction policies that ensure domestic and imported products face the same emission requirements; work towards greater policy coherence and ambition on reducing emissions at an international level; assist international technology transfer and

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

finance; collaborate towards a more holistic and robust international approach to nitrogen management.

Ammonia industry: explore options to work collaboratively to promote global industry emission reductions; participate in government-led efforts to form an international ammonia industry emissions reduction agreement; engage in efforts to transfer near-zero-emission technologies to other countries.

Non-governmental organisations: facilitate international dialogue and collaboration through research networks, events and targeted programmes.

Financial institutions: create green finance mechanisms that incentivise investment in near-zero-emission technologies across countries.

Planning and developing infrastructure

Large-scale, co-ordinated infrastructure planning and development will be needed to enable near-zero-emission ammonia production routes. CO2 transport and storage infrastructure will be needed for CCS-based production, enabling over 90 Mt of CO2 to be captured and stored from the sector globally in 2050 in the Sustainable Development Scenario. Electrolytic hydrogen-based production will require infrastructure to generate zeroor near-zero-emission electricity on a large scale, to produce hydrogen, and to distribute the electricity or hydrogen if distant from ammonia plants. The Sustainable Development Scenario requires build-out of over 110 GW of electrolyser capacity at ammonia production sites. The current number of infrastructure projects globally is a mere fraction of what will be required for the energy system transition.

Collaboration between governments, the ammonia industry, other industries and researchers will be needed to plan and develop such infrastructure, positioned around industrial clusters where possible. Considering the large scale and shared nature of supporting infrastructure, it is likely that governments will need to play a leading role in co-ordinating plans, ensuring sufficient financing, establishing a suitable regulatory framework for transporting and storing CO2 and hydrogen, and ensuring affordable access to infrastructure in all regions. Separate companies could also play a role in building and providing access to infrastructure, such as companies dedicated to CO2 transport and storage or hydrogen production and distribution.

All stakeholders, including non-governmental organisations in particular, can assist with raising awareness and increasing acceptance of CCS among the public.

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