How to farm into the future when fertilizer is both promise and problem

Climate Economy

How to farm into the future when fertilizer is both promise and problem

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Synthetic fertilizers have driven food production — along with climate change and environmental degradation

Chemical fertilizers have been an agricultural game changer. They have helped to catalyze the green revolution, dramatically increasing global food production by leveraging new technologies and practices to increase yields and reduce prices. These gains in productivity have in turn helped to alleviate hunger, malnutrition, and food insecurity, especially in developing countries.

Modern food production relies heavily on synthetic fertilizers which are used to produce roughly half the crops feeding the global population. But the increase in their use has come at a high environmental cost. 

Synthetic fertilizers are responsible for about 5% of global greenhouse gasses, with a third of emissions generated from the manufacturing process and two-thirds from fertilizer’s breakdown by microbes in the soil after being applied on fields. Nutrient runoff from fertilizers contributes to excessive algae growth that depletes oxygen and kills aquatic life in rivers and oceans. 

The dilemma the industry faces is: How can it decarbonize without putting global food security in jeopardy?

Greening the fertilizer industry is critical for combating global warming, even as the world’s growing population increases demand for food and more efficient food production. The fertilizer industry is forecast to expand rapidly over the next several decades, as the global population swells from 7.9 billion today to an estimated 10.4 billion by 2100, and demand for crops is expected to double from 2005 to 2050.

The dilemma the industry faces is: How can it decarbonize without putting global food security in jeopardy?

Balancing these two key priorities will require close collaboration between manufacturers of synthetic fertilizers and policymakers, multilateral lenders such as the International Finance Corporation (IFC), and the farmers and communities that use the fertilizers. The complex path to achieving net-zero fertilizer production underscores the challenges facing high-emissions industries as they transition to a more sustainable and circular future.

Leading fertilizer companies have started to adopt more sustainable manufacturing processes. For example, member companies of the International Fertilizer Association (IFA) have decreased the CO2 emissions rate per ton of ammonia by 14.5% since 2004. New fertilizer plants typically use one-third less energy per ton of ammonia produced compared to older facilities. And manufacturers have introduced innovations, such as in advanced catalytic processes, which facilitate the chemical reactions needed to make fertilizer.

The Ammonia Technology Roadmap, issued in 2021 by the International Energy Agency (IEA) with the European Bank for Reconstruction and Development (EBRD) and International Fertilizer Association (IFA), envisions further progress. One potential development path would allow the industry to achieve zero emissions by 2050, but the way forward is complicated.

Manufacturers would need to deploy near-zero-emissions technologies on a commercial scale to approach net-zero production. Such technologies already exist. Yara International ASA, a Norwegian fertilizer company, for example, is building what it says is one of the world’s largest pilot projects for producing green hydrogen to then produce green ammonia that can be converted to fossil-free mineral fertilizer. The technology, which involves splitting water through electrolysis using renewable energy, could reduce carbon emissions by 80 to 90%. Other companies working on new technologies include Denmark’s Topsoe, Japan’s Tsubame BHB, and U.S. startup ReMo Energy.

Manufacturers would need to deploy near-zero-emissions technologies on a commercial scale to approach net-zero production.

But these evolving technologies are not yet ready for large-scale implementation given the high costs and capital investments required. Ultimately, the industry will need to rely on a combination of many factors including existing and new technologies to improve its sustainability and facilitate its green transition.

Energy and emissions

In synthetic fertilizer manufacturing, one of the biggest problems is the greenhouse gas footprint from producing ammonia for use in nitrogen-based fertilizers. Global ammonia production accounted for nearly 2% of total final energy consumption and 1.3% of CO2 emissions from the energy system in 2020. Typically, natural gas, or in some cases coal, is used to provide hydrogen that combines with nitrogen to create ammonia needed in the manufacturing process.

Using electrolysis powered by renewable energy to produce green hydrogen could significantly reduce the industry’s carbon emissions compared to traditional methods using natural gas or coal. But technical barriers and high costs make the use of green hydrogen at scale challenging. While technology continues to advance, costs continue to fall, and an increasing number of fertilizer companies are starting to tap into green hydrogen to produce green ammonia, most are currently only doing so as a pilot or on a small scale.

Another solution is to capture CO2 emissions from the production process and store them underground. Norway’s Yara recently signed an agreement with Dutch company Northern Lights to transport liquified CO2 from its fertilizer production facility and store it more than a mile under the seabed of the Norwegian continental shelf. Carbon capture, utilization and storage (CCUS) may be an option in natural gas-based production of fertilizer but will remain costly and would require major investments in infrastructure

Traditionally, manufacturers have relied on the Haber-Bosch process to produce fertilizer. This process made it economically feasible to convert hydrogen and nitrogen into ammonia — one of inorganic fertilizer’s primary ingredients — and this revolutionized food production. But the process is very energy- and emissions-intensive. Some experts believe the industry won’t be able to achieve fully sustainable production unless it replaces the Haber-Bosch process altogether with new approaches such as green hydrogen and green ammonia, which many companies are exploring.

Excess nitrogen

Over the last century, man-made nitrogen compounds in the water, soil, and air have doubled. The Fertilizer Institute in the U.S. has developed a program called the “4R Nutrient Stewardship” to help farmers decrease fertilizer use and improve efficiency through four “rights” — applying the right fertilizer at the right rate, at the right time and in the right place.

Some major companies produce more environmentally friendly fertilizers such as time-release fertilizers, but these account for a sliver of the market and are not widely used by farmers. Regulation and effective nitrogen management could boost demand for such products.

In addition to nitrogen, two other nutrients essential for healthy plant growth are phosphorus and potassium. These help plants store and use energy and strengthen their disease resistance. Plants tend to absorb less of these two macronutrients than nitrogen, but their production also has environmental impacts, mostly related to mining. Proper fertilizer application and soil management, along with recapture efforts, could help address the impact. Researchers are also exploring alternative, organic substitutions.

Under the circular model… residual biomass, such as from harvest or livestock production, slaughter or food processing, or even human wastewater, could substitute for some raw materials used in fertilizer production.

Biowaste and circular economy

A circular approach could ease reliance on raw material reserves while decreasing energy use and greenhouse gas emissions in the production cycle. An EU-funded project, NEWFERT, found that it was possible to transform livestock effluent into a new generation of fertilizers, and the EU has set a 30% target for biowaste replacement of inorganic materials in synthetic fertilizer. 

Under the circular model promoted by the EU and European Industrial Organization of Fertilizers, residual biomass, such as from harvest or livestock production, slaughter or food processing, or even human wastewater, could substitute for some raw materials used in fertilizer production. New technologies and infrastructure would be needed to address safe access, collection, processing, storage, and introduction of biowaste-based raw materials. 

Regulation can help to secure these changes, such as the EU’s Fertilising Products Regulation, which took effect in 2022 and standardizes the use of organic and recovered waste-based fertilizers under a circular model. 

A major redirection of capital investment will also be necessary. Funding and other support from governments, investors, and multilateral institutions such as IFC can help support a sustainable energy transition, research and development, and the deployment of new technologies and supporting infrastructure. One proven incentive-based financing tool is green loans. The IFC has extended two green loans to phosphate-based fertilizer producer OCP Group. A €100 million loan was committed in March 2021 to finance the construction of four solar plants that will provide cost-effective energy for the production of low-carbon fertilizers. A second 100 million loan, extended in October 2023, is paying for the construction of photovoltaic power plants with a total installed capacity of 400 MWp and up to 1000 MWh of battery storage.

Ultimately, a combination of approaches and a great deal of investment will need to be used to improve the fertilizer industry’s transition to greener and less carbon-intensive manufacturing. Companies will need to deploy new technologies, some of which are already in the works. Production lines will need to use less polluting fuels. And farmers will need to adopt agricultural practices on a broad scale that use fertilizers more efficiently to grow high-yielding crops. Only then can the synthetic fertilizer industry transition to a greener, more sustainable future while continuing to meet growing global demand for food. 

This report is part of an occasional series on sustainability in industry which examines the opportunities and challenges facing various industrial sectors and the role that the IFC can play to support these efforts and contribute to a greener planet.

Full IFC report on Decarbonizing Fertilizer

Written by

Kelly Johnson

Kelly Johnson is the Global Sector Lead for Chemicals and Fertilizers at the International Finance Corporation (IFC), the private sector lending arm of the World Bank Group. He has 30 years experience in the energy value chain in upstream oil and gas operations, supply and logistics and downstream investments in refining, petrochemicals and fertilizers. Kelly has led negotiations and structured IFC financings for greenfield and brownfield projects in Africa, Latin America and Asia. He is currently responsible for increasing IFC’s investments in the sector through business development, client engagement, strategy formulation and global representation.