Ammonia is a primary chemical used as an intermediate and end-product for the fertilizer industry (70%) and other industries (30%). Ammonia is critical for the agriculture sector and global food security. It has also been identified as an energy carrier for clean hydrogen in the future. More than half of the world’s ammonia is currently produced in four countries: China, USA, India and Russia. 99% of ammonia production relies on coal gasification and steam methane reforming to make hydrogen. Hydrogen production generates 90% of total ammonia synthesis emissions.
With 1.3% of all man-made emissions, ammonia is the largest emitting product of the chemical sector (450 Mt CO₂), ahead of high-value chemicals (250 Mt CO₂) and methanol (220 Mt CO₂). Demand for ammonia is projected to rise nearly 40% by 2050, driven by demand for fertilizers in Africa, Latin America, the MiddleEast and South-East Asia. However, aligning with the IEA Net-Zero by 2050 requires limiting the increase to 23%. Two main pathways for low-emission ammonia exist, CCUS and electrolysis; both technologies are available today. However, blue and green hydrogen production costs typically range 10% and 40% higher, respectively, and require further cost reduction. Methane pyrolysis and biomass gasification are also emerging as potential technological alternatives.
Besides investing in production assets, a 50/50 green/blue ammonia supply in 2050 will require more than $850 billion in investments in decarbonized power and CO₂ infrastructure to be deployed –nearly 12 times the annual value of the ammonia market. Building ammonia and fertilizer producers’ confidence to pass a Green Premium over 10% to farmers is essential to unlock demand and incentivize investments. Governments should be cautious of the impact on food price and food security due to the widespread use of mineral fertilizers and low margins in farming.
More robust policy measures and international cooperation on carbon pricing, carbon border tax adjustments or product specification standards can help create a differentiated, and economically viable market for first movers into the low-emission ammonia industry. $450 billion is necessary to transform the ammonia industry asset base –nearly seven times the value of the current asset base. However, this is expected to decrease over the coming decade as the cost of electrolyzers and green power falls.
We emphasize five priorities for the sector:
1. Boost the number of green and blue ammonia projects to accelerate the learning curve, drive costs down and increase the competitiveness of low-emission ammonia technologies.
2. Prevent infrastructure bottlenecks by developing the low-emission power capacity, and the CO₂ transport and storage required to enable green and blue hydrogen production.
3. Multiply demand signals for low-emission ammonia and fertilizers to incentivize producers and investors to direct investments towards low-emission production assets.
4. Develop policies to support the priorities above and the business case for low-emission ammonia production
5. Ensure decarbonization of ammonia and fertilizer production does not impact food security for poorer households.