The Indian fertiliser industry emits 0.58 tonnes of CO2 per tonne of fertiliser

We estimate that the Indian fertiliser sector emits ~0.58 tCO2 per tonne of fertiliser produced. The sector has a total emissions footprint of ~25 million tonnes of CO2 (MtCO2). While 85 per cent of the emission is attributed to the use of natural gas, which is used as a fuel and feedstock in the production process, the remaining 15 per cent is from electricity use. Urea production accounts for about 65 per cent of the total emissions from the sector, and the remaining is from the production of di-ammonium phosphate (DAP) and other complex fertilisers (OCF).

Green ammonia can make the Indian fertiliser industry net carbon-negative

Deploying energy efficiency (EE) measures can reduce the fertiliser industry’s emissions intensity by ∼10 per cent – from 0.58 t-CO2 /t-fertiliser to 0.52 t-CO2 /t-fertiliser (Figure ES1 shows the consolidated emissions mitigation trajectory of the Indian fertiliser industry). Because fertiliser production does not require much electricity, switching to renewable power would result in a mere 2 per cent reduction in emissions. Since ammonia production1 accounts for ∼95 per cent of the emissions in this sector, switching from grey to green ammonia2 can result in a 151 per cent emissions reduction, thus resulting in net negative emissions for the sector. The negative emissions can be attributed to the need to source CO2 from other emitters to produce urea. According to our estimate, the Indian fertiliser sector can consume ∼20 MTPA of green ammonia. As a last resort, carbon management options such as carbon capture and sequestration (CCS), carbon capture and utilisation (CCU), and afforestation may be adopted.

Figure ES1 Emission mitigation pathways for the fertiliser industry

Source: Authors’ analysis

Figure ES2 illustrates the marginal abatement cost (MAC) curve for the fertiliser industry. It shows that cost-saving EE technologies have the lowest mitigation cost of USD -63.5 per tonne. It is also the only cost-saving option in the MAC curve. However, expense-driven EE technologies have a MAC cost of USD 49.6 per tonne. Yet, taken together, EE technologies can help abate ∼2.3 MtCO2. Renewable energy (RE) is the next mitigation option worth considering, with a MAC of ∼USD 42 per tonne, especially for DAP and OCF production. However, since it can abate only 0.4 MtCO2, it is unlikely to play a significant role in decarbonising the fertiliser industry.

With a MAC of ∼USD 160 per tonne for DAP and OCF each and ∼USD 270 per tonne for urea, green ammonia can abate 2 MtCO2 from DAP, 5.1 MtCO2 from OCF, and 30 MtCO2 from urea production. The MAC for the use of green ammonia in urea production is higher than those for DAP and OCF because the urea industry receives subsidised domestic gas priced at USD 7.5 per MMBtu, and we assume that imported natural gas priced at USD 10.1 per MMBtu is used for DAP and OCF production. The total emissions abated by using green ammonia alone in the urea sector stands at 30 MtCO2, which is more than the current level of total emissions from the urea sector, which stands at 16.2 MtCO2 , as urea production needs CO2 , which has to be sourced from other sectors, making the fertiliser industry a net-negative industry.

Figure ES2 Cumulative MAC for the fertiliser sector

Source: Authors’ analysis

With the implementation of carbon management measures, the MAC of CCS for DAP and OCF is estimated to be USD 90 per tonne, which has very limited potential to abate 0.006 and 0.1 MtCO2 for DAP and OCF, respectively. Urea plants do not need any CCS, as the entire CO2 abatement can happen with EE and green ammonia. It should be noted that while CCS has a lower abatement cost than green ammonia, the MAC curve reflects emissions mitigation through the use of green ammonia primarily because the cost of green ammonia is expected to decrease in the future and support India’s ambitions of becoming Aatma Nirbhar (self-reliance). The MAC curve highlights that in the absence of net-zero fuels and direct RE-based electrification of process heating applications, carbon capture, utilisation, and storage (CCUS) is essential for DAP and OCF decarbonisation, even after using green ammonia. Amongst the techniques considered, carbon offset through afforestation has not been assigned any number due to significant uncertainties in its mitigation costs.