70pc CO2 cut needs export solution: Fertilizers Europe

European fertilizer producers recently committed to 70pc greenhouse gas (GHG) cuts by 2040, compared to 2020 levels. But on its decarbonisation path, the fertilizer industry needs EU guarantees of a level playing field, not only with the carbon border adjustment mechanism (CBAM). The EU now needs to guarantee a level playing field for EU exporters, says Antoine Hoxha, director-general of Fertilizers Europe, in an interview with Argus.

Why so unhappy? CBAM is coming.

The CBAM is aimed at creating a level playing for imports to the EU, while nudging non-EU countries towards climate action. The current version of CBAM does not resolve an unlevel emissions playing field for EU fertilizer exporters. A review clause might allow for a solution. We need political will for a solution before CBAM finally cuts off free allowances for European fertilizer producers. The best trade lawyers have already come up with WTO-compliant solutions.

What happens if there's no CBAM solution for EU exports?

With no free allocation for the EU fertilizer industry, the emissions trading system (ETS) price effect will be huge. The ETS might constitute some 50-60pc of EU ammonia price per tonne in 2034, when free allowances are completely phased out. You'd be quite simply thrown out of the market, if you're only 20pc higher than non-EU producers. And what's the point, with no market, for EU producers to have the lowest carbon footprint in the world?

How do you feel about EU policy makers making ever more noise about specific CO2 cuts from agriculture and fertilizers?

The European Commission appears to be leaning towards a specific ETS for agricultural production. This is something we could certainly help with as fertilizer producers. And there's an obvious need to reduce emissions. But we need a way to incentivise cuts.

Any possibility of the EU moving against Russian fertilizers?

Russian imports are very high, especially for urea. But the EU has to decide what it wants. We need a level playing field for European producers to compete fairly. Anti-dumping duties on Russian ammonium nitrate aim to correct dumping and restore a level playing field. During the energy crisis, tariffs on urea and ammonia were only temporarily removed for a long list of countries, not for Russia or Belarus.

Will your 70pc CO2 cut by 2040 forestall binding EU emissions cuts?

Our industry target is doable, if there's financial support, enough renewables are available and we have the flexibility to choose the appropriate technology.

Can you decarbonise while the EU wants 20pc fewer fertilizers in 2030?

There's no EU target on reducing fertilizers. It's about cutting fertilizer losses by 50pc by 2030. And that should lead to a 20pc fertilizer use cut. The EU goal would also reduce imports. But once again the goal is not to reduce nutrients, nor cut production, but to cut fertilizer loss via greater nutrient use efficiency. This entails precision farming, new fertilizer formulations.

How is your certification scheme for low-carbon ammonia shaping up?

Our scheme will certify both imports and European production, according to the same criteria. It's currently a voluntary industry scheme. The scheme has to effectively tackle possible cheating, but be flexible enough for market development. At the start, we'll go with a flexible, mass balance approach, co-existing alongside a book-and-claim system. Long-term, we'll move to mass balance.

How stringent will the certification scheme be?

We've gone for a certificate with a numerical carbon footprint per tonne energy source, renewable or not. Biogas is an alternative that could be certified. We're not linked to certifying above a specific number, whether or not a 70pc greenhouse gas (GHG) emission reduction. We certify the carbon footprint. If you're 69pc, you're also cutting GHG. And with carbon capture and storage, you can make further quick gains.

By Dafydd ab Iago