Low Carbon Ammonia Company and Market Analysis

Index

1. Overview

2. Grey Ammonia

3. Blue Ammonia

4. Green Ammonia

5. Economics

6. CBAM

7. 45Q

8. Yara International

9. CF Industries

10. Nutrien Ltd.

11. Summary

Overview

Over the last few years there has been increasing talk of low-carbon ammonia production on Investor Calls — whether it is CF Industries, or Yara International, there are new points to consider each quarter, whether it is new capex, partnerships or regulations.

I wanted to look at the three largest publicly traded ammonia manufacturers and compare their efforts in low-carbon production.

Below you will find an overview of the segment and the companies.

Grey vs. Blue vs. Green Ammonia

Grey

Grey ammonia is what we've been making for over a century.

Traditional ammonia production uses the Haber-Bosch process, which combines nitrogen from the air with hydrogen (typically derived from natural gas via steam methane reforming) under high pressure and high temperatures using an iron-based catalyst.

However, it is cited as responsible for ~1.8 tonnes of CO₂ for every tonne of ammonia produced, and it accounts for about 1-2% of global CO₂ emissions. It does remain the most cost effective N source.

Blue

Blue ammonia is grey ammonia with carbon capture bolted on.

It still uses natural gas, but captures 90-98% of the CO₂ and stores it underground. This runs at a premium to grey in most markets. The technology is commercial and scaling rapidly. For regions with abundant natural gas and suitable geology for storage, it's become the the main priority for decarbonization efforts.

Green

Green ammonia skips fossil fuels entirely. The process electrolyzes water using renewable electricity to produce hydrogen, then synthesizes ammonia the traditional way, leading to zero carbon at the production site.

The problem is cost which can be double or more per tonne today, though projections suggest we could see it come down close to parity out towards 2030 and beyond.

There is much less capacity for this method today.

Economics

Given the increased costs for green and blue, there is a need to make the production and sale of green/blue ammonia worthwhile today, which tends to mean a need for incentives and carbon pricing.

Blue ammonia reaches cost parity with grey at around $60-90 per tonne of carbon pricing. Green doesn't get there until carbon hits roughly $150 per tonne.

This is why we will see so much emphasis below on initiatives like CBAM and 45Q being required to drive demand, investment in assets and utilization of low-carbon nitrogen.

Carbon Border Adjustment Mechanism (CBAM)

The EU's CBAM is a policy designed to prevent "carbon leakage" — where companies move production to countries with weaker emissions regulations to avoid carbon costs. It requires importers of certain carbon-intensive goods, like fertilizer, to purchase certificates corresponding to the carbon price that would have been paid if the goods were produced under EU carbon pricing rules.

The implementation was supposed to begin January 1st of this year.

For ammonia producers, like Yara, CBAM effectively levels the playing field by ensuring imports face similar carbon costs as EU-produced goods, creating a competitive advantage for low-carbon ammonia regardless of where it's manufactured.

45Q Tax Credits

The US Section 45Q tax credit incentivizes carbon capture and sequestration (CCS) by providing a per-tonne credit for CO₂ that is permanently stored or abated.

The credit now pays ~$85 per tonne for CO₂ permanently sequestered in geological formations. For ammonia producers like CF Industries and Nutrien, 45Q can improves the economics of blue ammonia production — a facility capturing 2 million tonnes of CO₂ annually could generate $170 million in annual tax credits, often making CCS projects profitable without requiring premium pricing for the low-carbon product.

Companies

Yara International

Yara operates one of the largest ammonia distribution network including 14 ships and 18 terminals globally:

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