Fertilizer production – particularly nitrogen-based fertilizers – is an energy-intensive, hard-to-abate industry that is responsible for approximately 5% of global greenhouse gas (GHG) emissions which is equivalent to 2.6 gigatons of carbon per year, including manure. Synthetic fertilizers can be decarbonized with renewable ammonia, a green hydrogen derivative, and with blue ammonia, which involves carbon capture and storage.
Despite delays in green hydrogen projects worldwide, green and low-carbon fertilizer projects are making progress. Fertilizer company, Yara, a leader in crop nutrition, recently signed an agreement with PepsiCo to supply low-carbon and green fertilizers to 1,000 potato farms across the EU and the UK, starting in late 2025.
Another leader in nitrogen fertilizers and clean ammonia solutions, Fertiglobe, has been awarded a landmark renewable ammonia supply contract under the H2Global market creation scheme at €1,000 per ton on a long-term basis.
In Latin America and the Caribbean, Yara and Atome Energy have agreed off-take terms for the entire green fertilizer production of the Villeta project in Paraguay which involves up to 264,000 tonnes of green nitrates a year. The National Ammonia Corporation – a joint venture between Atome Energy and Costa Rican firm Cavendish – has recently reached an agreement with the energy utility. In Brazil, Atlas Agro has commenced construction of a green fertilizer plant that will consume 2.5 TWh of renewable energy annually. These positive developments reveal the technical and business feasibility of green fertilizers.
Yara estimates that using green nitrates could result in an 18% GHG reduction per ton of harvested product. Green fertilizers result in an 80- 90% carbon emission reduction compared to fertilizers made with natural gas.
Latin America and the Caribbean rely on imports and are highly vulnerable to external shocks
The global fertilizer market – estimated to be worth approximately US$200 billion in 2023 – is concentrated in a few countries that produce and export more than 55% of the world’s fertilizers. Five corporations hold approximately 45% of the global market share.
Data from the Food and Agriculture Organization (FAO) reveals that Latin America faces a significant shortage of nitrogen-based fertilizers, making it one of the most import-dependent food-producing regions globally with 85% of all fertilizers used in the region being imported.
Brazil, the largest fertilizer market in Latin America, imports 95% of its nitrogen-based fertilizers. Costa Rica, known for its above-average fertilizer usage – estimated at 656.5 kg per hectare of arable land, compared to the global average of 146.4 kg/ha –is entirely reliant on imports. Other highly import-dependent countries include Belize, Ecuador, Guatemala, Dominica, the Bahamas, and Saint Lucia. About 25% of the nitrogen-based fertilizers consumed in Latin America and the Caribbean originate in Russia.
The surge in natural gas prices in 2021 followed by the war in the Ukraine in 2022 led to an increase in fertilizer prices worldwide since the price of nitrogen-based fertilizers is strongly linked to the price of natural gas. According to the Inter-American Institute for Cooperation on Agriculture, fertilizer prices in Latin America soared by 137% in 2022 compared to 2021, while imports saw only a modest increase of 4% during the same period.
A regional opportunity for green industrialization
Latin America has a substantial nitrogen-based fertilizer market, with agricultural use reaching approximately 13.6 Mt in 2021, according to FAO data. In comparison, Fertilizers Europe reports that the EU’s nitrogen-based fertilizer market reached 9.1 Mt in 2023, with nitrates holding a 47% market share.
Latin America, along with South Asia, is predicted to drive market growth between 2024 and 2028. Half of the additional nitrogen-based fertilizer consumption during this period is expected to come from these regions, as illustrated in Figure A below.
Figure A
Source: IFA, May 2024
The International Fertilizer Association recognizes that while affordability will continue to be a key market driver, other factors – such as government support, regulation, new products and technologies – are expected to play an increasingly important role in the near future.
Despite the existing price gap between grey and green ammonia, the lack of incentives and carbon taxation in Latin America and the Caribbean, early movers are entering the market, as evidenced by the aforementioned projects in Brazil, Costa Rica and Paraguay. Market players in the green nitrate market expect high-quality food producers to pay a premium for decarbonized fertilizers.
Demand driven by regulation could accelerate early uptake while the price gap remains. In the European Union, the Carbon Border Adjustment Mechanism will impact the fertilizer market from 2026 when carbon taxes are expected to apply on fertilizer imports, thus creating an opportunity in the green nitrate market. Notably, the EU is the largest consumer of nitrates, while Latin America is the largest importer.
Innovation management
In terms of the key challenges faced by the first movers in this market, Cavendish’s CEO, Silvio Heimann, highlighted a fundamental difference in how the private and public sectors approach innovation.
“While entrepreneurs accept the inherent risks of innovative industries such as green ammonia and green fertilizers, the public sector is not structured to handle such uncertainties but rather to eliminate all risks. Its incentives scheme not only lacks but penalizes the flexibility needed to engage in risk-taking initiatives in an effective way,” he noted.
Unlike other disruptive industries, green hydrogen and derivatives deployment requires proactive support from the public sector.
Expected impacts
Producing green fertilizers in Latin America offers additional benefits besides replacing gas-based fertilizers including the development of green products with added value, new value chains and employment generation.
Experts highlight that local production will reduce exposure to external shocks and could have a positive impact on the balance of payments. It will also contribute to the diversification of the global fertilizer supply chain and to the decoupling of fertilizer production from natural gas.
Widely used fertilizer products such as ammonium nitrate and calcium ammonium nitrate are among the green nitrogen-based fertilizers that will be produced in the region without the challenges posed by green urea production which requires biogenic carbon availability. Nitrates have a lower environmental impact than urea and urea-based products. Experts believe green fertilizers may be used in combination with biofertilizers and best agricultural practices to increase yield, improve sustainability and reduce GHG emissions.
