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2 Food Security

Could EU fertiliser rules export carbon, and jobs?

If EU targets to reduce the carbon footprint of the fertiliser industry are set too high producers will move abroad and threat Europe’s food security, Sean Hargrave is warned. ▲

In the simplest terms, most agricultural experts are agreed, humanity has two options. We can carry on and reinvigorate the green revolution of the 1970s by innovating new farming methods to produce more from the same land. Alternatively, we can seek more land to grow on by putting tropical forest and areas of natural beauty under the plough.

That is certainly the stark choice which Esa Härmälä, Director General of Fertilizers Europe, believes confronts the globe.

If it is accepted that the first of the two options is the more appealing, particularly as forests are essential in allowing the planet to ‘breathe’ and soak up carbon, then it is clear that intensive farming must be supported. This backing cannot be given without expecting the global agriculture industry to reduce its impact on the environment, Härmälä accepts, but within the fertiliser industry there is much concern over anticipated cuts in carbon footprint the EU is expected to announce towards the end of the year.

“Estimates suggest food production is going to have to double by 2050 .... so farmers are going to need the mineral fertilisers that will help them boost yields.”

Esa Härmälä

While the fertiliser industry believes it can cut its greenhouse gas emissions by 40% by 2020, conversations with the EU suggest that they will ask for bigger cuts.

Although fertiliser experts believe the EU has the globe’s best interests at heart, there is a fear that asking the industry to cut more than it believes possible would be counterproductive.

“If we accept that intensive farming, getting more out of the land we have, is preferable to chopping down forests to make more land, then fertilisers are clearly going to play a very important part in that process,” he says.

“We’re continuing our advocacy work with the EU to demonstrate this point and hope that the politicians take our 40% reduction target instead of imposing an unrealistic higher target.”

Esa Härmälä

“Estimates suggest food production is going to have to double by 2050, or at the very least increase by around 80%, and so farmers are going to need the mineral fertilisers that will help them boost yields.

“The issue is, producing nitrogen fertiliser is naturally a very carbon intensive process and we have already brought down the industry’s footprint considerably. My fear is, and we’re already starting to see this, if the EU brings in rules that are too tough, production will just move outside the EU. You will have carbon leakage as the plants are set up in North Africa, Middle East, Russia, and its neighbouring countries. There, regulation is nothing like the EU and so the globe will suffer from largely unregulated greenhouse gas emissions and thousands of EU jobs and millions of Euros in tax revenue will disappear abroad.”

Trading carbon The issue surrounds the introduction of ETS III (the third phase of the Emissions Trading Scheme) in 2013. The overriding aim is for Europe to reduce their footprint by an average of around 20% and estimates within the fertiliser industry suggested they could match this goal in the production of ammonia (the bed rock of mineral fertilisers) and then cut the impact of nitric acid plants (in to which ammonia is

converted) by more than 70%. Overall this would create a reduction of around 40%.

Härmälä reveals that discussions so far with the EU have appeared to show commission officials are aiming to give the industry higher targets than those set out in the directive. Indications are that the European Commission will, in isolation, demand a figure which far exceeds the best 10% principal.

“The starting point for industry in general is that they should be able to match the average performance of the top 10% of producers within that industry,” he says.

“This translates as only the best 5% of industry receiving free emission rights. The other 95% must pay. The commission in actual fact are demanding even more than the average best 10%,” he says.

“The problem with the fertiliser industry is that we start off with natural gas and so we are, by definition carbon intensive. Then we turn the ammonia we get from natural gas in to nitric acid. While we are making efficiencies, we are limited in what we can achieve. We have modern nitric acid plants which can have equipment fitted which can clean emissions but the problem is, not all plants can have this retro-fitted.”

“It means that if you look at the most efficient, modern plants and average out that performance, you get an unrealistic picture because the majority of older plants cannot have the technology fitted to make them cleaner.

“We’re continuing our advocacy work with the EU to demonstrate this point and hope that they take our 40% reduction target instead of imposing an unrealistic higher target.”

Food security The result of a higher target will, he warns will, not only result in the carbon leakage of plants moving abroad but will also see far higher greenhouse gas emissions through the need to import vast quantities of fertiliser back in to the EU.

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Food Security 33 “If we are going to strive for self-reliance then we can’t allow a significant part of our fertiliser industry to relocate away from the EU and then have to pay to import back the fertiliser we need to support higher yields to feed a growing population.”

Esa Härmälä

“If the EU brings in rules that are too tough, production will just move outside the EU. You will have carbon leakage as the plants are set up in Asia and Russia and its neighbouring countries.”

Esa Härmälä

Perhaps even more worryingly, he suggests, it would counter efforts to make the EU more self-reliance in agriculture.

“We obviously need to import some products we can’t produce in the EU, such as some fruits and spices, but do we really want to rely more and more on countries outside the EU to help us produce our staple diet?” He asks.

“Food security is a huge issue. We’ve seen what can happen to energy supplies and prices when the EU is reliant on imports and so do we really want to be reliant for our fertilizers and ultimately food from Russia and neighbouring countries?

“If we are going to strive for self-reliance then we can’t allow a significant part of our fertiliser industry to relocate away from the EU and then have to pay to import back the fertiliser we need to support higher yields to feed a growing population.”

If the worst case scenario were to happen and cuts in excess of 40% are mandated by the EU, Fertilizers Europe has estimated that to carry on producing fertilisers with today’s technology and an estimated carbon price of 30 Euros per tonne would face the industry with a billion Euro bill each year. This would all but wipe out the European fertiliser industry’s 1.3bn Euros annual profit.

This would seem like a major political victory but, of course, it wouldn’t take in to account the carbon leakage it would bring about and which we’re already starting to see as new plants are set up outside the EU because of uncertainty of what reduction figure the EU will come up with.”

Fertilizers Europe expects the level of reductions the industry will be expected to make will be released towards the end of the year.

It leaves the organisation carrying on intensive advocacy work which, Härmälä hopes, will lead to politicians seeing the larger picture and setting a target based on what is achievable for the majority of plants rather than an unrepresentative, top performing minority.

Saving billions of tonnes of CO2 Intensive farming may have attracted criticism from some environmental campaigners since the ‘Green Revolution’ of the 1970s, and beyond, began to boost crops through new crop varieties, improved pest control, innovative farming methods and better fertilisers.

Led by eminent scientists such as Norman Borlaug, who won the Nobel Peace Prize in 1970, new farming methods are believed to have saved a billion people from starvation - a feat humanity must hope can be achieved again by 2050.

In reality, Fertilizers Europe has estimated that advances in plant technology would probably bring down the overall bill to something in the region of 200m to 300m Euros per year, which would still be sufficient to force many producers to leave the EU, it warns.

One aspect which Esa Härmälä, Director General of Fertilizer Europe, believes is not always appreciated by those who are either opposed to intensive farming, or who seek to place, in his view, unduly harsh regulations, is the net contribution it makes to the environment.

Research among the global fertiliser industry shows that some other countries, particularly OECD members such as the USA, Canada and Japan, are considering cuts on the impact of fertiliser production but so far, no targets have been set, but it is unlikely any of the targets will be as tough as those imposed on European industry.

In June, for example, a research project from Stanford University suggested that intensive farming actually saves a massive amount of greenhouse gases being released because it allows far more food, and energy crops, to be grown per hectare.

Political pressure Härmälä claims such targets are much more realistic, allowing an industry to rise to the challenge of lower emissions without setting targets too high. If the EU does go ahead and insist on cuts above the 40% Fertilizers Europe believes are possible, Härmälä believes it will have been the result of listening too hard to environmental campaigners who, although well meaning, may not have fully considered the whole picture.

“We believe that the EU saying they want more than 40%, perhaps even more than 50% reductions is politically motivated,” he says.

“The politicians are environmentally minded and of course they want to do good. What they ultimately want is to slash footprints so the price of carbon permits per tonne will be very high, encouraging companies to save even more.

In fact, the research estimates that between 1961 to 2005 590bn more tonnes of carbon dioxide would have been released, mainly through land clearance and forest destruction, if intensive farming had not boosted yields.

Also, over the same period, the American researchers estimate that ever dollar put in to agricultural research cut greenhouse gas emissions by the equivalent of a quarter of a tonne of carbon.

“People often don’t consider that there are no alternatives to modern intensive farming,” says Härmälä.

“If you can’t produce more food with the resources you have then you have to deforest and clear more land which obviously releases a lot of carbon.” www.fertilizerseurope.com