Norway’s Yara Worldwide demerged from Norsk Hydro in 2004 and has change into one of many world’s largest producers of nitrogen-based mineral fertilisers. However its chief govt, Svein Tore Holsether, has been warning about issues with provide — and the trade’s greenhouse fuel emissions — for a few years.
Even earlier than Russia’s invasion of Ukraine final 12 months, international fertiliser provides had been being stretched by Covid shutdowns, labour shortages, Chinese language consumption and basic worth volatility.
Now, Holsether says the battle is enabling Russian president Vladimir Putin to “weaponise” meals, in the identical manner that he has weaponised fuel provides. However, right here, he tells the FT’s Ethical Cash editor Simon Mundy how hydrogen constructed from renewable vitality — together with US-style tax incentives — can supply an answer to those issues.
Simon Mundy: Why are fertiliser and meals so central to tackling local weather change?
Svein Tore Holsether: Thirty per cent of greenhouse fuel emissions come from agriculture and meals. So in case you don’t repair meals, we’re not going to have the ability to ship on the Paris Settlement. And that’s one thing near the guts for our firm, in addition to me as CEO.
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It was actually a game-changer to be in Paris in 2015 — it was simply three months into my time as CEO within the firm. The board gave me a set of expectations about what we should always concentrate on in our technique, and I went to Paris along with the Norwegian Ministry of International Affairs — there was kind of a bunch that got here collectively.
SM: So that is the Paris COP . . .
STH: Sure, Paris COP . . . What I noticed there actually made a huge effect: the demonstrations, the depth, the youth engagement . . . So I went again to the board after having been in Paris and stated: “Now we have to suppose fully otherwise across the atmosphere and meals and our function in driving that.”
In order that was the kick-off of a very lengthy 12 months to alter the whole lot: from our mission, our imaginative and prescient, our values and in addition our technique . . . constructing on the sustainable growth targets.
And it began with our function: why can we exist as an organization? We took that again to the very begin of our firm, about 118 years in the past now, 1905, when Europe was going through famine. Our founder, [Kristian] Birkeland, he was the one which got here up with the breakthrough expertise of getting nitrogen out of the air and turning it into fertiliser, which helped farming productiveness.
In order that’s the beginning. At present, half of the world will get meals due to fertiliser so it’s an essential product however one which additionally has an influence on emissions.
We ended up with our mission being to responsibly feed the world and defend the planet. So it’s in regards to the duality of offering sufficient meals for everybody within the inhabitants, however on the similar time doing that [in an] environmentally pleasant [way]. In order that was the beginning of the journey on the sustainability facet for us, constructing on the legacy the place we’ve got decreased our emissions considerably: [by] 50 per cent in comparison with 2005.
SM: Emissions out of your operations?
STH: Sure. We’ve taken all of the low-hanging fruit; now it’s in regards to the subsequent step — and that’s altering applied sciences, whether or not it’s carbon seize and storage or shifting to inexperienced hydrogen. And that may be a journey that we can not do alone. We have to do this with companions . . . by way of value-chain partnerships — so, trying on the totality of meals manufacturing, all the best way to the customers.
We’re working with governments to have incentives in place as properly, in order that, if there isn’t any first-mover benefit, [we] no less than attempt to keep away from the first-mover drawback on this subject.
SM: On that query of eliminating first-mover drawback, what would you prefer to see from governments?
STH: Now that it’s change into clear that the Inflation Discount Act (IRA) within the US is facilitating a really fast inexperienced transition, I believe it’s essential in Europe that we simply copy it. Except we choose up velocity in Europe, industries are going to lose out.
We’re already very a lot conscious of the vitality drawback that we’ve got in Europe proper now due to the conflict. But when on prime of that we don’t have the identical incentives to drive the inexperienced transition, we’re lacking an incredible enterprise alternative as properly. European companies had been within the lead and in one of the best place to quickly make this transition. Now, we see that the US goes to leapfrog us.
SM: So, on the meals and fertiliser facet, had been there specific provisions within the IRA that actually struck you?
STH: For us, hydrogen. So as to get nitrogen out of the air, you want hydrogen — and, at this time, we get that from pure fuel. However you can too get [green hydrogen] from water by way of electrolysers. And the IRA has very particular provisions for incentivising the manufacturing of inexperienced hydrogen that go straight to the core of what we’re doing. It additionally has provisions for carbon seize and storage. What we’re doing within the Netherlands would have certified for important incentives within the US. However, in Europe, it doesn’t.
SM: What are you doing within the Netherlands?
STH: We’re producing fertiliser within the Netherlands with carbon seize and storage. That’s the world’s first cross-border carbon seize and storage programme. It’s Yara’s largest fertiliser website, it is among the largest emissions factors within the Netherlands. And what we’re doing is utilizing our expertise to seize the carbon, liquefy it, put it on a ship, after which go to the North Sea, the place — by way of a co-operation between Shell, Complete and Equinor — they’ve storage of CO₂.
That’s one thing that we’re doing commercially. However, within the US, they’ve carried out the identical factor however have a major tax credit score on account of it.
SM: You’re nonetheless doing this undertaking though there isn’t any tax credit score. However would you say that there will probably be much less exercise on this area in Europe due to this lesser assist?
STH: Sure, completely — as a result of these websites are additionally export websites. And the way is it doable for Europe to compete with the US after they have an revenue and we’ve got an expense and we’ve got to ship the product to South America? These websites are depending on having the ability to flex between northern and southern hemispheres so you retain [them] operating all 12 months lengthy and then you definately export to the south.
However the vitality drawback and the motivation drawback are of a magnitude that actually makes me fear in regards to the future viability of this sort of manufacturing in Europe. That’s one thing we want to bear in mind in Europe: do we actually need to danger our personal gasoline sovereignty and change into depending on different areas? We’ve seen the influence of exporting our vitality manufacturing — like we did in connecting European infrastructure to Russia for reasonable vitality.
That labored properly till it didn’t work anymore. Now, we pay the value of not being ready. And we should be very conscious that, in case you’re doing the identical factor on meals and fertiliser — delegating that to the opposite components of the world — we might be in a really difficult place the place we’re vulnerable to not accessing a product that represents half of all meals manufacturing.
SM: To play satan’s advocate, somebody may say: “OK, so that you’re not getting as a lot assist to go down these new inexperienced routes, however you’re nonetheless producing a lot of fertiliser so what’s the issue?” What could be your response to that?
STH: Sure, it’s much less of an issue for Yara as a result of we’re worldwide. So we’ve got a world community, we’re bringing in merchandise from different components of the world with a view to optimise. However we’re nonetheless sounding the alarm on this as a result of we see the influence on smaller websites and on companies that wouldn’t have the identical flexibility as us.
European energy-intensive trade is struggling proper now and there’s a must decarbonise. If we’re not persevering with to take that lead, then we’re shedding essential trade in Europe . . . European fertilisers have half the carbon footprint of the world common.
SM: And why is that?
STH: Many industries in Europe have been very centered on vitality effectivity for a very long time — and we’ve come far. Our sustainability focus has been within the enterprise for an extended time — I believe that’s the principle factor. Additionally how we produce, and the competence ranges all through.
SM: So it’s essentially the vitality effectivity that’s meant Europe is greener in its fertiliser manufacturing. However, presumably, sooner or later, in case you can roll out carbon seize, utilisation and storage . . .
STH: Sure, then, we are able to go even additional in that. And it’s additionally about the kind of fertiliser we produce in Europe: it’s a extra nitrates-based versus urea commodity. That form of fertiliser behaves higher within the subject, on the farm, as properly. So you could have much less infield emissions. It’s a double hit for Europe . . . and triple for the planet. For Europe it’s not shedding essential trade and it’s [having] entry to superior fertiliser. For the planet, it’s not shutting down extra environmentally pleasant fertiliser manufacturing and shifting that out of Europe.
SM: What are the impacts of the [Ukraine] conflict and pure fuel costs? What has that carried out to the fertiliser trade?
STH: It’s a huge effect and for a lot of causes. Pure fuel is crucial element in producing fertiliser in Europe and 40 per cent of the pure fuel comes from Russia. If that’s shut off, then it creates unbelievable volatility out there and in addition manufacturing points for all of us. We’ve been having to flex operations up and down all through this era. That’s the oblique influence.
The direct influence is that Russia is the world’s largest exporter of completed fertiliser and elements to make fertiliser, like phosphate and potash. And, right here, each Russia and Belarus are impacted by the identical factor. For potash, 40 per cent of the world’s manufacturing is in Russia and Belarus — in order that has an influence. And we additionally sourced quite a lot of our uncooked supplies from Russia . . . even throughout the coldest a part of the chilly conflict these merchandise got here — the identical with pure fuel.
Now, with the advantage of hindsight, at what level ought to we’ve got modified it? Ought to we’ve got carried out it in 2007, once we began to alter how we talked about Russia? Or in 2008 with [Russia’s invasion of] Georgia? Or 2014, with [Russia’s annexation of] Crimea?
It hasn’t been simple however, then, we get to a really sudden change. That modified all of the logistics for traditional manufacturing virtually in a single day, and that has created huge volatility.
SM: What’s been the influence of all this on European households?
STH: Everybody has felt inflation throughout the whole lot — from utility payments as much as just about the whole lot for households.
SM: However, once we have a look at the fertiliser area, particularly, is that actually an enormous contributor to the inflation?
STH: It provides to it, and it makes meals manufacturing costlier. For farmers, it’s vitality intensive to do farming. They usually see it within the chemical compounds, they see it in seeds, the whole lot goes up. After which [so are] meals costs.
However what’s [simply] a value subject in Europe is a query of [either] having meals or not in different components of the world. The variety of folks going through acute starvation has doubled from 2019. In 2019, it was 175mn. Now, it’s 350mn.
SM: And, once more, you’d actually hyperlink this carefully with the fertiliser worth?
STH: Sure — fertiliser but additionally meals costs. As a result of Russia and Ukraine are food-producing superpowers as properly, and you’ve got impacts to the provision chains. This already began with Covid, the place we noticed there have been fragile meals programs — as a result of we didn’t a lot concentrate on producing kilos of crops quite than how strong [a supply chain] is that if it’s put to the take a look at. And we noticed bottlenecks and impacts on the transportation.
Then we had the large influence of the invasion the place one meals superpower attacked one other one — and that shifts provides, considerably.
And, on prime of that once more, you could have local weather. I used to be in Kenya in November along with some farmers. Espresso — no less than, in that area — is a little more resistant, so the espresso components of their farms are doing properly. However, additionally, they’re planting maize as a staple meals crop. However due to, first, drought, and, then, heavy rain, they’ve misplaced all their crops. The place there was speculated to be maize, there was nothing. And that’s a local weather influence, in order that performs into this.
It’s kind of an ideal storm for the entire meals system proper now: very difficult in Europe, after all, with greater costs; even worse in different components of the world the place a human being dies each 4 seconds on account of starvation. Now we’re in 2023, it’s tragic and shouldn’t be like that. That ought to be a really sturdy reminder of the necessity to have a extra strong meals system — from a local weather perspective, from a logistics perspective, but additionally from a political perspective.
In case you have a look at the function that we’ve got allowed Russia to have in international meals provide, we rely on them. How did that occur? What sort of weapon is that? And Putin is weaponising meals. This isn’t solely a conflict fought with navy weapons, it’s with vitality — we see that influence clearly right here in Europe, however it’s having an influence to the worldwide vitality disaster as properly. And he’s weaponising meals and fertiliser.
That may be a main wake-up name . . . we can not simply slide again to that, even when there was peace tomorrow, or subsequent month . . . how did we enable ourselves to be on the mercy of Putin for international meals?
SM: So are you saying the primary and most essential manner of fixing this in the long run is inexperienced hydrogen?
STH: That’s an important half . . . We have to make that transition and an essential ingredient of that’s inexperienced hydrogen, with a major build-up of renewable vitality. Then we are able to do two issues on the similar time: cut back emissions and cut back dependency on Russia for fossil fuels.
SM: So are you pursuing inexperienced hydrogen yourselves? Or is that actually one thing that’s not a part of your plan?
STH: We do each, so we are able to produce inexperienced hydrogen and we are able to additionally supply inexperienced hydrogen. That’s the fantastic thing about the ammonia vegetation that we’re operating. In essence, it has two steps. First, you produce hydrogen: with pure fuel — we take out the carbon and that turns into CO₂. Then, we produce hydrogen within the subsequent step. Or, we are able to simply get inexperienced hydrogen straight into our services as properly. So we do each.
SM: So that you do have your individual electrolysers?
STH: We’re constructing electrolysers.
SM: That’s within the Netherlands?
STH: It’s in Norway. Within the Netherlands, we do carbon seize and storage. However we’re doing a undertaking along with Orsted, the Danish firm, the place they’re producing inexperienced hydrogen after which we purchase inexperienced hydrogen from them. So we’re versatile. However our subsequent step [is] an essential enterprise enterprise: that’s Yara clear ammonia.
If you wish to transport inexperienced hydrogen, you are able to do that brief distances by way of pipelines however you can not do it very lengthy distances.
SM: Why not?
STH: As a result of, first, it’s very costly to get the pipelines and we can not do these lengthy distances. Hydrogen isn’t solely a lightweight molecule; it’s the lightest there’s — so it wears on the pipelines as properly. So if you wish to [move it long] distances, then you need to ship it, however hydrogen is so gentle that it is advisable cool it all the way down to -253C to make it liquid.
However in case you add a nitrogen molecule, that nitrogen molecule holds three hydrogen molecules [in the form of ammonia] and holds it tremendous tight. So it holds it collectively and it’s far more compressed — then you could have far more vitality per unit of quantity and you may make it liquid at -33C as a substitute. And right here we’ve got a transport fleet that may transport ammonia from all internationally.
SM: You might have your individual transport fleets?
STH: Sure, 12 ships ourselves. We’re the biggest ammonia dealer on this planet so, to take that hydrogen and transfer it over distances, we’ve got a really fascinating infrastructure to allow that — whether or not that’s to make use of it as a transport gasoline or to assist Japan on its journey to cut back coal consumption. As an illustration, you should utilize ammonia and substitute coal in coal-fired vegetation
SM: Sure, I noticed they’d been doing that, is that gathering steam, the Japanese ammonia?
STH: That is tremendous fascinating each for Japan but additionally for different components of the world as a result of it’s about utilising present infrastructure and others being conscious that these are huge ships. So, to the extent we are able to use infrastructure already there, we should always do this. That’s the considering in Japan, as properly. They are going to do it first however it has an influence in different components of the world, as properly.
SM: So if we have a look at the state of play in Europe, it hasn’t carried out as a lot maybe because the US has carried out by way of the IRA. Nevertheless it hasn’t carried out nothing. How would you assess Europe’s progress relating to hydrogen and ammonia?
STH: Properly, there are preliminary issues that we want velocity and readability on, as a result of it’s fairly a cumbersome course of to use for assist [in Europe]. Within the US . . . in case you meet the necessities, then you already know you could have it. So it’s just a few certainty round that.
Then, with a view to produce clear hydrogen, you want huge quantities of renewable vitality — and the velocity at which that’s being rolled out is far too sluggish in Europe. In my own residence nation of Norway, it’s not shifting
at a velocity close to what is required.
SM: So, essentially you’d need to see extra tax credit? Or would you need to see extra state-led funding?
STH: In all probability a mix, particularly within the renewable vitality area . . . There should be incentives for first movers right here to get this going. After which we have to deal with the local weather disaster, as properly.
That’s what the US is maybe understanding now: that if we delay this transition, the price to cope with the local weather disaster will enhance exponentially. So, sure, it’s some huge cash however let’s do it now and get it carried out. And if corporations make some cash on that, positive — it’ll simply make it even quicker.
In Europe, we take a special strategy the place it’s far more into the main points and lengthy processes to qualify. Companies must take these choices proper now and that’s why we’re making an attempt to speak that proper now.
Let’s not attempt to provide you with one thing fully totally different. What the US is doing is right here to remain. So, one of the best factor we are able to do is to fund the weather and see how can we discover a construction that resembles that in Europe.
SM: Do you suppose Europe ought to be involved about its meals safety?
STH: Sure. Not close to time period . . . there will probably be a scarcity and there will probably be a world public sale for meals — however Europe is a rich a part of the world.
However we have to suppose it by way of. If we’re not centered on producing the utmost quantity of meals inside our planetary boundaries in Europe and we are saying that we’d quite pay extra to get meals into Europe, we’re shopping for that meals away from another person. And by way of meals and meals safety, when you could have that, you see wars or mass migrations, extremism, all these items.
SM: And the identical would go for fertiliser, presumably. In case you’re importing it as a result of you possibly can’t produce sufficient domestically?
STH: Sure, it’s all related. And that’s one thing that we want to pay attention to. When we’ve got a number of the finest farmers on this planet, and a number of the finest companies on this planet, if we then select to say “We’ll get another person to try this on our behalf”, it sends a sign. And it’s the mistaken sign. It creates different dependencies internationally — and for nations that can’t afford to talk up towards what is going on on this planet proper now.