This is Dana Perkins and you're listening to Switched on the BENIF podcast. Green hydrogen is one of the most talked about clean energy technologies today and that's for good reason. It has the potential as a fuel source to address the missions coming from some of the harder to abate sectors like transport or heavy industry. But equally talked about is the cost as well as how to get this small, light and flammable gas from where it's produced to where it needs to be used. But this isn't a show
about hydrogen. We're going to talk about ammonia because recently one of BNF's analysts took a closer look at the things you can make with hydrogen, and in this instance, that's ammonia. Currently, production of ammonia accounts for anywhere between one to two percent of global emissions, and overall it could be as much as three percent of global emissions coming from ammonia's production and use. Now let's just stop there for a second, three percent of global emissions from ammonia.
And while ammonia is best known as a fertilizer, and of course there are other use cases such as explosives, we're going to talk about those a little bit later in the show. For those that are closely watching the hydrogen space, they may also be thinking about ammonia as a potential for an innovative shipping fuel, or perhaps thinking about how we're gonna ship hydrogen itself. Well, ammonia could be an answer by converting hydrogen to ammonia and then
back again. But really what does this mean for cost and just overall efficiency? Now to talk about this chemical, I'm joined by Dithya Bashem. He's an associate from Benef's hydrogen team. If you like this podcast, make sure to subscribe to receive updates on future episodes on your device, and give us a review on Apple Podcasts or Spotify, which will make us more discoverable by others. But right now,
let's jump into my conversation with Addi about ammonia. Addie, thank you very much for joining us today.
Great to be in the podcast. Thanks day Now.
So we set off on this journey initially thinking let's let's do another show about hydrogen. It's an ever popular topic, and as it turns out, this is not a show about hydrogen at all. This is the show about ammonia, which certainly hydrogen is a part of the discussion, but it has such a let's say, fascinating history and future, So let's get started with that. First of all, give me a quick definition of what is ammonia for the novice chemist.
Yeah, I mean that's how our journey started as well. In the hydrogen team. Ammonia is its own world. Ammonia is a molecule that is produced using hydrogen and nitrogen from the air combined over a catalyst at high temperature and pressure. And then that ammonia is really an intermediate product. You make a lot of other things with it. In eighty percent of the time, you make fertilizers with it, nitrogen fertilizers, which are used on fields and sustain about
half of the world's food production. And about twenty percent of the ammonia that we produce today is used in chemicals, uses everything from textiles like nylon and refrigerans, pharmaceutical and a lot of things that people don't really think about. So it's a huge industry in itself, where hydrogen just plays a role as a feedstock.
So ammonia has a lot of different use cases. But additionally it and I think we'll want to go into this in more detail, but as we first get started on the show, it's also easier to transport. So give us just a quick overview of the benefits of ammonia when you think about it versus hydrogen.
Yeah, the problem with hydrogen is that it takes up a lot of space, so that makes it extremely costly to transport in bulk with ammonia. Once you combine that hydrogen with nitrogen, ammonia liquifies at minus thirty four degrees or ten bar atmosphere at ambient temperature. So because it liquifies a relatively easily, the energy input to liquified is quite low, which makes it less costly, and it's a
molecule that we are transporting across the globe on ships. Already, there's about forty ships today that on a continuous basis transport ammonia across the globe. There's another one hundred or so one hundred to two hundred or so which do that on and one off basis from time to time. So it's already a traded industry and we have the infrastructures to transport ammonia around, which makes it comparatively a
lot easier than hydrogen. What's also interesting is and something that maybe is hard to grasp, is the fact that per unit volume, so per cubic meter or per liter, ammonia actually contains more hydrogen than liquid hydrogen itself. That's because it's NH three, so it has another hydrogen molecule in there, and it's not just H two, which is the hydroen molecule itself. So within a unit volume, it just contains my hydrogen. So it's a more efficient way of transporting hydrogen as well.
So we know how to ship it already, We're already doing it, which I think there is some conversation around what the future of shipping hydrogen looks like, and this could be a potential path. Let's talk a bit about Well, first of all, it's current emissions profile and then what the future of greening this industry could look like. So, at this current point in time, how is the vast
majority of ammonia produced? I guess what's its feedstock, let's say, And then additionally, what are the associated emissions?
Yeah, even today, you still need the hydrogen at the end to make the ammonia. The difference the future may be in a decarbonized wall is that we're getting the hydrogen from either natural gas or coal, and in eighty percent of cases it's natural gas across the world, and in twenty percent of times, so twenty percent of the feedstock that is being used as coal that's mostly used in China, and the extraction of the hydrogen is really where ninety percent of the emissions in the production of
ammonial lie. And that's why hydrogen and decarbonizing hydrogen is such a key aspect to this. So, for example, if you're producing ammonia using natural gas, that emits about two tons of CO two equivalent per ton of ammonia, and then you still have to do something to the ammonia later to actually make it usable as fertilizers. So actually that doesn't even cover it. And the problem with ammonia is also that to two tons or so is just
the production emissions. Sixty percent of the emissions associated with ammonia come from its use. So you combine it with a carbon molecule turned into a fertilizer like urea applied to the field, and at that point a lot of the emissions from the nitrogen get released again into the atmosphere. So actually ammonia itself was probably responsible for somewhere between two and four percent of all global greenhouse gas emissions.
So for those who are listening and feel like they are awash with different colors on the color we are for hydrogen which we B and EF have actually moved away from using these colors because they're somewhat confusing. And I'm going to admit I actually just asked my producer what the color was for hydrogen that's produced from natural gas,
and it's gray hydrogen. But what we're here to talk about today is actually how green hydrogen that that is produced from renewable energy sources could actually dramatically change the upstream emissions associated with hydrogen production and therefore ammonia. So let's talk a little bit about green hydrogen and the emissions benefit and then you know, of course we'll acknowledge some of the challenges because we know what the opportunities
are here. So, yeah, Addie, what are your views on I guess the future potential for green hydrogen as it relates to ammonia.
Sure, maybe making a step back. There's really two ways of decarbonizing ammonia production. One is just adding carbon capture and storage to the natural gas facility and then capturing the emissions associated with it. We call that blue hydrogen. The problem with blue hydrogen, or I guess the issue long term, is that, yes, you save about seventy eighty percent of the emissions with blue hydrogen already today or blue ammonia, but you never get to zero with blue
blue ammonia or blue hydrogen. That's really the issue. It's the easiest way to do it today, and maybe in terms of the additional cost it has, it's much smaller than what we will have for green, but it doesn't lead you to an at zero future, and that's really
where green comes in. Green ammonia produced using hydrogen that is again in itself produced using renewable electricity and a machine called an electrolyzer that splits water into hydrogen and oxygen, and then we take the hydrogen from that as an input, can be as close to net zero as you can get. The emission's reduction is up to ninety percent or so, as if you're using renewable electricity, that's as good as you can get with ammonia, and then you have a
little bit that you might need to offset. So long term, we would say that if you really want to decarbonize at least the production side of ammonia, you would need to switch to green and the incentives to do so will need to be there.
Now you're mentioning CCS, which is not currently incredibly cheap technology, and then mentioning also that green hydrogen, and therefore this other production process, which would be significantly cleaner, is even more expensive. Do you see a situation where the ammonia production is cost competitive at some point with current methods of production?
I mean, starting again with CCS. If you add carbon capture and storage to your existing ammonia facility today, with a carbon price of about one hundred dollars potanol slightly higher than that, it would be profitable to produce blue ammonia blue hydrogen with that carbon price alone. And there are markets where we have that, like in the EU.
The EUETS hovers around that price, and if you look at our forecast for the EUETS carbon price out to twenty thirty, we will be well in above the one hundred euros per ton and would will make blue ammonia cost competitive by itself. On top of that, there's tax credits in the US which allow blue ammonia to be competitive today already. Now, if you look at green ammonia, the cost differential today could be about somewhere between two
and four times gray ammonia. So, if you want to think of this in absolute numbers, gray ammonia or fossil ammonia, over the last ten years has traded at a price of about four hundred eighty dollars per ton or so, and it's produced at a price about two to three
hundred dollars per ton or so. Green ammonia will cost you anywhere between eight hundred to one thousand, two hundred dollars per ton, and that's largely because of the cost of hydrogen contained within it, because green hydrogen today costs at least four or five times as much as the fossil kind. So what really needs to happen is for that cost gap to close down the line, and we
see that in hydrogen already. We see by twenty thirty green hydrogen will be cheaper than blue hydrogen with so hydrogen produced carbon captrin storage, and then down the line in the late twenty thirties, early twenty forties or so that green hydrogen will even outcompete gray hydrogen in most markets. That we are looking at.
So in parts of the world where there is you know, functioning carbon market, there is some real potential there now just pivoting. Actually, you mentioned the price of ammonia, and this is a fascinating part of the ammonia story, which essentially is how the prices are formed and how trading works. Can you talk a little bit about how our price is dictated for when those who are actually purchasing ammonia down the line.
Yeah, that's a great question. We produce about one hundred and eighty million metric tons of ammonia globally today. Just about ten percent of that ammonia is traded as is so actually in the pure form of ammonia, and maybe another fifteen percent or so are traded as a fertilizer product, particularly urea. So about a quota to a third the market is really traded in ammonia. But the key point is that traded market sets the benchmark prices that all the ammonias apply in the world use this as a
formula to set their own pricing methodology. There's one in particular, which is the Tampa ammonia price, which is simply just based on a contract between an ammonia producer called Yarra and a phosphate fertilized a producer called Mosaic in the US, and they import about a million metric tons of ammonia every year to Tampa, and the price that they pay for these cargoes is used as a global benchmark for what ammonia prices really are, because why they use Tampa
is because it's the most transparent price benchmark, they have the longest history, and that it then goes into a lot of pricing formulas across the globe. They might add an additional charge for transport and storage, some local discounts and so on, but that's the benchmark price and in that sense that that one contract really determines a lot. There's other benchmarks as well that are used, like the
landed price of ammonia in Western Europe for example. All of those matter, but the key thing is that maybe ten to twenty percent of the market and the price that that traded market receives sets the price for a lot of the global supply and demand of ammonia.
So this is a future is rather than a spot price market.
This is completely spot so there is actually no futures market for ammonia. So ammonia is largely traded based on spot prices. There are term contracts, so ammonia is typically traded on one to three year term contracts where the pricing is then set based on a monthly ammonia price that varies every month. But the contract itself is up to three years long. But there's no futures that it can use, which makes actually hedging and protecting against risk really challenging in the ammonia market.
Well, and talk to me a little bit about the volatility.
Yeah, ammonia is actually extremely volatile. The ammonia prices are cyclical, so they go up and down with certain changes in supply and demand and availability of natural gas. Again, I mentioned four hundred and eighty dollars per ton was a ten year average, including the spikes that happened due to
the Ukraine War. But actually ammonia prices have gone all the way down from one hundred and fifty dollars a ton to all the way to I think over one thousand dollars per ton, particularly last year when the Ukraine War happened and that cost a spike in natural gas prices, So you can see how volatile the price of ammonia is I just checked today and today in Europe the price of ammonia is already again at four hundred dollars paton, while his last year was about a thousand dollars paton.
Now it dropped tremendously because natural gas prices relaxed.
Where in the world is it really popular to import it? And I guess just which countries and are the biggest buyers.
Yeah, the biggest buyers of pure ammonia are European countries. In particular, India buys a lot of ammonia, and actually the US is also a net importer of ammonia today, even though they do produce a lot themselves. But then there's a lot of buyers who buy ammonia not as ammonia but as urea, so a carbon based molecule produced using ammonia, And India and Brazil really top that ranking. They're one of the largest fertilizer importers in the world
and really dependent on it. Sometimes countries also directly import natural gas to produce their own ammonia, so that's not accountid for within these figures, but that happens as well.
Well. Then let's talk about who the producers are then, so it's clearly coming from somewhere.
Everyone in the world has some level of production of ammonia because they see it as energy security issue. So every country has at least a small amount of ammonia production facilities domestically, even if that means they are importing the natural gas itself. However, I think four or five countries really dominate global supply of ammonia. That's first China. China accounts for about a third of all global subpi of ammonia, but China mostly uses that domestically. It's a
huge market. All the ammonia that they produce they use domestically. They also have some sort of export restrictions on fertilized products like urea, so not much urea or ammonia actually leaves China. Ever, then that's about third, About nine to ten percent typically outside of today's situation comes from Russia. Russia is a major exporter. Over fifty percent of the production that Russia produces in house is exported to other markets, and both in the form of ammonia and as urea,
and that's a big one. What happened now is a result of the Ukraine War, is that Russian ammonia exports completely ceased. Why because Russia exports ammonia through a pipeline and where ammonia pipeline that goes from Russia to Ukraine to import in Ukraine from where it is then exported overseas via ships, So that pipeline ceased operating as a result of the Ukraine War. Well, Russia is still exporting urea directly from Russia, but ammonia exports from Russia have
completely seized. The other two markets where a lot of ammonia is produced are you the US in India, So the US, even though it has a lot of natural gas, is producing a lot of ammonia itself, but still needs to import a lot of ammonia to satisfy its own demand. Similarly with India, India produces a lot of ammonia domestically, but all of that ammonia is typically through imported natural gas. So in a sense they're not self reliant on fertilizers
at all. They just have a lot of production capacity for it, it still need the feedstock to come in or the import ammonia are other places, so on net basis, they still import more ammonia than they produce.
The Inflation Reduction Act in the US has certainly got hydrogen in its sites in terms of making the US possibly quite big producer of hydrogen, in particular green hydrogen. Have we started to see any of those projects come online and come to light? And if not, because I think I might know what the answer is. These are large infrastructure projects. When do we expect to start seeing some change.
Yeah. What's interesting about the Inflation Reduction Act, especially in terms of ammonia, is the fact that in the law there's nothing that says that a hydrid producer in the US could not use the tax credit and then export that subsidized hydrogen as ammonia, for example, to other markets, which really means that US could become one of the
cheapest suppliers of clean ammonia of any kind. To the goal, why we haven't really seen any impact of the Inflation Reduction Act tax credit just yet, I would say, is one, you're right, it's large infrastructure projects that will take another
three four years to actually become operational. And second, no one has actually received any tax for it, at least on the hydrogen part yet, and that's because they're waiting on crucial guidance from the US Treasury and how you can actually produce hydrogen and call that clean or green hydrogen and meet the emissions thresholds that the Inflation Reduction Act has set out for its tax credit. And there's
a heated debate. There's full page ads in the New York Times and the Washington Post about how these criteria should be set out, and that still needs to be determined. And we're working actually on a publication to set out our own view on this.
So we'll keep our eyes on what's going to happen in the US with the IRA. There are other parts of the world that are actively engaged in this market, and certainly incumbents don't want to lose market share. Can you talk a little bit about countries that are actively involved in this space and more importantly, the companies that are actually producing ammonia right now and really what they're doing with it.
Yeah, that's a really good point. I mean, every market with good renewable electricity sources like good sola and wind resources, as well as abundant natural gas, has been looking at one point at producing green or blue ammonia and trying to export that, particularly in the Middle East. Australia, Latin America, all of those markets have looked at it, and the Middle East is probably one of the places where most of the projects are concentrated. In One project in particular
that is worth highlighting here is in Saudi Arabia. It's the Neo project. It's a two point two gigaboute electoralizer project that has actually taken final investment decision, so it is becoming reality very soon. It'll be operational by twenty twenty six and it looks to export over a million metric tons of ammonia. That's actually huge for the traded market that is only about twenty millimetric tons today, so that's going to happen. The challenge with NIOM is really
part of its business model. So in Saudi Arabia, producing green ammonia makes a lot of sense because they have both good solar radiation but also good wind speeds, which means you can combine it to and produce really cheap green ammonia in the region. And the project is financed, so it's going ahead as well, and it has an off taker in air Products, which has been willing to sign a thirty year off take. So in a lot of ways, the financial zion place, the renewables are in place,
and the ammonia will be cheap. The questionnaer on Neium is really what they will do with the ammonia, because air Product is buying the ammonia, but they're not the final user of the ammonia. Air Product's role within this is to take the ammonia, put it on ships and then export it to other markets and then find willing buyers in these other markets for that ammonia. So they're
really a trader of the ammonia. And the stated business model right now is to take the ammonia, move it via ship to Europe to an import terminal that air Products is building, actually three of them, and then crack it back to hydrogen, so not actually use the ammonia as is, but crack the ammonia under high temperature back to hydrogen, which in a sense makes it more useful because there's more use cases for hydrogen and ammonia. But
that's where for us the economics really fall apart. We think it could make a lot of sense for country like Audi Area to produce ammonia in bulk ship it and then for that ammonia to be used as ammonia, and that will be broadly competitive with domestic production in let's say Germany or so. Once you think about cracking the ammonia bag, that's such an energy intense process that the efficiency losses along the chain mean that the hydrogen that you're getting out of that is probably a lot
more expensive than just domestic production of the hydrogen. And right now the business model goes further to use that hydrogen than in road transport in refueling stations, which is also probably not the most viable use case for clean hydrogen today. It will mean that needs to be heavily subsidized. So there's a huge question around what happens to the project and who's actually ends up buying it, and if
this stated use case will actually go ahead. Overall, I would say any project that is looking to crack ammonia back to hydrogen will struggle with finding buyers. Now, the wider issue beyond nium is the fact that about half of the world's hydrogen production is looking to export in some form and not just use it domestically. Because export projects tend to be quite large. Ninety percent of these projects.
Of these export projects are looking to export as ammonia, and at BNF we really struggle where with all this ammonia will go in the near term, at least, we don't see enough demand for all of this ammonia because the fertilizer industry is quickly saturated. Even if you put all the government targets together, you struggle with demands for that ammonia, especially as is and cracking makes it really expensive,
so that's not really a good option. So we really need to talk about future use cases of ammonia and how quickly those can be developed.
What are some of those future use cases and things that they could green because certainly when I think of hydrogen, I think about the hard to abate sectors and the things that we're still trying to figure out the answers for decarbonizing, and that's really where it comes into play. That's where we start to hear some very creative solutions
to decarbonize that are really at the technology forefront. And one of them that I think that we would love to see in that hard to abate sector get cleaned up is shipping, not the shipping of We've just went through the fact that shipping ammonia and then returning it into hydrogen again is very cost intensive, although technically feasible,
so certainly something that many people are thinking about. But what about as a fuel and as a means to decarbonize this critical part of how the world functions as a global marketplace.
That would be probably the use case right after what the low hanging food is, which is the fertilizer industry, once you have decombonized that, or in parallel, the next biggest use case will be the shipping sector. And we have been have to do a lot of analysis on how a net zero shipping industry will look like. And in our net zero scenario, the way this actually looks like is that sixty percent of the fuel used in
shipping will actually be reduced just through fuel efficiency. Efficiency gain could be so strong that sixty percent of the fuel you could just mitigate through efficiency. About forty percent of the PI is then met through a combination of biofuels and hydrogen based fuels, so we say each twenty percent or so, So twenty percent of the total fuel demand for shipping in twenty fifty could be met through hydrogen based fuels. And there's really two competing fuels in
the hydrogen sector. One is methanol and the other is ammonia. Just to put this into context, if that twenty percent were to use ammonia only, the amount of ammonia you need for that is about one hundred and fifty million metric tons of ammonia, which is as large as the ammonia industry today. So just with that, with just with a small share of shipping, you're looking at doubling the industry size of ammonia production today, which is crazy.
So that's where all the ammonia could.
Go potentially, right. The problem is that one ammonia has competition from methenol, which is a carbon based molecule and which a lot of shipping companies are investing in early in terms of buying vessels that are capable of running a methenol Long term, we do think ammonia could make a lot of sense simply because it's cheaper to get nitrogen out of the air than carbon out of the air. It's just more expensive because the concentration of carbon in the air is low.
And by long term, what timeframe are you talking?
I think right now, what we'll mostly see over the next few years is methenol fueled vessels and then towards the twenty thirties, there will be investment in ammonia fueled vessels as well.
To the new vessels coming out will essentially be focused on a different fuel source.
Exactly, or a dual fuel source. That's how shipping companies are approaching it. So have be able to both run on heavy fuel oil with just a conventional fuel and today methanol for example, and then switch between the two depending on which jurisdiction they're currently on and what carbon restrictions they have within that jurisdiction.
How difficult would it be to retrofit existing ships.
That's a really good question. I mean, what we don't have today is ammonia capable engines at all. There are companies like m an with which have suggested they're working on that and by about mid decade or so by twenty twenty five that they will have ammonia capable engines. Those could be retrofitted in existing ships, but I believe also ammonia takes up more space than existing fuel oil,
which so you also reduce your voyage by that. So there's challenges with retrofitting where I think probably most ships will actually be new builds where they can run either on existing fuel or ammonia. That's how methanol is being approached today, and from the hydrand sectors, I think that's the approach that most companies will take towards ammonia in the beginning as well once ammonia ready vessels are available.
So this falls firmly into the new technology space which we are watching closely but really is under development exactly.
I mean, the problem or the challenge with ammonia use as a fuel is the fact that it's very different to handling it as a cargo. We know very well how to handle it as a cargo. The problem with ammonia is that it's toxic. You don't want to be near ammonia at all, so but we know how to handle it as a cargo. Using it as a fuel creates a new challenge, and we don't have any safety protocols for that yet or these are being under are
still under development. So what first one needs to happen is one the engines need to become available that can actually combust ammonia, and the second is to have the protocols in place to actually use it as a fuel, which the IMO and other organizations are working on but we don't have them to. All of those are short term barriers to using ammonia as a shipping fuel. Long term, though, if ammonia is being used, the industry could actually be huge and the demand for it could be huge.
So let's back up a bit. When we first started talking about using ammonia as a potential means to decarbonize the shipping industry, you noted that the number one thing that ammonia can do to reduce emissions is actually going
to be in the agriculture space. And we've talked about it upstream, and I just want to know, am I missing something given that ammonia actually has such a downstream I guess in Scope three applications emissions profile, is there anything that really can be done to reduce emissions on that end of things? And kind of what's the problem there.
Decarbonizing ammonia use in agriculture will be challenging because even if you introduce green hydrogen and reduce about ninety percent of the production emissions, that's only about forty percent of
the emission's footprint of the ammonia use. Got sixty percent of it is really happening on the field when it's being applied and used by farmers, and that's partly because ammonia releases nitrogen emissions, but also because the most common way ammonia is applied to fields is not as is, but in the form of a fertilizer called urea, which is ammonia combined with a carbon source, which makes it more easy to transport it across the globe and easier
to apply. But that there's the problem. You need to have a sustainable carbon source able to decarbonize that, and that's what most countries are using, and most countries are not necessarily able to switch away from that. Other markets, like in europemonium nitrate is being used as a source of ammonia, the nitrogen fertilizer. That could be a solution, so switching from urea to ammonium nitrate, But ammonium nitrate is more expensive, it has explosive property, so that's also
a challenge. So partly the solution to decarbonizing nitrogen fertilizers used in agriculture is one. One answer to this is really using hydrogen and greening the ammonia production itself. There's probably a part which means that you switch to fertilizes that don't use any carbon with of themselves. There's probably a part of this which just means reduction of nitrogen
fertilizer use overall. And these are questions that our sustainable Agriculture team is looking at in a lot more detail, and we'll come up with a more clear answer in your future.
I mean, I guess that's part of the reason why your job is a lot of fun, because you get to overlap with the sustainable agriculture team and then the clean energy team, and there's a lot of different people to collaborate with because it is so interconnected to so many different parts of the economy. One of the things you had mentioned a little bit earlier on was policies that may need to be formed around some of the safety considerations. And certainly we know that hydrogen is flammable.
There are various other things in our daily lives, like natural gas that are flammable, although albeit not quite as flammable. But let's talk about ammonia and really whether or not many countries around the world are really focused on this safety consideration as something they're going to need to think about in the future, as we do expect to see ammonia taking off with some potential additional use cases in
the future. And the reason I bring this up really specifically is I think in many of our minds there's kind of this picture of a fairly recent explosion of an ammonia facility in Lebanon, and that was just over a year ago in twenty twenty two. In Beirut, When we talk about hydrogen, we say, oh, well, you know the Hindenberg, but it was so long ago, and maybe you have this ability to almost put distance in time, but we don't with this particular disaster that really was
quite fresh in people's memories. And therefore, do you think that something that those on the policy side are really looking at quite closely when they're thinking about whether or not to really support certain parts of hydrogen and ammonia production in their countries.
I think a lot of that is still being developed at the moment, just because there is no green or low carbon ammonia industry today. Really there's pilot's scale facilities, but not really much use of ammonia. The aemonia that is being used and sold is used into fertilizer and agriculture industry, where we have safety protocols in place to
handle ammonia. But yeah, once you're talking about doubling or tripling demand for ammonia, that will mean a lot more infrastructure, a lot more people involved in this, which will be exposed to ammonia, which is a toxic gas. If you're converted to something like ammonium nitrate that's used in explosives, so you have a flammability issue there. So all of that will need to be handled with it, particularly when
you're using it as a fuel on ships. And that's I would say that that's mostly are still under development and still under discussion and something that needs to be figured out. We haven't really spent a lot of time and attention on it today because simply because there isn't really an industry there today. I think these are questions that we'll need to tackle as we go forward into the future and ammonia's role increases. Safety protocols really vary
by by by markets. For example, in Europe, ammonia is really only put on trains and then on one pipeline that goes from Russia to Ukraine. Otherwise people don't really like to handle ammonia inland. In the US, you can put ammonia on a truck, you can put it on a train, you can put it through a pipeline. There's not very many restrictions on how you can handle ammonia. So there's all the differences between countries on how risk averse they are towards using ammonia and its safety issues.
So all of that will need to be harmonized to some extent to be able to enable a globally traded market for ammonia more widely than it is already traded today.
So we already discussed the US Inflation Reduction Act and how that may spur the hydrogen industry in the US to become much more prominent. What other sort of policies are really in place to or could be in place in the future to really get this going.
Yeah, it's actually something we're looking at as a research partner of the Bloomberg New Economy FUM Climate Technology Coalison and how to stimulate ammonia demand. And what we're settling on is ammonia's probably needs both supply side incentive for the hydrogen to scale up and become cheap, So that could be anywhere from direct subsidies to fixed premium support contract for difference mechanisms and so on to make hydrogen cheaper,
but also demand side mechanisms. We've talked about carbon pricing before. That will be a huge one, particularly for blue ammonia, which with a carbon price can already be competitive mechanic like the carbon border adjustment mechanism in the EU, which will incentivize importers to rely on more cleaner forms of ammonia as well, and then just encouraging the use of clean ammonia in sectors where there's no other alternative, right like in the fertilizer industry and so on. That could
be for example, to quotas on mandates. For example, in the EU, what we have is a quota to use renewable hydrogen in existing industry that is already using fossil hydrogen. The biggest user of fossil hydroen today in Europe is
the fertilizer industry. They use about I think two and a half million metric tons of hydrogen, so they now have a quota by twenty thirty to replace about forty two percent of the hydrogen that they're using with green hydrogen, meaning they will be producing green ammonia and by twenty thirty five that's all the way to sixty percent. Quotas like that and sort of carrots and sticks like that will probably help a lot in scaling up the industry. Well.
And then how about one of the policy interventions that certainly is more of a stick. How about the carbon border adjustment mechanism.
Yeah, absolutely, I mean that will really define what form of ammonia is treated and imported into the once the carbon bordered adjustment mechanism is in place, which will it will be fully in place from twenty thirty four. Carbon prices alone will probably encourage domestic ammonia importers to rely on lower carbon forms of ammonia because the carbon price
incentivizes you to do so. With the carbon price of over one hundred years per ton, blue ammonia is already in the money, and by the time green ammonia is probably cheap enough that a carbon price alone will also incentivize green ammonia use in low domestic industry over fossil fuels. So the carbon border adjustment mechanism will really define what ammonia is being imported, and not just for ammonia, other other hydrid projects as well.
You've been great at giving us so much detail around this industry and the pricing. And I am going to ask one final, extremely novice question. Can you see it and can you smell it?
I certainly don't want to smell it because that might affect me in some way. Yeah, it's a colorless guys with a pundit note.
Okay, so it smells bad. We might be familiar with it in cleaning products and stuff, but it's uh, you'll know it when you smell it, so to speak, but not necessarily when you see it. Addie, thank you so much for joining us today.
Thank you for having me.
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