Ammonia’s Potential Role in a Low-Carbon Economy

December 7, 2022

Ammonia’s Potential Role in a Low-Carbon Economy

Ammonia, composed of nitrogen and hydrogen (NH3), is

the second-most produced chemical in the world by mass,

according to a 2022 publication from the International

Renewable Energy Agency (IRENA). Most ammonia is

used to produce fertilizer. Ammonia production is energy

intensive and emits greenhouse gases. In the same report,

IRENA estimated that ammonia production represents 1520% of all carbon dioxide (CO2) emissions from the

chemical sector. Some ammonia applications also release

nitrogen oxides, a potent greenhouse gas that can trap more

heat than CO2. Experts view decarbonizing ammonia

production, referred to as low-carbon ammonia, as

expensive, but this cost could fall should costs of hydrogen

produced from renewable energy or fossil fuels paired with

carbon capture lower. Ammonia is seen as a potential

hydrogen carrier and as a fuel for ocean-going vessels.

These potential end-uses could employ existing

infrastructure supporting a well-established global ammonia

trade.

which in turn is produced via water electrolysis using

renewable energy.”

Ammonia is produced globally. China produces almost a

third of the world’s ammonia supply (Figure 2), using coal

as the primary hydrogen feedstock. The United States and

most other producers use natural gas. In 2021, the United

States had 35 active ammonia production plants across 16

states, with 60% of production capacity located in

Louisiana, Oklahoma, and Texas.

Figure 2. World Ammonia Production, 2021

Mt

Today’s Ammonia Economy

Ammonia is produced through a high-pressure, high-heat

catalytic reaction of nitrogen and hydrogen. The nitrogen is

generally obtained from air and the hydrogen from a fossil

fuel feedstock. Around 183 million metric tonnes (Mt) of

ammonia is produced annually worldwide.

Figure 1. Ammonia Feedstocks

Source: U.S. Geological Survey, Mineral Commodity Summaries,

“NITROGEN (FIXED)—AMMONIA,” January 2022,

https://pubs.usgs.gov/periodicals/mcs2022/mcs2022-nitrogen.pdf.

Source: IRENA, “Innovation Outlook: Renewable Ammonia,” May

2022, https://www.irena.org/publications/2022/May/InnovationOutlook-Renewable-Ammonia.

Notes: Naphtha and heavy fuel oil are petroleum products.

Feedstocks

Due to the comparatively low costs of natural gas and coal,

almost all ammonia today is produced from fossil fuels.

Over 70% of ammonia is generated from natural gas, and

over 20% is generated from coal (Figure 1). IRENA

estimates that less than 0.02 Mt of global ammonia

produced in 2021 was “renewable ammonia,” which

IRENA defines as “produced from renewable hydrogen,

Global Trade

A well-established global ammonia trading system features

pipelines, tankers, and infrastructure at around 200 ports.

According to IRENA, 18-20 Mt of ammonia is shipped

around the world annually. Ammonia can also be

transported via truck, train, and pipeline. The United States

is an active participant in this market, exporting almost 19%

of its domestically produced ammonia, and importing about

14% of its total consumption, according to the U.S.

Geological Survey (USGS) in 2022. The USGS reports that

top import sources for the United States for 2017-2020

were Trinidad and Tobago (63%), Canada (34%), and

Venezuela (2%).

Uses and Demand: Fertilizer and Other Chemicals

According to the International Energy Agency’s (IEA) in

2021, 70% of all ammonia produced globally is used to

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Ammonia’s Potential Role in a Low-Carbon Economy

make nitrogen-based fertilizer. 88% of ammonia consumed

in the United States is for the same purpose, according to

USGS in 2022. The chemical is also used to produce

various explosives, plastics, synthetic fibers, resins, and

other chemicals used in refrigeration, waste treatment,

pharmaceuticals, and air treatment.

Ammonia production is expected to increase based on a

range of projected future demands. USGS estimates

demand for ammonia to increase 1% annually, driven by

demand increases in Latin America and south Asia. The

IEA estimates ammonia production capacity will need to

increase by nearly 40% by 2050 to account for expected

global population and economic growth.

Ammonia’s Potential Future Uses

Ammonia production relies heavily on fossil fuel

feedstocks to supply hydrogen and heat due to low costs

and wide availability. Efforts to decarbonize ammonia

production have identified alternative approaches to

feedstock and energy. Existing ammonia plants can be

retrofit to have lower carbon dioxide emissions through use

of hydrogen generated from renewable energy or existing

fossil fuel resources paired with carbon capture and

sequestration (CCS). The first renewable hydrogen supply

was retrofit to an existing ammonia plant in Spain in 2021.

Additional low-carbon ammonia capacity is currently under

construction. In May 2022, IRENA estimated that the

combined capacity of announced ammonia projects

produced from renewable hydrogen, if constructed, would

total 15 Mt in 2030, equivalent to approximately 8% of

production.

Zero- and low-carbon ammonia is not currently considered

commercially viable due to high production costs. IRENA

estimated in 2022 that the cost to produce ammonia from

renewable hydrogen at $720-1,400 per metric tonne,

compared to $110-340 for production from natural gas and

coal.

Potential Applications for Low-Carbon Ammonia

Ammonia has a wide variety of potential uses beyond its

current role in food and chemical production. Applications

in earlier stages of development may include stationary

power generation, industrial heat, or vehicle fuel. Other

proposals include:

 Hydrogen carrier: Hydrogen, if developed and

employed as a fuel at scale, could contribute to reducing

CO2 emissions in a wide variety of industries and

processes. Ammonia can be decomposed via a catalyst

to produce hydrogen and atmospheric nitrogen

(“ammonia cracking”). Some assert that the transport

and delivery infrastructure of ammonia could be

combined with ammonia cracking to facilitate use of

hydrogen as a fuel source. For more information on

development of hydrogen as a fuel in the United States,

please see CRS Report R47289, Hydrogen Hubs and

Demonstrating the Hydrogen Energy Value Chain, by

Martin C. Offutt.

 Low-carbon maritime fuel: Ammonia has been

considered for use as a possible future maritime fuel

either through ammonia-based fuel cells or through

direct use as fuel. Testing and prototyping of such

approaches in maritime vessels is ongoing. Utilizing

available ammonia terminals could expand ammonia’s

use as a fuel to reduce the shipping sector’s emissions,

but ships would need to be built or retrofit to consume

ammonia as a fuel.

Federal Action

Federal involvement supporting low-carbon ammonia

production is primarily through research, development,

demonstration, and deployment (RDD&D) activities, as

detailed in Table 1.

Table 1. Selected Federal Support for Low-Carbon

Ammonia

Program Name

Statutory

Authority

Details

Department of

Energy’s Advanced

Research Projects

Agency—Energy

42 U.S.C.

§16538

Funds a variety of

RDD&D projects

involving ammonia

Tax Credit for

Carbon Oxide

Sequestration

26 U.S.C. §45Q

Provides

deployment

incentives for

utilizing CCS

Environmental

Protection Agency’s

ENERGY STAR

Efficiency Fertilizer

Plant Certification

42 U.S.C. §7403

Provides incentives

for greenhouse gas

reduction in

fertilizer production

Source: Program name and details, besides Section 45Q tax credit,

adapted from International Energy Agency, Ammonia Technology

Roadmap: Towards more sustainable nitrogen fertiliser production, Paris,

October 2021, p. 137, https://www.iea.org/reports/ammoniatechnology-roadmap.

Notes: For more on the Clean Air Act, please see CRS Report

RL30853, Clean Air Act: A Summary of the Act and Its Major

Requirements, by Richard K. Lattanzio.

To make low-carbon ammonia more commercially viable,

Congress could explore policies that make low-carbon

ammonia more cost competitive, such as a carbon price or

tax. Increasing funding for RDD&D could incentivize

further development of early stage technologies that may

eventually help increase the scale of low-carbon ammonia

production. Congress might support approaches to provide

low-carbon ammonia project financing that could also help

scale low-carbon ammonia and incentivize innovation from

the private sector.

Lexie Ryan, Analyst in Energy Policy

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Ammonia’s Potential Role in a Low-Carbon Economy

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