The transition to low-emission nitrogen production will not happen through market forces alone and requires supportive public policy. The EU should accelerate access to affordable, clean, and reliable electricity. This report sets five recommendations.
Key takeaways:
The fertilizer industry is overly dependent on gas: EU’s synthetic fertilizer production has fallen by ~12% since 2022. Imports from gas-rich regions are rising.
Europe is well placed to lead the development of low-emission fertilizer production routes: Every major method in history of industrial nitrogen fixation was developed in Europe. Europe now hosts more low-emission nitrogen innovators than any other region.
All low-emissions fertilizers require affordable electricity: In Sweden, renewable-hydrogen fertilizer can already reach market-price levels, but in Germany, power costs and grid charges keep clean routes above them.
There is no single breakthrough technology: Renewable hydrogen is commercially mature. Plasma is approaching first-of-a-kind deployment. Electrochemical ammonia is at an earlier stage. Each needs different support.
Production of low emission fertilizer is only half the story (or less): Better nutrient application, lowering demand where possible, and making the system more circular are essential parts of the solution.
Synthetic nitrogen fertilizers feed around half of the world’s population but cause 2.5% of global greenhouse gas emissions. Roughly 40% of these emissions stem from production, while 60% are released during field application, primarily as nitrous oxide. Production relies mainly on natural gas, used both as feedstock and as fuel for high-temperature heat. While Europe seeks to reduce its reliance on imported natural gas, its nitrogen fertilizer supply becomes more dependent on imports from regions with cheap and abundant gas. Natural gas can account for up to 90% of the variable cost of ammonia production. Since 2022, gas prices have remained around 160% above the pre-war average, and EU production has fallen by ~12%. This also raises costs for agriculture and food production, exposing Europe’s vulnerability along the food value chain.
Effective strategies for a resilient, affordable, innovative low-emission fertilizer value chain therefore diversify feedstocks and energy sources, reduce reliance on natural gas, and lower overall fertilizer use. This requires close coordination across four levers: pivot to low-emission production technologies (the focus of this report), improve nutrient management, reduce and shift demand, and recover nutrients and carbon.
Low-emission routes shift production from natural gas to electricity. Four routes are discussed:
Renewable hydrogen with upgraded Haber-Bosch: mature and ready for commercialization, with an energy intensity comparable to the incumbent (43-50 GJ/tN and 35-48 GJ/tN, respectively).
Plasma-based route: produces nitric acid directly from the air. Currently 3-4 times more energy-intensive (130-180 GJ/tN) but with a theoretical minimum below that of any other route, and modular, suited to flexible operation, and moving toward first-of-a-kind plants.
Electrochemical ammonia synthesis: produces ammonia directly from nitrogen and water, but is currently at laboratory scale and energy-intensive (111-172 GJ/tN).
Carbon capture and storage: retains natural gas as a feedstock and captures the pure process CO₂ stream, but its added costs mean it cannot compete without regulation, and it would require storing 22-25 Mt of CO₂ per year in Europe, a scale-up that remains uncertain.
Europe is well placed to lead the development of these low-emission fertilizer production routes. Every major method of industrial nitrogen fixation and its downstream processing (Haber-Bosch, Ostwald and Birkeland-Eyde) was developed in Europe, and it currently hosts more low-emission nitrogen innovators than any other region.
Importantly, the cost of electricity is decisive. The more energy-intensive a route, the more it gains from flexible operation during low-price hours. In Sweden, renewable hydrogen with Haber-Bosch already reaches the market price of natural-gas-based nitrogen fertilizer, and future plasma plants could too; in Germany, grid fees, levies and taxes keep both routes above it.
Our Recommendations:
The EU should build a diversified, resilient, domestic production base for nitrogen fertilizers by accelerating the development, demonstration, and commercialization of multiple low-emission nitrogen production pathways. Such a system would:
- Reduce exposure to geopolitical shocks by diversifying feedstocks and energy sources, reducing reliance on imported fossil fuels and limiting EU vulnerability to disruption in international gas markets and fertilizer supply chains.
- Improve price stability and affordability by decoupling fertilizer production costs from natural gas prices and enabling the development of alternative production pathways with competitive long-term costs.
- Scale up low-emission production routes in Europe such as renewable hydrogen with upgraded Haber-Bosch, plasma-based nitrogen, and electrochemical ammonia synthesis.
This means securing low-cost, low-carbon power at scale and enabling flexible operation of electrified fertilizer plants. All major low-emission production routes are electricity-intensive, so the cost of electricity is a central determinant of competitiveness. Policy can lower electricity costs and improve access by:
- Building out renewable generation and storage.
- Expanding and optimizing grids and fast-tracking connections for first-of-a-kind plants.
- Reducing non-energy charges such as grid fees and levies, including for plants co-located with renewable hydrogen and/or electricity generation.
Innovative nitrogen production pathways face different financing barriers depending on their technological maturity. This matters most for the EAS and plasma-based routes. EAS needs support to build pilot and demonstration plants, while plasma-based routes need capital for first-of-a-kind (FOAK) plants to demonstrate technical and commercial viability. EU policy should tailor funding to these distinct needs by:
- Strengthening EU-level funding for research, pilot and demonstration phases for EAS and plasma-based routes (e.g., Horizon Europe, European Innovation Council).
- Mobilizing capital for a first wave of industrial plasma-based FOAK plants through EU-level industrial financing instruments (e.g., Innovation Fund, Industrial Decarbonization Bank), with support linked to clearly defined technical and deployment milestones.
- Enabling regional FOAK deployment of decentralized plasma units through farmer–agricultural cooperative–innovator/technology developer partnerships.
- Funding independent field trials to validate product performance and build farmers’ confidence and facilitate market uptake.
In the short to medium term, low-emission fertilizers are likely to remain more expensive than their natural-gas-based alternatives. Demand-side measures and lead markets are therefore essential to help reduce investment risks and help early projects reach commercial scale. Policy can close this cost gap by:
- Introducing product carbon footprint (PCF) targets in fertilizer end markets, supported by a harmonized methodology for verifying emissions across production pathways.
- Fixing prices and volumes upfront through advance market commitments and long-term offtake agreements between producers and downstream buyers, for revenue visibility.
- Topping up revenues to a strike price through contracts for difference.
The fertilizer supply chain, from production through to consumption, is a far-reaching system of global importance. As Chapter 2 showed, this interconnectedness calls for an approach that pulls several levers at once. Policy can enable this by:
- Assessing the potential of each of the four levers, from low-emission nitrogen fertilizer production and better nutrient management to lower biomass demand and nutrient recovery.
- Establishing cross-cutting enablers, such as shared data, nitrogen accounting and integrated supply chain partnerships from energy providers, fertilizer producers, farmers, food retailers to public infrastructure services.
- Sequencing and coordinating the levers so that they reinforce each other.