Norway’s Yara Worldwide demerged from Norsk Hydro in 2004 and has develop 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 business’s greenhouse gasoline emissions — for a few years.
Even earlier than Russia’s invasion of Ukraine final yr, international fertiliser provides had been being stretched by Covid shutdowns, labour shortages, Chinese language consumption and common value volatility.
Now, Holsether says the battle is enabling Russian president Vladimir Putin to “weaponise” meals, in the identical means that he has weaponised gasoline provides. However, right here, he tells the FT’s Ethical Cash editor Simon Mundy how hydrogen comprised of renewable vitality — together with US-style tax incentives — can provide 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 gasoline emissions come from agriculture and meals. So when 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 center for our firm, in addition to me as CEO.
Local weather Alternate
Following the success of our month-to-month Economists Alternate and Tech Alternate dialogues, the FT has launched Local weather Alternate: conversations between FT reporters and the enterprise leaders, innovators and prime teachers within the fields of sustainability, vitality and the surroundings. The dialogues are in-depth and detailed, specializing in the challenges of tackling local weather and altering our vitality combine.
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 deal with in our technique, and I went to Paris along with the Norwegian Ministry of Overseas Affairs — there was kind of a gaggle 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: “We now have to suppose fully in a different way across the surroundings and meals and our function in driving that.”
In order that was the kick-off of a extremely lengthy yr to alter all the pieces: from our mission, our imaginative and prescient, our values and likewise our technique . . . constructing on the sustainable improvement targets.
And it began with our goal: why will 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 know-how of getting nitrogen out of the air and turning it into fertiliser, which helped farming productiveness.
In order that’s the beginning. As we speak, half of the world will get meals due to fertiliser so it’s an essential product however one which additionally has an impression on emissions.
We ended up with our mission being to responsibly feed the world and shield the planet. So it’s in regards to the duality of offering sufficient meals for everybody within the inhabitants, however on the identical time doing that [in an] environmentally pleasant [way]. In order that was the beginning of the journey on the sustainability aspect for us, constructing on the legacy the place now we have diminished 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 transferring to inexperienced hydrogen. And that could be a journey that we can not do alone. We have to do this with companions . . . by 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 effectively, in order that, if there isn’t any first-mover benefit, [we] at the very least attempt to keep away from the first-mover drawback on this discipline.
SM: On that query of eliminating first-mover drawback, what would you wish to see from governments?
STH: Now that it’s develop into clear that the Inflation Discount Act (IRA) within the US is facilitating a really fast inexperienced transition, I feel it’s essential in Europe that we simply copy it. Until we decide up pace in Europe, industries are going to lose out.
We’re already very a lot conscious of the vitality drawback that now we have in Europe proper now due to the struggle. But when on prime of that we don’t have the identical incentives to drive the inexperienced transition, we’re lacking an amazing enterprise alternative as effectively. 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 aspect, had been there specific provisions within the IRA that basically struck you?
STH: For us, hydrogen. To be able to get nitrogen out of the air, you want hydrogen — and, immediately, we get that from pure gasoline. However you may as well get [green hydrogen] from water by 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 vital 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 web site, it is without doubt one of the largest emissions factors within the Netherlands. And what we’re doing is utilizing our know-how to seize the carbon, liquefy it, put it on a ship, after which go to the North Sea, the place — by a co-operation between Shell, Whole and Equinor — they’ve storage of CO₂.
That’s one thing that we’re doing commercially. However, within the US, they’ve performed the identical factor however have a major tax credit score because of it.
SM: You might be nonetheless doing this challenge although there isn’t any tax credit score. However would you say that there shall be much less exercise on this house in Europe due to this lesser help?
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 now we have an expense and now we have to ship the product to South America? These websites are depending on with the ability to flex between northern and southern hemispheres so you retain [them] operating all yr lengthy and then you definitely export to the south.
However the vitality drawback and the inducement drawback are of a magnitude that basically makes me fear in regards to the future viability of this type of manufacturing in Europe. That’s one thing we’d like to remember in Europe: do we actually need to threat our personal gas sovereignty and develop into depending on different areas? We’ve seen the impression of exporting our vitality manufacturing — like we did in connecting European infrastructure to Russia for affordable vitality.
That labored effectively till it didn’t work anymore. Now, we pay the value of not being ready. And we should be very conscious that, when you’re doing the identical factor on meals and fertiliser — delegating that to the opposite elements of the world — we might be in a really difficult place the place we’re vulnerable to not gaining access to 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 help to go down these new inexperienced routes, however you’re nonetheless producing plenty 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 now we have a worldwide community, we’re bringing in merchandise from different elements of the world to be able to optimise. However we’re nonetheless sounding the alarm on this as a result of we see the impression on smaller websites and on companies that would not have the identical flexibility as us.
European energy-intensive business is struggling proper now and there’s a have to decarbonise. If we’re not persevering with to take that lead, then we’re shedding essential business 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 targeted 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 feel 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, when 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 sort of fertiliser behaves higher within the discipline, on the farm, as effectively. So you’ve got much less infield emissions. It’s a double hit for Europe . . . and triple for the planet. For Europe it’s not shedding essential business and it’s [having] entry to superior fertiliser. For the planet, it’s not shutting down extra environmentally pleasant fertiliser manufacturing and transferring that out of Europe.
SM: What are the impacts of the [Ukraine] struggle and pure gasoline costs? What has that performed to the fertiliser business?
STH: It’s a huge effect and for a lot of causes. Pure gasoline is crucial part in producing fertiliser in Europe and 40 per cent of the pure gasoline comes from Russia. If that’s shut off, then it creates unimaginable volatility available in the market and likewise manufacturing points for all of us. We’ve been having to flex operations up and down all through this era. That’s the oblique impression.
The direct impression is that Russia is the world’s largest exporter of completed fertiliser and parts 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 impression. And we additionally sourced numerous our uncooked supplies from Russia . . . even through the coldest a part of the chilly struggle these merchandise got here — the identical with pure gasoline.
Now, with the good thing about hindsight, at what level ought to now we have modified it? Ought to now we have performed it in 2007, after 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 easy 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 impression of all this on European households?
STH: Everybody has felt inflation throughout all the pieces — from utility payments as much as just about all the pieces for households.
SM: However, after we have a look at the fertiliser house, particularly, is that basically a giant contributor to the inflation?
STH: It provides to it, and it makes meals manufacturing dearer. For farmers, it’s vitality intensive to do farming. They usually see it within the chemical compounds, they see it in seeds, all the pieces goes up. After which [so are] meals costs.
However what’s [simply] a value challenge in Europe is a query of [either] having meals or not in different elements 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’ll actually hyperlink this intently with the fertiliser value?
STH: Sure — fertiliser but additionally meals costs. As a result of Russia and Ukraine are food-producing superpowers as effectively, and you’ve got impacts to the provision chains. This already began with Covid, the place we noticed there have been fragile meals techniques — as a result of we didn’t a lot deal with producing kilos of crops slightly than how sturdy [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 impression 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’ve got local weather. I used to be in Kenya in November along with some farmers. Espresso — at the very least, in that area — is a little more resistant, so the espresso elements of their farms are doing effectively. 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 imagined to be maize, there was nothing. And that’s a local weather impression, 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 larger costs; even worse in different elements of the world the place a human being dies each 4 seconds because of starvation. Now we’re in 2023, it’s tragic and shouldn’t be like that. That must be a really robust reminder of the necessity to have a extra sturdy 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 now we have 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 struggle fought with navy weapons, it’s with vitality — we see that impression clearly right here in Europe, nevertheless it’s having an impression to the worldwide vitality disaster as effectively. And he’s weaponising meals and fertiliser.
That could 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 means 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 component of that’s inexperienced hydrogen, with a major build-up of renewable vitality. Then we are able to do two issues on the identical time: scale back emissions and scale back dependency on Russia for fossil fuels.
SM: So are you pursuing inexperienced hydrogen yourselves? Or is that basically 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 great thing about the ammonia crops that we’re operating. In essence, it has two steps. First, you produce hydrogen: with pure gasoline — 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 amenities as effectively. 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 challenge 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 quick distances by 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 effectively. So if you wish to [move it long] distances, then it’s important to ship it, however hydrogen is so mild that it’s worthwhile to cool it all the way down to -253C to make it liquid.
However when 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 way more compressed — then you’ve got way more vitality per unit of quantity and you can also make it liquid at -33C as an alternative. And right here now we have a transport fleet that may transport ammonia from all the world over.
SM: You have got your individual transport fleets?
STH: Sure, 12 ships ourselves. We’re the most important ammonia dealer on the planet so, to take that hydrogen and transfer it over distances, now we have a really attention-grabbing infrastructure to allow that — whether or not that’s to make use of it as a transport gas or to assist Japan on its journey to scale back coal consumption. As an illustration, you need to use ammonia and substitute coal in coal-fired crops
SM: Sure, I noticed they’d been doing that, is that gathering steam, the Japanese ammonia?
STH: That is tremendous attention-grabbing each for Japan but additionally for different elements of the world as a result of it’s about utilising present infrastructure and others being conscious that these are large 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 effectively. They may do it first nevertheless it has an impression in different elements of the world, as effectively.
SM: So if we have a look at the state of play in Europe, it hasn’t performed as a lot maybe because the US has performed by the IRA. Nevertheless it hasn’t performed nothing. How would you assess Europe’s progress in terms of hydrogen and ammonia?
STH: Effectively, there are preliminary issues that we’d like pace and readability on, as a result of it’s fairly a cumbersome course of to use for help [in Europe]. Within the US . . . when you meet the necessities, then you recognize you’ve got it. So it’s just a few certainty round that.
Then, to be able to produce clear hydrogen, you want large quantities of renewable vitality — and the pace at which that’s being rolled out is far too gradual in Europe. In my own residence nation of Norway, it’s not transferring
at a pace 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: Most likely a mix, particularly within the renewable vitality house . . . 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 effectively.
That’s what the US is maybe understanding now: that if we delay this transition, the fee to cope with the local weather disaster will improve exponentially. So, sure, it’s some huge cash however let’s do it now and get it performed. And if corporations make some cash on that, tremendous — it’ll simply make it even quicker.
In Europe, we take a unique strategy the place it’s way more into the main points and lengthy processes to qualify. Companies have to take these selections 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 completely 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 must be involved about its meals safety?
STH: Sure. Not close to time period . . . there shall be a scarcity and there shall be a worldwide public sale for meals — however Europe is a rich a part of the world.
However we have to suppose it by. If we’re not targeted on producing the utmost quantity of meals inside our planetary boundaries in Europe and we are saying that we’d slightly pay extra to get meals into Europe, we’re shopping for that meals away from another person. And when it comes to meals and meals safety, when you’ve got 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 may’t produce sufficient domestically?
STH: Sure, it’s all linked. And that’s one thing that we’d like to pay attention to. When now we have a few of the finest farmers on the planet, and a few of the finest companies on the planet, if we then select to say “We’ll get another person to do this on our behalf”, it sends a sign. And it’s the fallacious sign. It creates different dependencies the world over — and for nations that can’t afford to talk up towards what is occurring on the planet proper now.