April 19. 2024. 9:33

The Daily

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How can European agriculture move away from its dependence on imported fertilizers?

The European Parliament’s motion for a resolution on fertilizer availability and affordability offers an opportunity to recognize the importance of domestically produced mineral fertilizers and pave the way for Europe’s long-term action plan for strategic autonomy on low-carbon fertilizers and food.

Mineral fertilizers help feeding 50% of the global population, improving soil fertility and providing plants with the nutrients they need to allow farmers to grow high-quality crops to bring food to European tables.

Last year has been extremely challenging for the fertilizer sector: sky-high EU gas prices led to the closure of about 70 percent of ammonia production plants in Europe by the end of August 2022, throwing the EU into a state of great uncertainty and concerns regarding food security both at European and global level. Despite a significant correction of the gas prices in Europe, the situation remains uncertain with more than third of EU production capacity remaining offline.

The European Commission’s communication on ensuring the availability and affordability of fertilizers was a good starting point. Now it is time to take a step further with a comprehensive strategy to support the European fertilizer industry, break its dependence on imported and particularly Russian made fertilizers and prevent the risk of carbon leakage.

The ball is now in the European Parliament’s court, which through this week’s vote on the motion for a resolution on the Commission’s communication of fertilizers, can help shape the greener future of the European fertilizer sector.

Avoid carbon leakage by stimulating green investments

Europe is leading the process of industrial decarbonization, which represents the core of the EU’s environmental and climate goals set out in the Green Deal.

Changing the production process of fertilizers by promoting the use of renewables, will not only allow reducing the carbon footprint of fertilizers by up to 90% but will also represent the game-changer in moving away from the EU’s dependency on Russian gas and imported raw materials, and all the consequences that such dependence entails.

In this phase, public support for investment and operational costs is necessary to upscale the new technologies that have already been identified by European manufacturers. Such move would increase the resilience and sustainability of the nitrogen fertilizer industry and avoid the risk of carbon leakage that would result from the displacement of nitrogen fertilizer production in countries with lower environmental standards and/or preferential green investment incentives.

Mineral and organic fertilizers: better together

As humans need food, plants equally require nutrients to grow and reach their full potential. Such nutrients can come from mineral or organic sources, which represent different pieces of the very same puzzle. The objective of balanced plant nutrition is to ensure that plants have access to an adequate supply of each nutrient at every growth state, regardless of whether their origin is mineral or biological.

Therefore, to achieve optimal results, a combination of the two sources is proven to be the most effective strategy to ensure the right nutrient balance to grow healthy crops at their full potential while maintaining soil fertility.

In order to reduce nutrient losses to the environment, it is imperative to focus on improving the nutrient use efficiency of both fertilizer sources. Precision fertilization, advisory services and new products formulations aim at maximizing nitrogen use efficiency and reducing environmental emissions, representing the best ways to meet crop nutrient requirements. This is also the best strategy to increase effectiveness and reduce losses by 50% as stated in the Farm to Fork strategy.

Maintain import duties to ensure level playing field and reduce the gas cost gap.

With natural gas accounting for around 90% of the variable costs in fertilizer production, fertilizers prices in the current gas crisis are largely dependent on gas prices. European manufacturers are highly exposed to the gas cost gap, whereby they pay crisis level market economy gas prices while competitors often sit on artificially low state fixed gas prices.

In a complex geopolitical context we are currently experiencing, trade defence tools take on particular relevance as they represent the most workable way to ensure an EU market level playing field and reducing the exposure of EU industry to unfair competition.

Lifting anti-dumping measures and import duties – as also recognized by the European Commission – would only jeopardize the competitiveness of the European fertilizer industry and its ability to continue to provide European farmers with the nutrients they need to obtain high-quality yields. This would ultimately lead Europe to become fully dependent on imported fertilizers, replacing gas dependency with dependency on fertilizers.

As confirmed by the recent import surge, trade defence measures do not impede imports: between August and October of 2022, imports of urea rose by 247% compared to the same period in 2021. Such a surge is a negative development for fertilizer producers, farmers and the EU’s environmental goals considering the higher environmental footprint of imported fertilizers in comparison to fertilizers produced in Europe.

The fertilizer industry is a vital industry for Europe and plays a crucial role in ensuring EU’s strategic autonomy. As Europe is already a net importer of fertilizers, policymakers should refrain from actions that will further strain the competitiveness of the domestic fertilizer industry. Instead, a close cooperation and proactive dialogue between business and policy makers is needed to develop long-term sectorial strategy. This strategy is a prerequisite to provide the business case for investing in Europe as well as to offer a clear direction for the industry to contribute to achieving European Green Deal goals.