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November 15, 2023

Investors should consider environmental risks of fertiliser industry, says report

A nitrogen fertiliser plant. According to the report by Planet Tracker, the world uses double the amount of nitrogen-based fertiliser than is necessary, and production is outstripping demand (Photo: Akos Stiller/Bloomberg)
A nitrogen fertiliser plant. According to the report by Planet Tracker, the world uses double the amount of nitrogen-based fertiliser than is necessary, and production is outstripping demand (Photo: Akos Stiller/Bloomberg)

Planet Tracker finds that the nitrogen-based fertiliser industry is a significant source of greenhouse gas emissions, which could be a risk for investors

The nitrogen-based fertiliser industry produces up to 5 per cent of global greenhouse gas emissions, according to a new report from non-profit Planet Tracker, while its methods of use lead to leakage that damages biosystems. 

The report says: “There is a maximum environmental limit of nitrogen fertiliser that should be used to avoid the consequences of significant environmental changes, but also a minimum social limit to provide enough food to feed the global population.” 

However, it adds that the world uses double the amount of nitrogen-based fertiliser than is necessary. In farming, for example, only a third of fertiliser applied is taken up by the plants for which it was intended, according to the study. The rest washes off and causes environmental harm, such as algal blooms. 

The report forecasts that production capacity for nitrogen-based fertiliser will grow six per cent by 2027, reaching 202mn tonnes. The fertilizer industry “is an important industry in its own right […] it is a crucial input for the $14trn global food system, affecting both costs and efficiency measures,” says the think-tank, urging investors to consider the risks connected to nitrogen pollution.

“At present, the [nitrogen-based fertiliser] industry pollutes at an alarming rate and contributes to billions of dollars of economic losses and social harm. Investor complacency on this issue will surely come back to haunt them,” says the report’s lead author Christopher Baldock in a statement.

The report also found that nitrogen-based fertiliser production is exceeding planetary boundaries by a factor of two. Nitrogen is primarily affecting biochemical flows, one of the nine planetary boundaries first defined in 2009. These describe the threshold within which humanity can continue to operate and thrive.

The report is available here.

A service from the Financial Times