Some ammonia producers are implementing their own chain of custody (CoC) approaches in order to incorporate upcoming reduced carbon tonnes into existing ammonia supply chains, ahead of unified regulation, certification or wide-scale clean ammonia availability. But approaches will vary, depending on whether producers are targeting regulatory or voluntary markets, Belgian-headquartered consulting firm Hinicio told Argus ahead of the Clean Ammonia Europe Conference in Rotterdam this month.
Hinicio is consulting on three different ammonia certification schemes currently under development. The schemes are being developed in partnership with Fertilizers Europe, the Fertilizer Institute in the US and the Ammonia Energy Association, which is developing a global scheme.
The schemes have a mix of both mass balance or book and claim CoC methods, as producers and buyers seek to optimise on cost and carbon intensity (CI) when clean ammonia tonnes become available. Clean ammonia includes renewable ammonia produced with electrolysis and renewable electricity, or ammonia produced with a natural gas feedstock that uses carbon capture and storage (CCS) to reduce carbon emissions.
The mass balance approach is well established in other values chains and has been set forth by the EU as the regulatory standard in the Renewable Energy Directive, FuelEU Maritime and the Gas Directive. And the CoC method has already been adopted by ammonia producers such as Yara and OCI.
In a mass balance approach, the ratio of sustainable material incorporated into the value chain is tracked and reflected in the products produced and sold to customers. Physical trade flow is accounted for and a defined time (reconciliation) period is assigned.
"When talking about chain of custody, the European regulation really dictates to use mass balance for everything you want to call RFNBO or low-carbon in Europe, or for anything that you want to bring to Europe," Hinicio manager Thomas Winkel said.
But a ‘book-and-claim' system grants significantly more flexibility for economic operators that are looking to trade in voluntary markets — where companies buying reduced carbon ammonia are looking to reduce scope 3 emissions or EU ETS obligations.
Book and claim allows for physical flow of a product to be completely decoupled from attributes like CI. Characteristics are ‘booked' into a central registry to be ‘claimed' by consumers, without a connection to the physical material, like renewable electricity certificates.
"The voluntary market is going towards a combination of mass balance and book and claim," Winkel said. Elements of book and claim can be employed if required, within geographic or other constrictions.
But Europe's stance on CoC could force companies to employ mass balancing. "I think many players around the world are looking at Europe as their main export market and they are starting to understand their criteria well," Winkel said.
Europe currently accounts for around one-fifth of global ammonia imports, or around 4mn-5mn t/yr, according to Argus line-up data. And at least a quarter of the 40-plus offtake agreements Argus is tracking from clean ammonia projects are likely to supply the European market. Renewable ammonia projects in India and Canada have received pre-certification of RFNBO compliance from certification body Certifhy, with European offtakers already lined up.
Under currently announced agreements alone, at least 500,000t of renewable ammonia will be shipping to Europe from 2027, pending project delivery, with the potential for a substantial scale-up in volume as the decade draws to a close. That is excluding large-scale ammonia projects with CCS that are scheduled for start-up in the US in 2025-26 and are also eyeing the European market for export opportunities.
"Mass balance is the standard — the schemes that are being developed that are for voluntary purposes allow a bit more flexibility otherwise," Winkle said.
For most jurisdictions, the regulatory playbook is still being written. Australia, Japan, South Korea, the US and the UK are still developing regulations surrounding low-carbon fuels.
But in the meantime, fledgling supply agreements for voluntary markets may opt for book and claim where possible. But regulatory markets in Europe have declared mass balance as the standard. The development of regulatory and certification schemes in other regions will determine global standards moving forward.
