The Australian fertilizer industry is divided on whether government incentives are the best solution to meet the country's new 2035 emissions reduction target, after the federal government proposed the use of low-emissions nitrogen alternatives.
Australia's federal government introduced its 2035 emissions targets alongside six sector plans on 18 September. The Agriculture and Land sector plan, created after consulting with key industry participants, is aligned with many of the practices encouraged by industry players but did not include any incentives for farmers to adopt new sustainable methods or products. Policies should encourage the use of sustainable fertilizer products, Fertilizer Australia (FA) had said in its Nitrogen Fertiliser Use and Greenhouse Gases white paper in the end of 2023.
The fertilizer industry has altered technology and methods to increase profitability and productivity, the Australian Climate Service (ACS) said in its 2025 National Climate Risk Assessment. Farmers will likely continue to improve their nitrogen use efficiency without incentives, according to the ACS. This aligns with the sector plan's proposal for precision agriculture and reducing costs for growers.
Climate adaptation in agriculture requires trusted relationships, clear incentives and a shared commitment to sustainable productivity — not just regulation and innovation, FA told Argus on 26 September.
Grants, tax incentives or other financial support mechanisms could incentivise the adoption of sustainable practices, Australian lobby group Grain Growers said in its submission to the plan's consultation.
Coated urea and straight urease or nitrification inhibitors are the recommended products to lower the emissions from nitrogen fertilizer use.
Emissions from fertilizer use make up 7pc of the sector's carbon dioxide equivalent (CO2e) emissions and are primarily nitrous oxide, the Climate Change Authority (CCA) said in its 2024 Sector Pathways Review. The use of nitrification inhibitors could reduce nitrous oxide emissions from fertilizer use by over 50pc, the CCA said.
Nitrogen efficiency focus
But subsidising fertilizers can increase emissions from its use by creating soil imbalances and increasing leaching, the Australian Bureau of Agricultural and Resource Economics and Resources (Abares) said in its March 2025 insights paper.
Other industry stakeholders believe that farmers should adopt sustainable fertilizers because of their increased efficiency, without relying on government support like subsidies. Farmers are beginning to see the value of nitrification inhibitors on the east coast of Australia, a sustainable fertilizer producer told Argus. Increased nitrogen efficiency can reduce emissions and increase productivity through higher yields or reduced fertilizer usage, according to FA.
The agricultural sector accounted for 19.6pc of Australia's emissions in the financial year ending 30 June 2024 and will contribute 37pc in 2050 as other sectors decarbonise more quickly, according to the sector plan. Emissions from the sector increase when Australia has a good cropping season because of crop residue and fertilizer use.
Replacing natural gas or coal with renewable energy can make nitrogen fertilizer production low-emissions, but this does not reduce nitrous oxide emissions in the soil after application.
Production and clean ammonia
Urea production primarily uses the Haber-Bosch method that combines CO2 and ammonia using natural gas or coal as a feedstock. These operations could be decarbonised by using renewable generation such as solar or wind. Some local projects intend to progress to renewables or other technologies to reduce emissions.
Wesfarmers Chemicals, Energy and Fertilisers (WesCEF) has completed a feasibility study to decarbonise its 300,000 t/yr ammonia plant and plans to double its ammonia capacity to replace imports. The company received a A$500,000 ($333,000) grant in May for technology to cut emissions at an ammonium nitrate and nitric acid plant in West Australia's Kwinana.
Australian fertilizer producer Perdaman Chemicals and Fertilizers' 2.3mn t/yr Project Ceres is expected to be operational in 2027. The project will use natural gas as a feedstock through its 20-year agreement with Woodside's 8mn t/yr Scarborough gas project, which is set to start production from 2026. Perdaman's proposed 100MW solar power facility will contribute to decarbonising the urea project.
Beyond these decarbonisation investments, the Australian government is considering introducing a carbon border adjustment to reduce the risk of carbon leakage from the fertilizer industry. This would likely increase fertilizer prices and support domestic fertilizer manufacturing, FA said.
But other projects do not have clear plans to use renewable energy. Australian fertilizer company NeuRizer's (previously Leigh Creek Energy) 1mn t/yr urea project in South Australia will use underground coal gasification to produce fertilizer. The project is pending a final decision under the Environment Protection and Biodiversity Conservation act. NeuRizer has offtake agreements with Daelim and Samsung, NeuRizer's executive chairman Justyn Peters said.
Australia's safeguard mechanism applies to operations that emit over 100,000 t CO2e/yr. Incitec Pivot Fertilizers, CSBP, a subsidiary of Wesfarmers, and Yara are under the mechanism for their manufacturing facilities. Fertilizer companies under the safeguard mechanism must reduce emissions or buy and surrender Australian Carbon Credit Units or Safeguard Mechanism Credits.
