London, 23 March 2023
Global energy and commodity price reporting agency Argus has launched two Carbon-Adjusted Price of Ammonia (CAPA) assessments that reflect the future impact of the Carbon Border Adjustment Mechanism (CBAM) on European ammonia prices.
The CBAM has the potential to be the first instrument available to the rapidly developing clean ammonia market that will combine a carbon intensity measurement with a mandatory carbon price. Its goal is to provide market transparency and facilitate liquidity in the coming market. Clean ammonia is attracting widespread commodities market attention, both because it decarbonises ammonia’s traditional end-uses in fertilizers and chemicals, and due to its exciting potential in transport fuels and power generation.
The new assessments combine Argus’ daily price for ammonia delivered to northwest Europe with the price of CO2 emissions under the EU’s Emissions Trading System (ETS), and with two separate carbon intensity factors for European ammonia imports calculated by Argus. The carbon intensity factors reflect two scenarios, one modelling the initial state of the CBAM mechanism (i.e. with free ETS allowances, starting from 2026) and one that does the same for the end state of the mechanism (i.e. without free ETS allowances, which will be fully phased out by 2034).
The new prices will allow market participants to evaluate how carbon pricing will impact their business, incentivise their decarbonisation efforts, and support investment in new clean ammonia capacity.
Argus Media chairman and chief executive Adrian Binks said: “Argus is at the forefront of providing pricing and contractual instruments to the nascent clean ammonia industry, and this latest development is a testament to our commitment to this market.”
The CAPA assessments are published daily as part of the Argus Ammonia service and complement Argus’ existing suite of ammonia and hydrogen price and cost assessments.