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Fertilisers · Green Hydrogen · Policy AnalysisUrea Decarbonisation and the CO₂ Feedstock Problem: Why Green Ammonia Alone Cannot Decarbonise India’s Urea Sector
Every discussion of green ammonia in fertilisers quietly skips past the most uncomfortable fact in the sector’s decarbonisation story. Urea synthesis requires carbon dioxide — approximately 0.74 tonnes of CO₂ per tonne of urea produced — as a chemical reactant in the Bosch-Meiser process. Today, that CO₂ comes for free as a byproduct of natural gas reforming. Switch to green hydrogen from electrolysis, and the CO₂ disappears. Making green urea then requires finding hundreds of millions of tonnes of non-fossil CO₂ from somewhere else. That somewhere is the hardest unsolved problem in fertiliser decarbonisation — and India, which channels more than 80% of its nitrogen use through urea, sits at the epicentre of it.
Urea synthesis (Bosch-Meiser process) requires approximately 0.735 to 0.75 tonnes of CO₂ per tonne of urea as a chemical reactant — the CO₂ is incorporated into the urea molecule, not emitted. In conventional grey ammonia plants, this CO₂ is captured from the natural gas reforming step as a byproduct and fed directly to the urea reactor. No separate CO₂ procurement is needed. This elegant co-location disappears entirely when green hydrogen is used: electrolysis produces only H₂ and O₂, leaving no CO₂ byproduct.
If all of India’s ammonia production switched to green hydrogen, approximately 14 to 15 million tonnes of CO₂ per year would need to be sourced from non-fossil feedstock streams — purely to maintain urea production at current levels. This is more than India’s entire industrial CO₂ capture capacity today, and roughly three times the country’s total current CO₂ utilisation from all commercial sources combined.
Three non-fossil CO₂ pathways are technically available: biogenic CO₂ from ethanol fermentation, biomass combustion and biogas upgrading; industrial point-source capture from on-site captive power plant flue gases; and direct air capture. Each has constraints in India that limit its near-term scale. The most pragmatic near-term option is flue gas capture from on-site coal or gas CPPs — which India’s fertiliser complexes already operate.
The most commercially rational transition strategy for India’s fertiliser sector is to switch green ammonia first into non-urea nitrogen fertilisers — ammonium sulphate, ammonium chloride, ammonium phosphate, and nitrate-based products — where CO₂ feedstock is not required. This allows green hydrogen to be deployed meaningfully in the fertiliser sector before the CO₂ sourcing problem is solved for urea.
CBAM’s impact on urea is smaller per tonne than on most other CBAM-covered products, because the CO₂ that goes into the urea molecule is fixed — not emitted. The CBAM liability for grey urea comes primarily from the ammonia production step (natural gas reforming) and the nitrogen oxide/N₂O steps, not from the CO₂ used in synthesis. Green urea reduces CBAM primarily through the green ammonia pathway and N₂O abatement, not through CO₂ sourcing.
India’s urea self-sufficiency strategy — expanding domestic production to reduce imports, currently at 33% of consumption — is in tension with green ammonia transition. Expanding urea capacity using grey ammonia and natural gas deepens the CO₂ feedstock lock-in. New urea capacity should be built with CO₂ flexibility architecture from day one — either with flue gas capture provisions or with feedstock switching capability to accommodate DAC or biogenic CO₂ as they become available.
The chemistry — why CO₂ is not an emission but a feedstock
To understand the CO₂ feedstock problem, it is necessary to understand urea’s chemistry. Urea — CO(NH₂)₂ — contains a carbon atom. That carbon has to come from somewhere. In the Bosch-Meiser process that has dominated commercial urea production since 1922, ammonia and carbon dioxide are reacted under high pressure (140 to 200 bar) and temperature (170 to 190°C) to form ammonium carbamate, which is then dehydrated to yield urea and water. The reaction is:
2 NH₃ + CO₂ → (NH₂)₂CO + H₂O
Bosch-Meiser process: stoichiometric CO₂ requirement = 0.735–0.75 tCO₂/t urea
The CO₂ in this reaction is not emitted — it is incorporated into the urea molecule. Urea is in fact a CO₂ storage product: every tonne of urea produced sequesters approximately 0.74 tonnes of CO₂ in solid form. When urea is applied to fields and breaks down (hydrolysis), the carbon is released as CO₂ — but this happens at the point of agricultural use, outside the industrial production system boundary, and currently outside CBAM scope.
In the conventional grey ammonia pathway, the CO₂ feedstock for urea is provided by the natural gas reforming step (steam methane reforming) which generates approximately 1.9 tonnes of CO₂ per tonne of ammonia as a byproduct of hydrogen production. Integrated ammonia-urea plants capture this CO₂ — which would otherwise be vented or emitted — and pipe it directly to the urea synthesis unit. The arrangement is thermodynamically elegant: the CO₂ that results from making the ammonia is chemically fixed in the downstream urea product. No separate CO₂ procurement infrastructure is required.
The side-by-side comparison makes the structural problem visible. In the grey pathway, the CO₂ feedstock for urea synthesis is an internal byproduct — it costs nothing and requires no additional infrastructure. In the green pathway, it must be sourced externally, stored, transported (if not co-located), and supplied at the purity and scale required by the urea synthesis unit. This is not a minor logistical complication. At full scale, India would need to source approximately 14 to 15 million tonnes of CO₂ per year from non-fossil sources purely to maintain current urea output.
The scale problem — what 14 million tonnes of CO₂ means
India currently produces approximately 28 to 30 million tonnes of urea per year, consuming approximately 21 to 22 million tonnes of CO₂ as feedstock in the synthesis step. Of this, roughly 14 to 15 million tonnes is the net CO₂ captured from the ammonia reforming step and used in urea synthesis — the rest is either vented in inefficient plants or not captured. If all of India’s ammonia production transitioned to green hydrogen, 14 to 15 million tonnes of CO₂ per year would need to be sourced from non-fossil pathways.
To put this in context: the entire global installed direct air capture capacity as of early 2026 is a few tens of thousands of tonnes per year — a factor of approximately 500 below India’s urea-sector CO₂ requirement alone. India’s total commercial CO₂ utilisation from all sources — ethanol production, brewery gas, food and beverage carbonation, industrial applications — is estimated at 2 to 3 million tonnes per year. The gap between current non-fossil CO₂ availability in India and the requirement for a fully decarbonised urea sector is therefore enormous and cannot be closed quickly.
This scale reality has one clear implication for transition strategy: urea must be the last product in the nitrogen fertiliser portfolio to switch to green ammonia, not the first. The products where green ammonia can be deployed immediately without a CO₂ sourcing problem — ammonium sulphate, ammonium chloride, ammonium phosphate, ammonium nitrate, anhydrous ammonia applied directly — should receive priority.
An important clarification for trade and compliance professionals: the CO₂ that goes into the urea synthesis step is not the primary driver of CBAM costs for Indian urea exporters. Because that CO₂ is chemically fixed in the product (not emitted), it reduces the net embedded emissions calculation. The dominant CBAM liabilities for grey urea come from: the CO₂ emitted during natural gas reforming to produce hydrogen (process emissions that are not captured in the urea step), and the N₂O from nitric acid production if the plant also produces ammonium nitrate or other nitric acid-derived fertilisers. Green urea reduces CBAM costs primarily through the green ammonia pathway (eliminating reforming CO₂) and N₂O abatement — not through CO₂ sourcing. The CO₂ sourcing problem is a production feasibility challenge, not primarily a CBAM compliance challenge.
Three CO₂ pathways for green urea — and what each faces in India
Three non-fossil CO₂ supply pathways are technically available and have been applied commercially in various contexts globally. Each has a different readiness level, cost profile, and India-specific constraint picture.
Most of India’s fertiliser complexes operate captive coal or gas power plants (CPPs) to meet their electricity demand. The flue gas from these CPPs contains CO₂ at concentrations of 12 to 15% (coal combustion) or 7 to 8% (gas combustion) — significantly higher than atmospheric concentration and suitable for post-combustion capture using mature amine-based scrubbing technology. IFFCO has been using CO₂ capture from flue gases for urea synthesis at several plants already — demonstrating that this is not a theoretical technology but an operational reality in India’s fertiliser sector. Industry analysis cited in Business Standard suggests that during the transitional period, “availability of carbon dioxide can be supplemented by its recovery from furnace flue gases at the site itself.” This is the most pragmatic near-term bridge for plants beginning the green hydrogen transition: replace reforming CO₂ with CPP flue gas CO₂ progressively as grey ammonia is displaced.
point-source capture
at IFFCO plants
capacity on-site
Not carbon-neutral
Biogenic CO₂ — CO₂ derived from biological sources that recently absorbed atmospheric carbon — is considered carbon-neutral for accounting purposes when it is used as a feedstock rather than emitted. The most promising biogenic CO₂ sources for India’s fertiliser sector are ethanol fermentation (where CO₂ is produced as a 100% pure byproduct of sugar fermentation, without requiring any capture technology), biogas upgrading (where CO₂ separated during biomethane production is currently vented), and biomass combustion in industrial boilers. India’s ethanol blending programme — targeting 20% ethanol in petrol by 2025 — is rapidly scaling domestic ethanol production, particularly in Maharashtra, Uttar Pradesh and Karnataka, creating a growing stream of high-purity biogenic CO₂. However, ethanol plants and fertiliser complexes are not co-located, and CO₂ transport infrastructure does not exist at scale. Biogas upgrading offers localised supply near agricultural waste concentrations.
from ethanol CO₂
No pipeline infra
location mismatch
If biomass is waste
Direct air capture extracts CO₂ directly from ambient air, using either solid sorbents (high-temperature swing adsorption) or liquid solvents. It provides unlimited, location-independent CO₂ supply — the atmosphere is the feedstock, making it the only truly scalable non-fossil CO₂ source in principle. In practice, DAC is currently expensive: a techno-economic study of green urea with DAC CO₂, using Australia’s renewable electricity costs of USD 71/MWh, found a levelised cost of green urea of approximately USD 989 per tonne — approximately 3× the current cost of grey urea in India. Sensitivity analysis shows that at renewable electricity of USD 30/MWh (India’s best solar cost range) and hydrogen at USD 1/kg, the green urea cost with DAC falls to approximately USD 580/t — closer to the commercial range, though still above grey urea. DAC costs are declining rapidly — from approximately USD 600/tCO₂ in 2020 to USD 200 to 400/tCO₂ in current projects, with a projected trajectory toward USD 100/tCO₂ by the mid-2030s as scale improves.
Current projects
Projected trajectory
No commercial DAC
Atmospheric carbon
The strategic sequencing India should follow
Given the CO₂ feedstock constraint, the rational transition strategy for India’s fertiliser sector is to sequence the green ammonia deployment in order of CO₂ independence — beginning with the fertiliser products that do not require CO₂ feedstock, and leaving urea to the stage when non-fossil CO₂ supply infrastructure has been developed.
Phase 1 (now to 2030) — green ammonia in non-urea nitrogen fertilisers
Ammonium sulphate (NH₄)₂SO₄, ammonium chloride (NH₄Cl), ammonium phosphates (DAP, MAP), and direct ammonia application as anhydrous ammonia all use green ammonia without requiring any CO₂ feedstock. Industry analysis suggests that as a first step, approximately 3 million tonnes of grey ammonia could be replaced with green ammonia in these non-urea applications — avoiding approximately 6 million tonnes of CO₂ per year in a first phase. As a next step, existing ammonia plants can be modified to partially use green hydrogen in hybrid mode. A 25% substitution of 19 million tonnes of grey ammonia over 10 years — in both urea and non-urea applications — would reduce approximately 9.5 million tonnes of CO₂ per year. For the urea fraction of that 25%, the CO₂ feedstock gap would be partially bridged by increased flue gas capture from on-site CPPs and progressively by biogenic CO₂ as the ethanol blending programme scales.
Phase 2 (2030 to 2040) — flue gas capture and biogenic CO₂ at scale
As green ammonia scales and natural gas reforming on-site reduces, fertiliser complexes need an alternative CO₂ supply for continuing urea synthesis. The phased strategy outlined by industry professionals is to capture CO₂ from on-site CPP flue gases — supplementing or replacing the reforming CO₂ with power plant flue gas CO₂. This is operationally realistic for integrated complexes that operate coal or gas CPPs adjacent to their urea synthesis units. Simultaneously, biogenic CO₂ from ethanol production — scaled by India’s 20% blending programme — provides a geographically distributed non-fossil CO₂ stream that could supply some regional fertiliser plants near sugar belt clusters in Maharashtra and Uttar Pradesh.
Phase 3 (2040 onwards) — DAC and urea portfolio rethink
Beyond 2040, two developments are likely to change the urea decarbonisation calculus. First, DAC costs will have declined substantially — potentially to USD 100/tCO₂ or below in favourable renewable electricity environments — making direct air capture a feasible feedstock for green urea synthesis at industrial scale. India’s abundant solar resource means that by 2035 to 2040, the renewable electricity cost base for DAC in India could be among the lowest in the world. Second, the nitrogen fertiliser portfolio itself may shift. India’s current N:P:K ratio is significantly imbalanced toward nitrogen, with urea accounting for an abnormally high share of total nitrogen applications relative to global averages. Policy and soil health imperatives already push toward increased use of phosphatic and potash fertilisers, which do not require CO₂ feedstock. A gradual shift in the fertiliser mix away from urea and toward balanced NPK products would reduce the absolute quantity of CO₂ feedstock required for the same agricultural output.
India’s urea self-sufficiency programme is targeting expanded domestic production to reduce the 5 to 7 million tonne annual import gap. New greenfield urea plants are under consideration. If these plants are designed as conventional natural gas to ammonia to urea integrated facilities — optimised around co-location of reforming CO₂ — they will create 30 to 40 years of lock-in to fossil CO₂ sourcing for urea synthesis. The design of any new urea capacity committed from 2026 onwards should incorporate CO₂ flexibility: feedstock inlet engineering that can switch between reforming CO₂, flue gas CO₂ and biogenic or DAC CO₂ as supply sources evolve. This is not primarily a capital cost question — the urea synthesis unit itself is CO₂-source agnostic. The engineering question is pipeline design and CO₂ purification specifications at the inlet. Getting these specifications right in new plant design adds minimal capital cost and eliminates a potentially very expensive future retrofit.
The CBAM impact on grey urea — and what it actually measures
Because the CO₂ used in urea synthesis is fixed in the product rather than emitted, the CBAM embedded emissions calculation for urea is more nuanced than for most other covered goods. The CBAM Implementing Regulation specifies embedded emission calculation methodologies for fertilisers that account for this chemistry — the CO₂ absorbed in urea synthesis is credited back against the gross production emissions.
For a typical integrated grey ammonia-urea plant, the net embedded emissions in urea are calculated approximately as follows: the total CO₂ equivalent emissions from natural gas reforming (the dominant source), minus the CO₂ captured and used in urea synthesis, plus any N₂O from co-located nitric acid production (if applicable). The Sandbag analysis for 2026 estimates the net embedded emissions for urea from an efficient integrated plant at approximately 1.1 tCO₂e per tonne of urea — which, under CBAM at €80/tCO₂, generates a levy of approximately €88 per tonne of urea before the SEFA free allocation adjustment brings it down to approximately €16 per tonne using actual data (as discussed in the CCTS and N₂O abatement article).
The practical implication: the CBAM driver for urea decarbonisation is primarily the natural gas reforming step (through the green ammonia pathway) and N₂O abatement in co-located nitric acid production. The CO₂ sourcing problem — the central challenge in full urea decarbonisation — does not reduce CBAM costs directly. This creates an interesting policy asymmetry: the investments that reduce CBAM costs most (green ammonia, N₂O abatement, verified MRV data) are commercially feasible now. The investments that fully decarbonise urea (DAC CO₂, biogenic CO₂ infrastructure) are commercially distant. India should pursue both tracks — but prioritise the commercially viable CBAM-reducing investments first.
The nitrogen fertiliser product comparison — CO₂ requirement and transition ease
| Fertiliser product | CO₂ as feedstock? | Green ammonia transition ease | CBAM exposure | India market share |
|---|---|---|---|---|
| Urea | Yes — 0.74 tCO₂/t urea required | Hardest — CO₂ sourcing unsolved at scale | Moderate (from NH₃ step) | ~55–60% of N fertiliser |
| Ammonium sulphate | No CO₂ required | Easiest — green NH₃ directly substitutes | Low (sulphate step minor) | ~8% — growing |
| Ammonium chloride | No CO₂ required | Easy — direct substitution | Low | Small — industrial |
| Di-ammonium phosphate (DAP) | No CO₂ required | Easy — green NH₃ directly substitutes | Low-moderate | ~15–18% of N+P market |
| Ammonium nitrate | No CO₂ required | Medium — N₂O from nitric acid step is key | High (N₂O component) | Minor in India |
| Anhydrous ammonia | No CO₂ required | Easiest — green NH₃ IS the product | High (pure ammonia embedded emissions) | Growing (export focus) |
The table illustrates the prioritisation logic. Every fertiliser product except urea can accept green ammonia as a direct input without any CO₂ sourcing challenge. India’s overwhelming dependence on urea — driven by its high nitrogen content, ease of handling and deep subsidy incentivisation — is the structural constraint. The CO₂ feedstock problem is, at root, a consequence of India’s fertiliser policy choices over the past five decades, not just a chemistry challenge.
Frequently Asked Questions
Does the CO₂ in urea production count as a greenhouse gas emission under CBAM?
No — the CO₂ used as a feedstock in urea synthesis is incorporated into the urea molecule and is therefore not an emission from the production facility. CBAM calculates embedded emissions as the net CO₂ equivalent released from the production process — which for urea means the reforming CO₂ minus the CO₂ captured and fixed in the product, plus any N₂O from co-production. The CO₂ absorbed in urea synthesis actually reduces the net embedded emission calculation. When urea is subsequently applied to fields and hydrolyses, the CO₂ is released — but this is a Scope 3 agricultural application emission, currently outside CBAM’s scope.
Why does India have such a high dependence on urea compared to other countries?
India’s urea-dominated nitrogen fertiliser portfolio is primarily a consequence of subsidy policy. Urea has been subject to price controls and government-funded subsidies since the 1970s, while other nitrogen fertilisers (ammonium sulphate, DAP, etc.) moved to market-based pricing under the Nutrient Based Subsidy regime in 2010. The resulting price differential made urea dramatically cheaper to farmers than balanced alternatives, driving a systematic shift toward urea-heavy application that has persisted for decades. The recommended N:P:K ratio for Indian soil conditions is approximately 4:2:1; actual usage has been significantly more skewed toward N (approximately 8:3:1 in some years), partly due to urea’s availability and price advantage.
What would green urea cost in India with the most favourable current technology assumptions?
A techno-economic study of green urea production with DAC CO₂ at 30 USD/MWh renewable electricity (close to India’s best solar costs) and hydrogen at USD 1/kg found a levelised cost of approximately USD 590/tonne — roughly 1.5 to 2× the current grey urea cost of approximately USD 300 to 350/tonne in India. Using flue gas CO₂ capture instead of DAC would reduce the CO₂ sourcing cost from ~USD 200–400/t to ~USD 30–70/t, making green urea with flue gas CO₂ and cheap renewables potentially cost-comparable with grey urea by the late 2020s in India — if the green hydrogen cost trajectory reaches USD 2/kg as projected.
Is there a technology that makes urea without using CO₂ as a feedstock?
Electrochemical direct synthesis of urea — reacting nitrogen gas (N₂) or nitrate (NO₃⁻) with CO₂ directly using electricity, bypassing both the Haber-Bosch and Bosch-Meiser steps — has been demonstrated at laboratory scale. Current efficiency is approximately 9%, and energy consumption is approximately 13.3 GJ per tonne of urea in one step versus ~20.8 GJ in two steps. This is promising for research but far from commercial deployment — the catalyst stability, selectivity and production rate challenges are substantial. A different approach — making urea from N₂ and CO₂ directly using photocatalysis — has also been reported but is even earlier stage. Both approaches still require CO₂ as a reactant; they do not eliminate the CO₂ feedstock requirement, they change the process pathway through which it is used.
What should India’s new urea capacity builds do differently from an engineering standpoint?
New urea plants should be designed with CO₂ inlet flexibility — the ability to accept CO₂ from multiple sources (reforming CO₂, flue gas CO₂, biogenic CO₂, eventually DAC CO₂) without requiring fundamental process redesign. Practically this means: designing CO₂ purification and inlet conditioning systems to handle variable CO₂ source quality; co-locating with or providing piping connections to potential CO₂ capture points (CPP flue stacks, biomass combustion units); and engineering the ammonia synthesis loop to operate efficiently at variable H₂-to-N₂ ratios as the feedstock shifts between grey and green hydrogen blends. None of these design choices adds significant capital cost. The alternative — designing a plant locked to reforming CO₂ — creates an expensive and potentially stranded retrofit challenge within the plant’s 30 to 40 year operating life.