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Fertilisers · CCTSCCTS and Fertilisers: Why N₂O Abatement at Nitric Acid Plants May Be the Sector’s Highest-Return Decarbonisation Investment
India’s fertiliser sector was included in the CCTS draft notification of June 23, 2025. While final gazette-notified GEI targets for the sector remain pending, the order of priority for compliance investment is already clear: nitrous oxide emitted by nitric acid plants has a global warming potential of 273 times carbon dioxide. Every tonne of N₂O eliminated through catalytic abatement removes 273 tCO₂e from the plant’s GEI footprint. For a large or older high-emission nitric acid plant emitting 5,000 tonnes of N₂O per year, catalytic abatement at 90% efficiency could generate up to roughly Rs 98.3 crore in theoretical CCC regulatory value annually under an illustrative Rs 800/CCC scenario — with projected payback in roughly 1 to 4 years. No other single investment in the Indian fertiliser sector delivers this ratio of GEI impact to capital cost.
India’s fertiliser sector GEI targets were in the June 23, 2025 draft notification, subject to 60-day public consultation. As of April 2026, final gazette-notified plant-specific GEI targets for the fertiliser sector have not been published. The October 8, 2025 gazette covered the first four sectors. The January 16, 2026 gazette added Refinery, Petrochemicals, Textiles, and secondary Aluminium — fertiliser remains pending. CEEW (February 2026) notes that delays risk weaker final targets. Plants should begin internal MRV aligned with expected CCTS methodology, especially using FY2023-24 as a baseline reference, rather than waiting for the final gazette.
India’s fertiliser sector produces approximately 75 Mt CO₂e per year — approximately 2.7% of total industrial emissions. While ~20 major ammonia-urea plants are covered under the broader CCTS draft, this is not a sector-wide lever. It is a highly concentrated opportunity applicable only to fertiliser and chemical producers operating nitric acid units (such as those producing ammonium nitrate, explosives intermediates, or specific complex fertilisers). Gas represents 70 to 80% of standard urea production cost, but N₂O provides an entirely separate, highly actionable decarbonisation vector for applicable facilities.
Nitrous oxide (N₂O) is formed as an unintentional byproduct during nitric acid production when the platinum-rhodium catalyst gauze in the ammonia oxidation reactor converts a fraction of ammonia to N₂O instead of the desired nitric oxide. N₂O has a global warming potential of 273× CO₂ over 100 years (IPCC AR6). Nitric acid production is among the largest sources of process-related N₂O emissions in the chemical sector. Unlike Haber-Bosch CO₂ (which requires expensive feedstock substitution to eliminate), N₂O is a point-source emission amenable to catalytic destruction at relatively modest cost.
Catalytic N₂O abatement achieves 80 to 97% N₂O elimination through two proven routes: secondary abatement places a catalyst bed downstream of the ammonia oxidation reactor; tertiary abatement treats the tail gas stream at lower temperatures. The technology is commercially mature and deployed at well over 100 installations globally, with particularly high adoption in Europe. No modification to the core ammonia oxidation chemistry is required, though tail-gas system retrofits, pressure drop management, and monitoring upgrades are needed.
Financial case under CCTS: For a large or older high-emission nitric acid plant emitting 5,000 t/year N₂O, 90% catalytic abatement eliminates 4,500 t N₂O = 1,228,500 tCO₂e per year. Under an illustrative CCTS scenario of Rs 800/CCC, this could generate up to ~Rs 98.3 crore per year in theoretical regulatory value, assuming the full abatement translates into tradable surplus credits. Installation cost of Rs 15 to 60 crore gives an estimated payback of 1 to 4 years (factoring in MRV costs, catalyst replacement, and downtime) from CCTS value alone.
CBAM creates exposure to direct emissions and, depending on product and methodology, can also create meaningful indirect electricity-related exposure for fertiliser producers. A plant emitting 5 kg N₂O per tonne of nitric acid produced faces approximately €89 per tonne in CBAM certificates from N₂O alone (at €65/tCO₂e). After 90% abatement, this drops to approximately €9 per tonne. However, CBAM creates additional value only for producers with meaningful EU-facing export exposure, which is currently limited for most Indian fertiliser PSUs.
Why N₂O is the priority — the chemistry and the carbon arithmetic
The fertiliser sector’s GHG profile has two distinct components. The first is CO₂ from the Haber-Bosch process — steam methane reforming of natural gas to produce hydrogen. Eliminating this CO₂ requires green hydrogen or carbon capture. It is a major long-term challenge. The second is N₂O from nitric acid plants. This emission is chemically unintended, technically preventable with commercially proven technology, and carries a climate impact per tonne that exceeds Haber-Bosch CO₂ by a factor of 273. For any fertiliser or chemical company operating a nitric acid unit, N₂O abatement is an operational improvement decision that pays back rapidly under moderate carbon price scenarios.
The Ostwald process produces nitric acid from ammonia in three stages: ammonia oxidation at approximately 890°C over platinum-rhodium gauze produces nitric oxide (NO); NO is oxidised to nitrogen dioxide (NO₂); NO₂ is absorbed in water to produce nitric acid. The Pt-Rh gauze is not perfectly selective — a fraction of ammonia reacts to form N₂O instead of NO. This N₂O plays no role in subsequent nitric acid chemistry and is released to atmosphere unless abated. N₂O yield depends on catalyst condition, temperature, and gauze age: as the gauze ages, N₂O formation increases. This creates a systematic incentive to schedule gauze replacement and to install downstream abatement as the dominant long-term solution.
Typical unabated emission factors range from ~2 to 12 kg N₂O per tonne of nitric acid produced, depending heavily on burner design, catalyst, and plant vintage. A large or older high-emission plant producing up to 1 million tonnes of nitric acid per year emits approximately 2,000 to 12,000 tonnes of N₂O annually. Conservatively assuming 5,000 tonnes for modelling, this is equivalent at GWP 273 to 1.365 Mt CO₂e per year from N₂O alone. This is comparable in scale to the CO₂ emission from Haber-Bosch ammonia synthesis at the same facility, yet is technically eliminable at a fraction of the cost.
Decarbonisation options ranked by ROI
Secondary abatement (HT-deN₂O): Catalytic bed installed downstream of the ammonia oxidation reactor in the nitrous gas stream at high temperature. Achieves 80–97% N₂O elimination. Low capital cost if space is available in existing reactor vessel. Tertiary abatement (LT-deN₂O): Separate reactor treating the tail gas stream at lower temperature. Required when reactor geometry precludes secondary abatement. Combining both achieves near-complete N₂O elimination. Technology is proven with well over 100 global installations. No modification to the core ammonia oxidation chemistry is required, though tail-gas handling modifications, pressure drop adjustments, and thermal integration may be necessary. This is the first investment that should appear on any applicable Indian plant’s CCTS compliance roadmap.
Indian gas-based urea plants typically consume 9 to 10.5 Gcal per tonne of ammonia; best-practice is approximately 7 to 8 Gcal/tonne — a 15 to 25% improvement gap. Key interventions: condensate recovery systems, variable frequency drives on large compressors, reformer burner management, secondary reformer optimisation, CO₂ removal unit efficiency. GSFC achieved approximately 8% CO₂ reduction with Rs 35 crore in such improvements. These investments take longer to implement and verify than N₂O abatement but deliver sustained GEI reduction and operating cost savings.
Fertiliser plants use electricity primarily for utilities (cooling water pumps, compressors, instrument systems) rather than the core chemical process. Electricity typically accounts for 10 to 20% of total energy input at gas-based plants. Replacing grid electricity with renewable sources reduces Scope 2 GEI under CCTS. FACT Cochin has integrated 20 MW of solar. Given fertiliser plants’ continuous operation, baseload RE contracts or battery-backed solar are preferable to simple daytime solar PPAs.
India’s proposed Hydrogen Purchase Obligation requires fertiliser plants to procure a fraction of green hydrogen. At current costs of approximately $4 to $6/kg (falling toward $2/kg by 2030 in optimistic scenarios), every 1% replacement of conventional hydrogen cuts approximately 0.02 tCO₂e per tonne of urea. Blending 10% is becoming technically feasible but commercially marginal today. Full green ammonia transition eliminates Haber-Bosch Scope 1 CO₂ but requires a separate CO₂ source for urea synthesis. Academic analysis suggests green urea can approach cost parity with gas-based urea by approximately 2028 at modest carbon prices when fossil fuel subsidies are excluded. This is the 2030 to 2040 lever — important for long-term planning but not the primary FY2025-27 CCTS compliance instrument.
CBAM Scope 1 and 2 — A highly lucrative but narrow export advantage
Fertilisers and cement currently face broader embedded emissions coverage under CBAM, creating exposure to direct emissions and, depending on product and methodology, meaningful indirect electricity-related exposure, unlike some metal categories where indirect emissions treatment is more limited or phased. For Indian fertiliser exporters to the EU, both direct production emissions — including N₂O at its GWP-adjusted value of 273 tCO₂e per tonne — and relevant indirect emissions must be verified and covered by CBAM certificates.
For a nitric acid plant emitting 5 kg N₂O per tonne of nitric acid produced, the N₂O embedded emission is 5 × 273 = 1.365 tCO₂e per tonne. At an EU ETS price of approximately €65 per tCO₂e, this represents approximately €89 per tonne of nitric acid in CBAM certificate cost from N₂O alone — before CO₂ from Haber-Bosch. After 90% catalytic abatement, this falls to approximately €9 per tonne. The approximately €80 per tonne saving is commercially significant at any meaningful EU export volume.
However, CBAM creates a strategic future incentive rather than an immediate sector-wide mandate, as it creates additional value only for producers with meaningful EU-facing export exposure, which is currently limited for most Indian fertiliser PSUs. The first CBAM declaration deadline — September 30, 2027, covering calendar year 2026 — requires EU importers to have product-level emission data from Indian suppliers. Fertiliser plants without N₂O abatement and without verified emission data may face conservative default emissions values, materially increasing certificate liability from 2028.
The data architecture required for CCTS — emission sources identified, emission factors documented, production volumes certified — is substantially the same data required by CBAM’s embedded emission verification methodology. A fertiliser plant that establishes verified CCTS MRV immediately acquires the data infrastructure needed for CBAM product-level emission reporting. Conversely, a plant that delays CCTS MRV will also lack data to avoid CBAM default values — paying penalties in both systems simultaneously. Plants should begin internal MRV aligned with expected CCTS methodology, especially using FY2023-24 as a baseline reference, ahead of final gazette notifications.
Where this thesis does NOT apply
This article outlines an extraordinary financial opportunity, but its applicability is strictly bounded. 1. Pure urea plants: Facilities that produce only ammonia and urea (without downstream nitric acid integration) have no N₂O emissions to abate. 2. Already-abated plants: Facilities that maintained their CDM-era catalysts or installed abatement for ESG reasons cannot generate additional baseline-beating credits for what they already do. 3. Domestic-only producers: The CBAM export premium applies exclusively to product hitting European shores; for purely domestic suppliers, the CCTS CCC value is the sole financial driver.
Frequently Asked Questions
What is N₂O abatement and why does it matter so much for plants under CCTS?
N₂O (nitrous oxide) forms as an unintentional byproduct during nitric acid production with GWP 273× CO₂ (IPCC AR6). Every tonne eliminated removes 273 tCO₂e from the GEI under CCTS. For a 5,000 t/year N₂O plant, 90% catalytic abatement effectively removes 1,228,500 tCO₂e annually. Under an illustrative scenario of Rs 800/CCC, this could generate up to ~Rs 98.3 crore/year in theoretical regulatory value — resulting in a projected payback in roughly 1 to 4 years. No other lever delivers this ratio of GEI impact to capital cost.
Has India’s fertiliser sector received final gazette-notified CCTS GEI targets?
As of April 2026, no. The fertiliser sector was in the June 23, 2025 draft notification. The January 2026 gazette added Refinery/Petrochemicals/Textiles/secondary Aluminium — fertiliser remains pending. CEEW’s February 2026 analysis warns that delays risk weaker final targets. Plants should begin internal MRV aligned with expected CCTS methodology using the June 2025 draft as a working reference.
Does CBAM apply to N₂O from Indian fertiliser plants?
Yes. CBAM covers fertilisers on Scope 1 (including N₂O at GWP 273) and, depending on the specific methodology, Scope 2. At 5 kg N₂O/t nitric acid and €65/tCO₂e EU ETS price, CBAM cost from N₂O alone is ~€89/t. After 90% abatement: ~€9/t — saving ~€80/t exported. However, this is only financially relevant for facilities that have actual export exposure to European markets.