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Fertilisers · Carbon Markets · CCTSIndia’s CCTS and the Fertiliser Sector: Why N₂O Abatement Is the Highest-Return Compliance Investment Any Obligated Plant Can Make
Nitrous oxide has a global warming potential 273 times that of CO₂. A single unabated nitric acid plant emits 6 to 9 kilograms of N₂O per tonne of acid produced — equivalent to 1.6 to 2.5 tonnes of CO₂ equivalent per tonne of output from this one process source alone. Technology exists, is commercially proven, and has been operating in European plants since 2003 with 98 to 99% removal efficiency. Under India’s CCTS, these emissions count toward every obligated fertiliser plant’s GHG intensity. Under CBAM, they inflate every nitrogen fertiliser exported to the EU. The abatement investment case is straightforward. The question for Indian plants is why so few have made it yet.
N₂O from nitric acid production is both a CCTS Scope 1 liability and a CBAM embedded emission for nitrogen fertiliser exports. With a GWP of 273 (IPCC AR6), every kilogram of N₂O avoided at the production stage removes 273 kg of CO₂ equivalent from a plant’s CCTS compliance burden and from its CBAM-assessed embedded emission footprint simultaneously. No other single technology intervention in the fertiliser value chain delivers such a large reduction in CO₂ equivalent per unit of capital invested.
Secondary and tertiary catalytic N₂O abatement systems for nitric acid plants can achieve 80 to 99% N₂O removal efficiency. Tertiary systems — such as thyssenkrupp Uhde’s EnviNOx, Stamicarbon’s tertiary abatement system and KBR’s N₂O abatement process — operate in the tail gas downstream of the absorption column and have the additional advantage of allowing baseline emissions to be measured in real time, which is important for CCTS verified reporting and CBAM compliance documentation.
India’s CCTS notified emission intensity targets for the fertiliser sector in June 2025, covering 20 major chemical and fertiliser plants. The targets apply from FY 2025-26 using FY 2023-24 as the baseline, with a 2 to 3% reduction in year one and 3 to 7% in year two. For plants with unabated nitric acid production, installing N₂O abatement would achieve reductions of 80 to 99% in N₂O emissions — far exceeding the CCTS reduction trajectory and generating Carbon Credit Certificates that can be sold on India’s power exchanges from July 2026.
Under CBAM, the N₂O emissions embedded in Indian nitrogen fertilisers exported to the EU add directly to CBAM certificate costs for EU importers. Because CBAM converts N₂O to CO₂ equivalent at a GWP of 273, a small quantity of N₂O creates a disproportionately large CBAM liability. A plant that installs N₂O abatement can supply verified actual emission data to EU importers, replacing the EU’s punitive default emission values and dramatically reducing the per-tonne CBAM cost burden.
The abatement cost is historically very low — EPA data estimates capital costs of USD 2 to 6 per tonne of CO₂ equivalent removed, with minimal operating costs. Against a CCTS carbon credit price that may reach Rs 200 to 500 per tonne of CO₂e, and a CBAM cost trajectory of €60 to €140 per tonne of CO₂e through 2030, the simple financial return on N₂O abatement investment is compelling even at conservative carbon price assumptions. The strategic question is not whether to install abatement, but how quickly.
N₂O and fertiliser production — where it comes from and why it matters
The fertiliser industry has two distinct emission hotspots under India’s CCTS and EU’s CBAM: the hydrogen production step (which generates CO₂ from natural gas reforming in the Haber-Bosch synthesis of ammonia) and the nitric acid production step (which generates N₂O as an unavoidable byproduct of ammonia oxidation). Most coverage of fertiliser sector decarbonisation focuses on the hydrogen production step — green ammonia, hydrogen purchase obligations, and the SIGHT programme. Far less attention goes to the nitric acid step. That is a mistake, because the N₂O from nitric acid production is, per unit of capital required to address it, the largest single decarbonisation opportunity in India’s CCTS-obligated fertiliser sector.
Nitric acid is produced through the Ostwald process: ammonia is burned (oxidised) over a platinum-rhodium-palladium catalyst gauze at high temperature to form nitric oxide, which is then converted to nitrogen dioxide and absorbed in water to form nitric acid. The oxidation reaction is highly selective for nitric oxide (NO), but the platinum catalyst simultaneously promotes two undesired side reactions that produce N₂O and nitrogen gas. N₂O concentrations in the tail gas of unabated nitric acid plants typically range from 300 to 1,500 parts per million. Per tonne of nitric acid produced, unabated plants emit approximately 6 to 9 kilograms of N₂O — which, multiplied by the IPCC AR6 global warming potential of 273, equals approximately 1.6 to 2.5 tonnes of CO₂ equivalent per tonne of acid.
The reason N₂O from nitric acid production has not been systematically addressed in India, despite the available technology and compelling economics, lies primarily in a combination of regulatory inertia and subsidy structure. Most Indian nitric acid producers are either public sector units or operate in sectors where pricing is controlled — fertiliser prices are regulated, and investment decisions have been made on the basis of production cost optimisation rather than carbon compliance. The CCTS, by creating a financial liability for N₂O emissions for the first time, changes this calculus fundamentally.
How N₂O enters the CCTS calculation
India’s CCTS notified emission intensity targets for the fertiliser sector in June 2025 under the second tranche of target notifications. Approximately 20 major chemical and fertiliser plants carry legally binding GHG emission intensity (GEI) targets for the compliance years FY 2025-26 and FY 2026-27, using FY 2023-24 as the baseline year. The targets require 2 to 3% intensity reduction in the first year and 3 to 7% in the second.
The CCTS uses a gate-to-gate methodology that covers Scope 1 direct process and combustion emissions and Scope 2 indirect electricity emissions. For a nitric acid and fertiliser complex, this means the GEI calculation includes: CO₂ from natural gas combustion in ammonia synthesis, CO₂ or CH₄ from on-site power generation or process heat, N₂O from nitric acid production, and the CO₂ equivalent of electricity consumed from the grid (at the grid emission factor published by CEA). N₂O emissions are converted to CO₂ equivalent at GWP 273 before being added to the total GEI numerator.
The consequence of this design is stark. A 1,000 tonne per day nitric acid plant operating without abatement emits approximately 6,000 to 9,000 kg of N₂O per day — equivalent to 1,638 to 2,457 tonnes of CO₂ equivalent per day. Over a full year, that is approximately 600,000 to 900,000 tonnes of CO₂e in N₂O emissions alone. For a typical integrated fertiliser complex of this size, the N₂O contribution to total GEI can be the dominant emissions source — outweighing the CO₂ from natural gas reforming in CO₂-equivalent terms. Plants without abatement will find the CCTS targets structurally demanding precisely because N₂O is so potent per kg.
A plant that installs tertiary N₂O abatement achieving 95% efficiency on a 1,000 tpd nitric acid plant would avoid approximately 570,000 to 855,000 tonnes of CO₂e per year in N₂O emissions. Under the CCTS, if this reduction brings the plant’s GEI significantly below its notified target, the plant would be eligible to receive Carbon Credit Certificates for the excess reduction. At an initial CCC price of Rs 200 per tonne of CO₂e, the abatement generates approximately Rs 114 crore to Rs 171 crore per year in CCC revenues. At Rs 500/tCO₂e (consistent with later years of the CCTS as targets tighten), the annual revenue becomes Rs 285 crore to Rs 428 crore. Against a one-time capital investment for tertiary abatement of typically USD 2 to 10 million depending on plant size, these returns can achieve payback within 1 to 3 years. No other single capital intervention in the fertiliser sector comes close to this return profile.
The three generations of N₂O abatement technology
N₂O abatement in nitric acid plants is achieved through three technology categories, installed at different points in the process, each with different efficiency characteristics and suitability depending on plant design. Understanding which technology applies where is the starting point for any plant planning its CCTS compliance strategy.
Primary abatement — optimised catalyst design
Primary abatement involves modifications to the platinum-rhodium-palladium catalyst gauze or the ammonia oxidation conditions to suppress N₂O formation at the source. Advanced catalyst designs and optimised operating conditions can reduce N₂O formation by up to 40% compared to standard catalysts. Primary abatement requires no additional capital installation — it operates within the existing ammonia oxidation reactor — but its efficiency is limited. The practical ceiling of approximately 40% reduction makes primary abatement insufficient as a standalone compliance strategy against CCTS targets or CBAM default value penalties. It is useful as a component of a combined abatement strategy, but cannot carry the compliance burden alone.
Secondary abatement — catalyst between gauze and absorption tower
Secondary abatement installs a decomposition catalyst directly below the platinum catalyst gauze pack in the ammonia oxidation reactor, before the absorption tower. The high temperatures inside the reactor — typically 850°C to 950°C — provide the thermal energy needed for catalytic N₂O decomposition without any external energy input. Secondary catalysts can achieve 70 to 90% N₂O removal efficiency in practice. The main limitation is that the available space in the reactor constrains the catalyst volume, and the secondary catalyst is gradually consumed during operation, requiring periodic replacement. Secondary abatement also eliminates the ability to measure baseline N₂O emissions after installation — because there is no sampling point between the gauze where N₂O forms and the catalyst where it is destroyed — which creates a verified reporting challenge for both CCTS and CBAM documentation.
Tertiary abatement — tail gas catalytic reactor
Tertiary abatement installs a catalytic reactor in the tail gas stream downstream of the absorption tower, upstream of the expansion turbine. At operating temperatures of 350°C to 660°C (depending on the specific plant configuration and technology), an iron-zeolite catalyst converts N₂O to harmless nitrogen and oxygen. Tertiary systems such as thyssenkrupp Uhde’s EnviNOx process — recognised by the EU Commission as Best Available Technology — achieve 98 to 99% N₂O removal with simultaneous NOx reduction to as low as 1 ppmv. Stamicarbon’s tertiary system achieves comparable performance. KBR’s proprietary iron-zeolite system achieves above 95% removal at operating temperatures up to 660°C.
The key advantage of tertiary over secondary abatement for compliance purposes is that the baseline N₂O concentration can be measured in real time immediately upstream of the tertiary reactor — providing a clean, verifiable record of both unabated emissions and the reduction achieved. This is essential for CCTS verified reporting under the BEE ACVA framework and for producing the actual emission data that EU importers need for CBAM declarations to avoid default value penalties. EnviNOx has been operating continuously at some plants since 2003 with the same initial catalyst charge — demonstrating commercial robustness and low ongoing operational costs.
| Technology | Location in process | N₂O removal efficiency | Key vendors | CCTS/CBAM verification suitability | Retrofittability |
|---|---|---|---|---|---|
| Primary abatement Optimised catalyst design | Within oxidation reactor | Up to 40% | Heraeus, Johnson Matthey | Partial — no dedicated measurement point | Retrofit via catalyst replacement |
| Secondary abatement Catalyst below gauze pack | Oxidation reactor — below gauze, before absorption | 70–90% (practical) | Johnson Matthey, Heraeus, Clariant | Limited — no post-gauze sampling possible | Retrofit — catalyst installed in existing reactor |
| Tertiary abatement Tail gas catalytic reactor | Downstream of absorption tower, upstream of expander | 95–99% | thyssenkrupp Uhde (EnviNOx), Stamicarbon, KBR | Optimal — baseline measured in real time upstream of reactor | Retrofit for most existing plants; may need additional heat exchanger |
| Combined secondary + tertiary | Both locations | Near-zero emissions achievable | EnviNOx combined system (Uhde) | Excellent — dual-stage with monitoring at both points | More complex; requires plant-specific engineering |
The CBAM dimension — how N₂O inflates fertiliser export costs
Under CBAM, the embedded emissions declared for nitrogen fertilisers include both CO₂ (from ammonia production) and N₂O (from nitric acid production), both expressed in CO₂ equivalent. Because N₂O has a GWP of 273, a relatively small absolute quantity of N₂O gas creates a disproportionately large CBAM certificate obligation. A plant producing nitric acid without abatement and exporting nitrogen fertilisers to the EU faces CBAM costs based on the full N₂O emission burden — either through EU default values (applied when verified actual data is not provided) or through actual verified emission data.
The EU’s default embedded emission values for nitrogen fertilisers, published under CBAM Implementing Regulation 2025/2621, are based on the highest emission intensities observed among countries with reliable data — meaning they are typically higher than actual plant-level emissions for efficient producers. A plant that installs N₂O abatement and provides verified actual emission data to EU importers instead of relying on default values can dramatically reduce its reported embedded emissions and the associated CBAM certificate cost. The financial benefit flows directly to the EU importer (who purchases fewer certificates) but the commercial incentive flows back to the Indian producer through better pricing negotiations — since EU buyers will prefer suppliers who reduce the CBAM burden on their declarations.
The range narrowing above — from €42 to 58 per tonne to €5 to 16 per tonne — is achieved primarily by installing N₂O abatement and then providing verified actual emission data instead of letting EU importers rely on default values. The reduction in CBAM cost per tonne is approximately €30 to 45/t urea. At an Indian urea export volume of approximately 1 to 2 million tonnes per year to Europe (growing with the FTA), that €30 to 45/t saving translates to €30 million to €90 million per year in avoided CBAM costs across the Indian urea export industry — savings that accrue to EU importers but are reflected in the price they are willing to pay Indian suppliers.
The compliance strategy for CCTS-obligated fertiliser plants
For the approximately 20 Indian fertiliser plants obligated under the CCTS, the compliance strategy question reduces to a two-stage decision: first, whether to install N₂O abatement (for those with nitric acid production); and second, how to address the remaining CO₂ and Scope 2 electricity emissions through a combination of efficiency improvements and renewable energy procurement.
For plants with nitric acid production, N₂O abatement should be the first and largest capital allocation in the compliance strategy for three reinforcing reasons. First, it addresses the largest single emissions source in CO₂-equivalent terms at the lowest cost per tonne of abatement. Second, it produces verified emission data that directly reduces CBAM liability for EU-export products. Third, it generates surplus Carbon Credit Certificates under the CCTS that can be sold — converting a compliance cost into a compliance revenue once the target is exceeded, which tertiary abatement will comfortably achieve.
For plants without nitric acid operations — pure ammonia and urea producers — the CCTS compliance challenge is dominated by CO₂ from natural gas reforming and Scope 2 electricity emissions. These producers face a different set of compliance tools: energy efficiency in the Haber-Bosch process, waste heat recovery, renewable electricity procurement, and in the longer term, partial green hydrogen substitution through the HPO or SIGHT programme. The path to significant GEI reduction for these plants is structurally harder and more capital-intensive than N₂O abatement in nitric acid plants.
Only approximately 25% of global nitric acid plants have N₂O abatement technology installed. The global pattern reflects the Indian reality: historically, there was no financial incentive in India to address N₂O emissions from nitric acid production. The PAT scheme — India’s previous compliance mechanism — measured energy efficiency in tonnes of oil equivalent per unit of output, not greenhouse gas emissions. N₂O does not drive energy consumption and therefore had no visibility under PAT. The CCTS changes this categorically by measuring GHG emission intensity in tCO₂e per unit of output — making N₂O’s potency (273× CO₂) suddenly and very visibly relevant to compliance costs and revenues. The subsidy structure of India’s fertiliser sector also creates governance friction: investment decisions in public sector urea producers require multiple layers of approval, and capital expenditure on environmental compliance has historically competed poorly against production capacity expansion. The CCTS eliminates the ambiguity about the financial return: it creates a quantified, certified, tradable financial benefit from N₂O abatement that was entirely absent before June 2025.
The CCTS-CBAM double benefit — a single investment, two compliance streams
The structural design of India’s CCTS and CBAM creates an unusual situation where a single capital investment — tertiary N₂O abatement — simultaneously delivers compliance value in two separate regulatory frameworks on opposite sides of the world. This double benefit is unique to the fertiliser sector among all CCTS-covered industries, and it should be at the centre of every fertiliser plant’s investment analysis.
The CCTS benefit: abatement reduces the plant’s GHG emission intensity below its notified target, generating Carbon Credit Certificates that are sold on Indian power exchanges. Every tonne of CO₂e avoided in N₂O form generates one CCC. At Rs 200 per CCC and 95% efficiency on a medium-scale plant, the annual CCC revenue can comfortably exceed the annualised capital cost of the abatement system.
The CBAM benefit: verified actual emission data showing near-zero N₂O in the production process replaces EU default values — reducing the embedded emission footprint of the plant’s exported fertilisers from ~1.1 to 1.4 tCO₂e/t to ~0.1 to 0.25 tCO₂e/t. This dramatically reduces the CBAM certificate cost for EU importers, improving the plant’s commercial attractiveness as a supplier. Because the CCTS MRV procedure is aligned with CBAM’s verified reporting requirements through the same BEE-accredited ACVA framework, the same verification report serves both compliance purposes — eliminating the cost of running two parallel MRV systems.
The compounding financial logic is this: the abatement investment pays for itself through CCC revenues in one to three years, then generates positive annual returns indefinitely as carbon prices rise under the CCTS tightening trajectory. The CBAM benefit is additional — it does not require any incremental capital beyond the abatement installation itself. For an Indian fertiliser plant exporting to Europe, the combined CCTS plus CBAM return on N₂O abatement investment is among the strongest in India’s entire industrial decarbonisation portfolio.
Frequently Asked Questions
Which Indian fertiliser plants are obligated under the CCTS?
Approximately 20 major chemical and fertiliser plants were notified under the CCTS Draft 2025 (June 2025 notification). These are large-scale producers above the output threshold for mandatory compliance — predominantly public sector integrated fertiliser complexes producing ammonia, urea, nitric acid, and downstream nitrogen fertilisers. Smaller plants below the threshold are excluded from mandatory compliance but can register as non-obligated entities under the CCTS Offset Mechanism to earn CCCs from voluntary emission reductions.
Why is the GWP of N₂O cited as 273 rather than 265 or 298 as seen elsewhere?
Different values of N₂O GWP appear in the literature because they use different timescales and IPCC assessment report vintages. The IPCC Sixth Assessment Report (AR6, 2021) updated the 100-year GWP of N₂O from 265 (AR5) to 273. CBAM uses GWP factors from the relevant IPCC report, which in current EU implementing regulations references AR5 values (265). India’s CCTS uses the GHG Protocol guidelines, which are expected to align with AR6. The practical difference between 265 and 273 is approximately 3% — meaningful but not order-of-magnitude. When modelling compliance costs and benefits, using the most current AR6 value of 273 is appropriate.
Does N₂O abatement in nitric acid also qualify as a CCTS Offset Mechanism project?
For CCTS-obligated plants, N₂O abatement is addressed within the compliance mechanism — it reduces the plant’s GEI and generates CCCs if the reduced intensity falls below the target. It does not qualify as a separate Offset Mechanism project for obligated entities. For non-obligated entities — a nitric acid plant below the compliance threshold — registration under the Offset Mechanism is possible, and industrial energy efficiency is among the eight approved methodologies. Whether N₂O abatement specifically falls under the approved industrial energy efficiency methodology, or requires a dedicated methodology, would need to be confirmed with BEE.
How does verified actual emission data differ from EU default values for CBAM purposes?
CBAM allows EU importers to use either verified actual emission data — provided by the installation operator in the third country — or EU-published default values. Default values are set at the highest emission intensities observed among countries with reliable data for each product type, plus a mark-up — meaning they are deliberately conservative and punitive for producers who do not provide actual data. For nitrogen fertilisers, the default values typically exceed actual plant emissions by a factor of 1.5 to 3 times. Any fertiliser exporter to the EU should be gathering plant-level emission data through BEE-accredited verification — the cost savings on avoided CBAM certificates far exceed the cost of accredited verification.
What is the NACAG initiative and is India participating?
NACAG (Nitric Acid Climate Action Group) is an international initiative, primarily funded through Germany’s development finance, that provides technical and financial support to governments and plant operators in developing countries to install N₂O abatement technology in nitric acid and caprolactam plants. NACAG covers ODA-eligible countries. India’s eligibility and participation status should be confirmed directly with the NACAG Secretariat, but the initiative specifically targets the exact situation of developing-country nitric acid plants that have not yet installed abatement — India’s fertiliser sector is a natural candidate for NACAG engagement alongside the CCTS commercial incentive structure.