Svein Tore Holsether: Europe needs ‘green’ fertiliser as Putin weaponises food

Norway’s Yara Worldwide demerged from Norsk Hydro in 2004 and has change into one of many world’s largest producers of nitrogen-based mineral fertilisers. However its chief government, Svein Tore Holsether, has been warning about issues with provide — and the business’s greenhouse gasoline emissions — for a few years.

Even earlier than Russia’s invasion of Ukraine final yr, international fertiliser provides had been being stretched by Covid shutdowns, labour shortages, Chinese language consumption and basic value volatility.

Now, Holsether says the battle is enabling Russian president Vladimir Putin to “weaponise” meals, in the identical approach that he has weaponised gasoline provides. However, right here, he tells the FT’s Ethical Cash editor Simon Mundy how hydrogen constituted of renewable power — together with US-style tax incentives — can provide an answer to those issues.

Simon Mundy: Why are fertiliser and meals so central to tackling local weather change?

Svein Tore Holsether: Thirty per cent of greenhouse gasoline emissions come from agriculture and meals. So in case you don’t repair meals, we’re not going to have the ability to ship on the Paris Settlement. And that’s one thing near the guts for our firm, in addition to me as CEO.

It was actually a game-changer to be in Paris in 2015 — it was simply three months into my time as CEO within the firm. The board gave me a set of expectations about what we must always give attention to in our technique, and I went to Paris along with the Norwegian Ministry of International Affairs — there was type of a gaggle that got here collectively.

SM: So that is the Paris COP . . .

STH: Sure, Paris COP . . . What I noticed there actually made a big impact: the demonstrations, the depth, the youth engagement . . . So I went again to the board after having been in Paris and stated: “We have now to assume utterly in another way across the surroundings and meals and our function in driving that.”

In order that was the kick-off of a extremely lengthy yr to alter the whole lot: from our mission, our imaginative and prescient, our values and likewise our technique . . . constructing on the sustainable improvement objectives.

And it began with our function: why will we exist as an organization? We took that again to the very begin of our firm, about 118 years in the past now, 1905, when Europe was going through famine. Our founder, [Kristian] Birkeland, he was the one which got here up with the breakthrough know-how of getting nitrogen out of the air and turning it into fertiliser, which helped farming productiveness.

In order that’s the beginning. Right now, half of the world will get meals due to fertiliser so it’s an vital product however one which additionally has an affect on emissions.

We ended up with our mission being to responsibly feed the world and shield the planet. So it’s in regards to the duality of offering sufficient meals for everybody within the inhabitants, however on the similar time doing that [in an] environmentally pleasant [way]. In order that was the beginning of the journey on the sustainability facet for us, constructing on the legacy the place we have now lowered our emissions considerably: [by] 50 per cent in comparison with 2005.

SM: Emissions out of your operations?

STH: Sure. We’ve taken all of the low-hanging fruit; now it’s in regards to the subsequent step — and that’s altering applied sciences, whether or not it’s carbon seize and storage or transferring to inexperienced hydrogen. And that may be a journey that we can not do alone. We have to try this with companions . . . via value-chain partnerships — so, wanting on the totality of meals manufacturing, all the way in which to the shoppers.

We’re working with governments to have incentives in place as properly, in order that, if there isn’t any first-mover benefit, [we] a minimum of attempt to keep away from the first-mover drawback on this discipline.

SM: On that query of eliminating first-mover drawback, what would you prefer to see from governments?

STH: Now that it’s change into clear that the Inflation Discount Act (IRA) within the US is facilitating a really speedy inexperienced transition, I believe it’s vital in Europe that we simply copy it. Until we choose up velocity in Europe, industries are going to lose out.

We’re already very a lot conscious of the power drawback that we have now in Europe proper now due to the warfare. But when on high of that we don’t have the identical incentives to drive the inexperienced transition, we’re lacking an amazing enterprise alternative as properly. European companies had been within the lead and in the perfect place to quickly make this transition. Now, we see that the US goes to leapfrog us. 

SM: So, on the meals and fertiliser facet, had been there specific provisions within the IRA that actually struck you?

STH: For us, hydrogen. As a way to get nitrogen out of the air, you want hydrogen — and, at present, we get that from pure gasoline. However you too can get [green hydrogen] from water via electrolysers. And the IRA has very particular provisions for incentivising the manufacturing of inexperienced hydrogen that go straight to the core of what we’re doing. It additionally has provisions for carbon seize and storage. What we’re doing within the Netherlands would have certified for vital incentives within the US. However, in Europe, it doesn’t.

SM: What are you doing within the Netherlands?

STH: We’re producing fertiliser within the Netherlands with carbon seize and storage. That’s the world’s first cross-border carbon seize and storage programme. It’s Yara’s largest fertiliser website, it is likely one of the largest emissions factors within the Netherlands. And what we’re doing is utilizing our know-how to seize the carbon, liquefy it, put it on a ship, after which go to the North Sea, the place — via a co-operation between Shell, Complete and Equinor — they’ve storage of CO₂.

That’s one thing that we’re doing commercially. However, within the US, they’ve executed the identical factor however have a major tax credit score because of it.

SM: You’re nonetheless doing this challenge although there isn’t any tax credit score. However would you say that there shall be much less exercise on this area in Europe due to this lesser help?

STH: Sure, completely — as a result of these websites are additionally export websites. And the way is it attainable for Europe to compete with the US once they have an earnings and we have now an expense and we have now to ship the product to South America? These websites are depending on with the ability to flex between northern and southern hemispheres so you retain [them] working all yr lengthy and then you definitely export to the south.

However the power drawback and the motivation drawback are of a magnitude that actually makes me fear in regards to the future viability of this sort of manufacturing in Europe. That’s one thing we want to bear in mind in Europe: do we actually need to threat our personal gas sovereignty and change into depending on different areas? We’ve seen the affect of exporting our power manufacturing — like we did in connecting European infrastructure to Russia for affordable power.

If we delegate fertislier to different elements of the world, we might be susceptible to not accessing a product that represents half of all meals manufacturing

That labored properly till it didn’t work anymore. Now, we pay the value of not being ready. And we must be very conscious that, in case you’re doing the identical factor on meals and fertiliser — delegating that to the opposite elements of the world — we might be in a really difficult place the place we’re susceptible to not accessing a product that represents half of all meals manufacturing.

SM: To play satan’s advocate, somebody would possibly say: “OK, so that you’re not getting as a lot help to go down these new inexperienced routes, however you’re nonetheless producing numerous fertiliser so what’s the issue?” What can be your response to that?

STH: Sure, it’s much less of an issue for Yara as a result of we’re worldwide. So we have now a world community, we’re bringing in merchandise from different elements of the world as a way to optimise. However we’re nonetheless sounding the alarm on this as a result of we see the affect on smaller websites and on companies that wouldn’t have the identical flexibility as us. 

European energy-intensive business is struggling proper now and there’s a have to decarbonise. If we’re not persevering with to take that lead, then we’re dropping vital business in Europe . . . European fertilisers have half the carbon footprint of the world common.

SM: And why is that?

STH: Many industries in Europe have been very targeted on power effectivity for a very long time — and we’ve come far. Our sustainability focus has been within the enterprise for an extended time — I believe that’s the primary factor. Additionally how we produce, and the competence ranges all through.

SM: So it’s basically the power effectivity that’s meant Europe is greener in its fertiliser manufacturing. However, presumably, sooner or later, in case you can roll out carbon seize, utilisation and storage . . . 

Pure gasoline is a very powerful part in producing fertiliser in Europe and 40 per cent of the pure gasoline comes from Russia

STH: Sure, then, we are able to go even additional in that. And it’s additionally about the kind of fertiliser we produce in Europe: it’s a extra nitrates-based versus urea commodity. That form of fertiliser behaves higher within the discipline, on the farm, as properly. So you’ve gotten much less infield emissions. It’s a double hit for Europe . . . and triple for the planet. For Europe it’s not dropping vital business and it’s [having] entry to superior fertiliser. For the planet, it’s not shutting down extra environmentally pleasant fertiliser manufacturing and transferring that out of Europe.

SM: What are the impacts of the [Ukraine] warfare and pure gasoline costs? What has that executed to the fertiliser business?

STH: It’s a big impact and for a lot of causes. Pure gasoline is a very powerful part in producing fertiliser in Europe and 40 per cent of the pure gasoline comes from Russia. If that’s shut off, then it creates unimaginable volatility available in the market and likewise manufacturing points for all of us. We’ve been having to flex operations up and down all through this era. That’s the oblique affect.

The direct affect is that Russia is the world’s largest exporter of completed fertiliser and elements to make fertiliser, like phosphate and potash. And, right here, each Russia and Belarus are impacted by the identical factor. For potash, 40 per cent of the world’s manufacturing is in Russia and Belarus — in order that has an affect. And we additionally sourced a number of our uncooked supplies from Russia . . . even throughout the coldest a part of the chilly warfare these merchandise got here — the identical with pure gasoline.

Now, with the good thing about hindsight, at what level ought to we have now modified it? Ought to we have now executed it in 2007, once we began to alter how we talked about Russia? Or in 2008 with [Russia’s invasion of] Georgia? Or 2014, with [Russia’s annexation of] Crimea?

It hasn’t been easy however, then, we get to a really sudden change. That modified all of the logistics for traditional manufacturing virtually in a single day, and that has created huge volatility.

SM: What’s been the affect of all this on European households?

STH: Everybody has felt inflation throughout the whole lot — from utility payments as much as just about the whole lot for households.

SM: However, once we have a look at the fertiliser area, specifically, is that actually an enormous contributor to the inflation?

STH: It provides to it, and it makes meals manufacturing dearer. For farmers, it’s power intensive to do farming. And so they see it within the chemical substances, they see it in seeds, the whole lot goes up. After which [so are] meals costs.

However what’s [simply] a value situation in Europe is a query of [either] having meals or not in different elements of the world. The variety of folks going through acute starvation has doubled from 2019. In 2019, it was 175mn. Now, it’s 350mn.

SM: And, once more, you’d actually hyperlink this intently with the fertiliser value?

STH: Sure — fertiliser but in addition meals costs. As a result of Russia and Ukraine are food-producing superpowers as properly, and you’ve got impacts to the provision chains. This already began with Covid, the place we noticed there have been fragile meals techniques — as a result of we didn’t a lot give attention to producing kilos of crops relatively than how strong [a supply chain] is that if it’s put to the take a look at. And we noticed bottlenecks and impacts on the transportation.

Then we had the large affect of the invasion the place one meals superpower attacked one other one — and that shifts provides, considerably.

And, on high of that once more, you’ve gotten local weather. I used to be in Kenya in November along with some farmers. Espresso — a minimum of, in that area — is a little more resistant, so the espresso elements of their farms are doing properly. However, additionally, they’re planting maize as a staple meals crop. However due to, first, drought, and, then, heavy rain, they’ve misplaced all their crops. The place there was imagined to be maize, there was nothing. And that’s a local weather affect, in order that performs into this.

It’s type of an ideal storm for the entire meals system proper now: very difficult in Europe, after all, with increased costs; even worse in different elements of the world the place a human being dies each 4 seconds because of starvation. Now we’re in 2023, it’s tragic and shouldn’t be like that. That ought to be a really sturdy reminder of the necessity to have a extra strong meals system — from a local weather perspective, from a logistics perspective, but in addition from a political perspective.

If you happen to have a look at the function that we have now allowed Russia to have in international meals provide, we rely on them. How did that occur? What sort of weapon is that? And Putin is weaponising meals. This isn’t solely a warfare fought with army weapons, it’s with power — we see that affect clearly right here in Europe, however it’s having an affect to the worldwide power disaster as properly. And he’s weaponising meals and fertiliser.

That may be a main wake-up name . . . we can not simply slide again to that, even when there was peace tomorrow, or subsequent month . . . how did we enable ourselves to be on the mercy of Putin for international meals?

Have a look at the function that we have now allowed Russia to have in international meals provide, We rely on them. How did that occur? What sort of weapon is that? And Putin is weaponising meals

SM: So are you saying the primary and most vital approach of fixing this in the long run is inexperienced hydrogen?

STH: That’s a vital half . . . We have to make that transition and an vital factor of that’s inexperienced hydrogen, with a major build-up of renewable power. Then we are able to do two issues on the similar time: cut back emissions and cut back dependency on Russia for fossil fuels.

SM: So are you pursuing inexperienced hydrogen yourselves? Or is that actually one thing that isn’t a part of your plan?

STH: We do each, so we are able to produce inexperienced hydrogen and we are able to additionally supply inexperienced hydrogen. That’s the fantastic thing about the ammonia vegetation that we’re working. In essence, it has two steps. First, you produce hydrogen: with pure gasoline — we take out the carbon and that turns into CO₂. Then, we produce hydrogen within the subsequent step. Or, we are able to simply get inexperienced hydrogen straight into our amenities as properly. So we do each.

SM: So that you do have your individual electrolysers?

STH: We’re constructing electrolysers.

SM: That’s within the Netherlands?

STH: It’s in Norway. Within the Netherlands, we do carbon seize and storage. However we’re doing a challenge along with Orsted, the Danish firm, the place they’re producing inexperienced hydrogen after which we purchase inexperienced hydrogen from them. So we’re versatile. However our subsequent step [is] an vital enterprise enterprise: that’s Yara clear ammonia.

If you wish to transport inexperienced hydrogen, you are able to do that quick distances via pipelines however you can’t do it very lengthy distances.

SM: Why not?

STH: As a result of, first, it’s very costly to get the pipelines and we can not do these lengthy distances. Hydrogen isn’t solely a lightweight molecule; it’s the lightest there may be — so it wears on the pipelines as properly. So if you wish to [move it long] distances, then it’s important to ship it, however hydrogen is so gentle that it is advisable to cool it all the way down to -253C to make it liquid.

However in case you add a nitrogen molecule, that nitrogen molecule holds three hydrogen molecules [in the form of ammonia] and holds it tremendous tight. So it holds it collectively and it’s rather more compressed — then you’ve gotten rather more power per unit of quantity and you can also make it liquid at -33C as a substitute. And right here we have now a delivery fleet that may transport ammonia from all the world over.

SM: You will have your individual delivery fleets?

STH: Sure, 12 ships ourselves. We’re the biggest ammonia dealer on this planet so, to take that hydrogen and transfer it over distances, we have now a really attention-grabbing infrastructure to allow that — whether or not that’s to make use of it as a delivery gas or to assist Japan on its journey to scale back coal consumption. As an illustration, you need to use ammonia and substitute coal in coal-fired vegetation

SM: Sure, I noticed they’d been doing that, is that gathering steam, the Japanese ammonia?

STH: That is tremendous attention-grabbing each for Japan but in addition for different elements of the world as a result of it’s about utilising current infrastructure and others being conscious that these are large ships. So, to the extent we are able to use infrastructure already there, we must always try this. That’s the pondering in Japan, as properly. They’ll do it first however it has an affect in different elements of the world, as properly.

SM: So if we have a look at the state of play in Europe, it hasn’t executed as a lot maybe because the US has executed via the IRA. But it surely hasn’t executed nothing. How would you assess Europe’s progress in terms of hydrogen and ammonia?

STH: Effectively, there are preliminary issues that we want velocity and readability on, as a result of it’s fairly a cumbersome course of to use for help [in Europe]. Within the US . . . in case you meet the necessities, then you realize you’ve gotten it. So it’s just a few certainty round that.

Then, as a way to produce clear hydrogen, you want large quantities of renewable power — and the velocity at which that’s being rolled out is far too sluggish in Europe. In my own residence nation of Norway, it’s not transferring

at a velocity close to what is required.

SM: So, basically you’d need to see extra tax credit? Or would you need to see extra state-led funding?

STH: Most likely a mixture, particularly within the renewable power area . . . There must be incentives for first movers right here to get this going. After which we have to deal with the local weather disaster, as properly.

That’s what the US is probably understanding now: that if we delay this transition, the fee to take care of the local weather disaster will improve exponentially. So, sure, it’s some huge cash however let’s do it now and get it executed. And if firms make some cash on that, effective — it’ll simply make it even sooner.

In Europe, we take a special strategy the place it’s rather more into the main points and lengthy processes to qualify. Companies have to take these selections proper now and that’s why we’re attempting to speak that proper now.

Let’s not attempt to provide you with one thing utterly completely different. What the US is doing is right here to remain. So, the perfect factor we are able to do is to fund the weather and see how can we discover a construction that resembles that in Europe.

SM: Do you assume Europe ought to be involved about its meals safety?

STH: Sure. Not close to time period . . . there shall be a scarcity and there shall be a world public sale for meals — however Europe is a rich a part of the world.

However we have to assume it via. If we’re not targeted on producing the utmost quantity of meals inside our planetary boundaries in Europe and we are saying that we’d relatively pay extra to get meals into Europe, we’re shopping for that meals away from another person. And by way of meals and meals safety, when you’ve gotten that, you see wars or mass migrations, extremism, all this stuff.

SM: And the identical would go for fertiliser, presumably. If you happen to’re importing it as a result of you’ll be able to’t produce sufficient domestically?

STH: Sure, it’s all related. And that’s one thing that we want to concentrate on. When we have now among the greatest farmers on this planet, and among the greatest companies on this planet, if we then select to say “We’ll get another person to try this on our behalf”, it sends a sign. And it’s the mistaken sign. It creates different dependencies the world over — and for nations that can’t afford to talk up in opposition to what is going on on this planet proper now.