Net Zero Reality Check | Part 1
Post 12 | The Indispensability of Ammonia and Plastics
Part 1 of a series examining decarbonization and net zero
Setting stretch goals in business is tricky. If you’re not aggressive enough you won’t grow, but excessive targets will demotivate your organization, waste capital, outspend your revenue, and cause employees to tune out for lack of buy-in.
This seems an apt analogue when considering the drive to net zero.
What is Net Zero?
Net zero is a United Nations concept referring to the elimination of all net carbon dioxide (CO2) emissions globally with progressive step targets against a 2010 baseline - of a 45% reduction by 2030 and a 100% reduction by 2050. The UN proposes this will limit an increase in average global temperatures to 1.5 degrees Celsius beyond pre-industrial levels (considered to be 1850-1900) and further predict this will hold off catastrophic climate effects. The inaugural 2010 UN goal was set at 2 degrees Celsius, before being reduced to 1.5 degrees in 2015 saying, “While science on the 1.5°C warming limit is less robust, efforts should be made to push the defence line as low as possible.”
The UN notes that more than half of 2020 emissions were produced by seven main emitters – China, United States, India, European Union, Indonesia, Russia and Brazil - who are part of 70 countries (out of 193) with net zero targets as of October 2022. At that same date, they also predicted we are tracking to hit a 10% emission increase by 2030 versus their desired 45% decrease, with just over six years remaining.
[In this post I will leave aside discussion of the climate change movement and its related predictions, and focus on net zero itself]
Reality Check
Barring a miracle, these net zero stretch goals are not within the realm of reality, as the tracking trend reinforces. They rely on idealistic assumptions about behavioural changes needed to influence demand, an exponential ramp up of renewable energy sources, transformative alterations in production methods that are currently not scalable, carbon capture and storage that remains nascent, development of infrastructure needs at an almost unimaginable scale, and extreme actions from a global community with vastly different states of economic development and mindsets regarding carbon emissions and global warming.
Yet we persist in making a multi-generational bet that will globally spend trillions (including billions by Canada), shutter industries that currently power humanity, weaken food and energy security, substantially disadvantage poor and developing countries, and potentially imperil those countries who go all-in including Canada. These activities are driven by targets that do not seem to acknowledge realities about how our material world actually works, not to mention human behaviour and geopolitics.
Vaclav Smil’s book, “How The World Really Works | The Science Behind How We Got Here and Where We’re Going” provides an ideal jumping off point to examine some inescapable facts of our modern physical world and how those relate to this rush to decarbonize. In the chapter “Understanding our Material World”, Smil discusses the realities of fossil fuel consumption behind what he calls “the four pillars of modern civilization” - ammonia, plastics, concrete and steel. While government and media focus on carbon emitters like passenger vehicles which consume about 25% of global oil supply and generate 10% of CO2 emissions this quartet of materials consumes about 17% of global energy supply while generating about 25% of CO2 emissions.
If that surprises you, you’re not alone. Yet these products are ubiquitous, with limited production or product alternatives in the immediate offing, and one of them is existentially critical. Let’s start there.
Ammonia
Global production of ~170 million tons of ammonia is used for more than cleaning windows as it drives a critical human need – food. Ammonia is created from the synthesis of airborne nitrogen married with hydrogen derived from natural gas. Eighty percent (80%) of ammonia is then further processed to make nitrogen fertilizers, while the remaining 20% is used mostly in explosives and cleaners. In this process, natural gas is copiously used as both feedstock and energy source, while coal remains the energy input for about 20% of global production.
The 1960s-70s saw an eight-fold increase in nitrogen as one of two key fertilizers – mined phosphate being the other – which pushed agricultural yields through the roof and continued humanity’s march beyond subsistence living started decades earlier. While generative and organic farming have a niche role to play in our future, including their use of animal fertilizers, their small scale simply cannot make a dent in the food needs of 8 billion people as Smil covers in detail, while saying, “in 2020, nearly 4 billion people would not be alive without synthetic ammonia.”
Ammonia contributes only about 2% of global carbon emissions, yet fertilizers have recently been a whipping boy of governments, environmentalists and net zero advocates. No doubt, there are some non carbon related environmental downsides of excess synthetic nitrogen use and we are seeing some improvements in slow-release products and precision farming techniques toward addressing those.
The industry touts green ammonia which relies on a combination of renewable energy inputs, carbon capture and new production methods including water electrolysis. But despite heavy marketing promotion, green ammonia is still in limited concept production and generates only a fraction of 1% of the world’s total. The industry also promotes ammonia as a fuel itself and as a method to transport hydrogen, one of the long promised though unproven fuels of the future.
China is the largest ammonia producer at more than 42 million tons (~25%), with most of it fueled by coal - followed by Russia, India and the USA each at about 10 million. Meanwhile, according to Smil, 60% of fertilizer is applied in Asia, with only about 5% in Africa – a fast growing population and a continent continuing to suffer substandard food generation.
Increased taxation and harsh top-down restrictions on farmers’ fertilizer inputs and other environmental mandates are causing strife and serious food security issues in the agricultural world including across Europe.
Sri Lanka’s 2021 total ban of fertilizers offers a stark warning on the dangers of poorly conceived stretch goals and mandates. Having used synthetic fertilizers since 1952 which drove their transition to net exporter of rice along with capability to feed themselves, the 2021 abrupt ban caused crop yields (rice, tea, vegetables, etc.) to plummet by 50-70%, leading to a default on their national debt, spiraling inflation, shortages of food, fuel and medicine, and social unrest. This all happened inside of a one-year timeframe.
Taken together it is quite a stretch for this industry to reach net zero by 2050, with existential downsides threatening our subsistence. Working against it is a growing global population with increased appetite, including for meat protein which drives higher agricultural needs; the unproven scalability and tenuous business case of green ammonia; and countries like China, Russia and India who currently control ~40% of total production along with a majority of the consumption – while they exhibit few net zero concerns or policies compared to the fervent west.
Plastics
This incredible compound has taken it on the chin the past few decades thanks to the scourge of PET water bottles and other single use products littering our world. Plastics’ light weight (strongest plastic can be as little as 12% of steel) and durability (25% tensile strength of steel and 90% of aluminum) make them indispensable and ubiquitous in construction, medicine, transportation, textiles, packaging, electronics, and every major industry of our modern world. You are touching, sitting on, standing on, eating from, moving in, filling, extracting from or wearing some form of plastic throughout your day.
Of the four materials plastics are the fastest growing – having exponentially grown since the 1950s. Estimates vary but they place plastics’ global carbon contribution currently at 3.5 to 5%, plus more than 3% growth per year and projections to reach beyond a total 10% global carbon emissions by 2050 at current trajectory.
The carbon reduction strategy for plastics follows a familiar four-part prescription: demand reduction (hopes for behaviour modification and discovery of replacement materials), transforming production inputs and methods, use of renewable energy sources in the production process, and reliance on future carbon capture technology.
Despite performative policies such as banning bags and straws, which have little impact on total demand, plastics are omnipresent with few viable alternatives. Significant demand reduction is currently more hope than plan.
That leaves a heavy focus on alterations to the supply side of the equation, with some huge stumbling blocks in the way. Fossil fuels serve as both feedstock and preferred energy source for the plastics industry – with China again favouring coal for their nearly one-third of global production. In the balance of the world, a shift to renewable energy inputs will have little impact (the industry has already made good strides in creating closed loop energy cycles) and also involves an unvirtuous circle with plastics being a key material in two of our favorite renewable sources - solar panels and wind turbines. Bioplastics are another part of the future decarbonization promise by way of a switch to corn and sugarcane feedstocks, yet less than 1% of plastics currently come from these sources, while they also increase fertilizer demand and compete with critical food production resources. And, finally, carbon capture remains early stage and of limited impact with a massive infrastructure and energy footprint needed to support it.
How this growing and embedded industry gets near net zero, despite promised environmental offsets, will take quite a magic trick.
The Good and the Bad
Humanity advances partly through innovation driven by opportunity and need, with the net zero movement leaning very strongly on their message that decarbonization is an existential need. Indeed, some of the actions taken to reduce emissions will have positive knock-on benefits including more judicious use of commodities, development of innovative new science and technology, waste reduction, and thoughtfulness about our broader environment - while perhaps also helping slow humanity’s gluttonous appetite for more.
Yet there are very serious negative consequences looming, including fiscal, political and societal that are poorly acknowledged, along with major downside implications for developing world populations. I believe the risk-reward equation is much worse than is being currently discussed and the underlying premise heavily oversold. We will explore some of these topics in a future post.
But for now, I make a case that the net zero targets themselves are simply not realistic, with ammonia and plastics being the first two illustrative examples. If so, then the at-all-costs rush to hit these targets is unwise, at best. In Part 2 of the series we’ll examine concrete and steel, two more foundational elements that make up our modern world, with even greater carbon footprints.
Stay tuned and stay pragmatic.