How are decarbonization policies in the US and Canada shaping low-carbon ammonia production strategies?

Abstract

The US and Canada contribute to 11% (22 million tons (Mt) per year) of global ammonia production, with an additional 42 Mt of production capacity currently planned or under construction. The distinct decarbonization policies adopted by these two countries—namely production tax credits in the US and carbon taxes in Canada—lead to significantly different outcomes and implications for decarbonized ammonia production strategies. This study evaluates facility-specific production strategies for low-carbon ammonia, considering the decarbonization policies of both countries. We assess the most cost-effective strategy for low-carbon ammonia production at each facility, both with and without the influence of these policies. Our results indicate that Canada’s carbon tax incentivizes the adoption of carbon capture and storage (CCS), while the US production tax credits promote the use of wind energy and biomass coupled with CCS, to produce hydrogen for ammonia synthesis. These findings highlight a dichotomy between the impacts of tax credits and carbon taxes: production tax credits facilitate the transition to low-carbon production methods, whereas carbon taxes incentivize existing facilities to upgrade with CCS technology. These insights underscore the effectiveness of tailored policy approaches and provide a comprehensive blueprint for other regions globally seeking to transition towards low-carbon ammonia production.