CO2 taxes: The new cost trap

For a long time, it was just words that no one really wanted to believe in: climate neutrality. Whether it can really be done, especially in a densely populated country like Germany, is uncertain. But one thing is certain: the attempt to push private consumption and the economy toward climate neutrality through increasing taxes and tighter regulations alone will be expensive, very expensive. What this means for agriculture in detail cannot be said today. Things won't get really serious until 2030 - the necessary conversions and investments can't be made much earlier. But initial estimates of the dimensions we will be talking about then are possible.

For these operations, the calculation is quite simple - and also unspectacular. Grain mills are in themselves largely emission-free, they just need a lot of electricity. If this comes from "green" sources, it becomes more expensive. But no investment is necessary. About 50 to 60 kWh of electricity is needed per t of grain milling. If "green" electricity becomes more expensive - let's say by 20 Ct/kWh - it will be noticeable at 10 to 12 €/t of wheat, but no investments are required. In addition, there would be higher transport costs for the flour, but at 35 l diesel for 25 t flour and 100 km freight, these costs are negligible.

The figures are somewhat larger for the oil mills, which require heat in addition to electricity. Conversion to climate-neutral operation and optimization of the processes require investments and more expensive energy sources such as hydrogen or wood pellets. Already today, the CO₂ taxes burden each t of rapeseed in the oil mill with € 2.50. Not much at prices above 500 €, but still there are free CO₂ certificates from previous allocations. These are decreasing and the levies are increasing, so that larger amounts are then also due. 

Starch factories have their largest energy demand in drying the starch. As with flour mills, the milling of the grain, including cleaning, requires only 50 to 60 kWh per ton of wheat. However, the starch factories require three to four times this amount of energy in the form of heat for drying. Efficiency is therefore the most important factor for them. As energy-intensive companies, the starch industry is subject to European certificate trading (box). This means they do not have to pay CO₂ taxes. Since this applies to all starch factories in the EU, the costs can also be easily passed on to the consumer. And since starch is not an imported product (due to the relatively high transport costs in relation to the value of the goods), there is no threat of trade distortion from third countries.

While potash can be mined and processed with large investments but relatively little energy, the calculation is quite different for nitrogen. Whether it is KAS, AHL or urea, the production of nitrogen fertilizers costs a great deal of energy. Mostly in the form of gas, in China also with coal. Both are associated with high CO₂ emissions.

In the manufacturing process, there are two steps in which CO₂ is released: Ammonia synthesis (Haber-Bosch process) and nitric acid oxidation, which produces nitrous oxide. The latter can be filtered out with catalysts, which is state of the art in the EU. This is more difficult in the case of ammonia synthesis. The CO₂ produced can be bound in urea, but then it is released in the field during conversion. A list from the International Fertilizer Industry puts the emissions per kg of nitrogen in KAS at 3.5 kg of CO₂. For urea, the figure is 1.9 kg without the CO₂ bound in the product (another 1.6 kg of CO₂ is bound in the urea and is released in the field when it is converted). For 30s AHL, the authors give a value of 2.6 kg CO₂ per kg N (plus 0.8 kg bound in the product). Added to this are the emissions from transport.

The figures given refer to average values for European mills, which are technically up to date and world leaders. In North America, emissions from (urea) fertilizer plants per kg N are at a comparable level, and in Australia and the Middle East they are even better. However, in Russia, Asia and especially China, emissions per t of urea are up to 45% higher. The worst performers are the Chinese plants that operate on a coal basis: Their emissions are three times higher than those of European plants. Nitrates from countries outside the EU also emit nitrous oxide due to the lack of catalysts in the nitric acid plant. Therefore, KAS and AHL plants in Russia emit about twice as much climate-damaging gases as Western European plants and Chinese coal-based plants even three times as much.