US climate change bill could raise fertilizer prices - trade group

13 May 2010 15:27  [Source: ICIS news]

HOUSTON (ICIS news)--Climate change legislation introduced in the US Senate this week could result in higher prices for nitrogen fertilizers, trade group The Fertilizer Institute (TFI) said on Thursday.

“The climate change legislation introduced by Senators John Kerry and Joe Lieberman provides government incentives that will encourage a wide range of utilities to switch to natural gas as an alternative for generating energy, as well as incentives for natural gas vehicles,” said TFI president Ford West. 

Senators Kerry (Democrat-Massachusetts) and Lieberman (Independent-Connecticut) introduced their long-expected “American Power Act”, a 1,000-page bill that would cap US greenhouse gases and mandate a staged-but-sharp cutback in those emissions on a schedule lasting until 2050.

“This will undoubtedly increase the demand for, and price of, natural gas, which there is no substitute for in the manufacturing process of nitrogen fertilizers,” West said.

The domestic fertilizer industry is highly dependent on a reliable and reasonably priced supply of natural gas, TFI said.

As much as 90 percent of the cost of producing nitrogen fertilizers can be directly attributed to the price of natural gas, according to TFI. 

Nitrogen is also an essential component of many phosphate fertilizers.

“Despite the bill authors’ stated intent to offset natural gas rate increases for industrial users, its design fails to protect the fertilizer industry from the threat of fuel switching since our natural gas feedstock purchases are not made through a local distribution company,” said West. 

“Congress must keep in mind that fertilizer is a crucial food security resource that is responsible for 40 to 60 percent of the world’s food supply," he continued. "Essential industries, such as fertilizer, will be severely challenged by climate policy that does not address our unique sensitivity to the price and availability of natural gas."

TFI suggested that Congress develop climate change legislation that preserves the fertilizer industry’s ability to remain viable in a competitive global market.

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By: Frank Zaworski
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