Authors: Josh McBee

Climate Transitions Are Planting the Seeds of Change for Global Fertilizer Use 

Fertilizer is a double-edged sword for the agricultural sector, providing the ability to grow more food on less land but also exposing stakeholders to climate transition risks from nitrous oxide emissions. 

Fertilizer’s ability to grow more food on less land helps prevent deforestation and related greenhouse gas emissions, while also ensuring food security as the world’s population and food demand continue to grow. However, fertilizer use poses major climate challenges.

Despite being a costly input for farmers, excessive fertilizer use is a widespread practice. This problem not only erodes farmers’ profits but also makes agriculture the largest source of nitrous oxide (N₂O) emissions, a potent greenhouse gas and ozone-depleting substance. In addition, fertilizer production is a significant source of carbon dioxide emissions.

As a result, companies and financial institutions face growing financial risks from inefficient fertilizer use as climate transitions—societal responses to climate change that will have a material impact on businesses and investors—impose more penalties on emission sources. But by encouraging efficiency and supporting low-carbon fertilizers, they can mitigate these risks and tap into emerging opportunities.

Risks and Opportunities for Companies and Financial Institutions Stemming from Fertilizer Use 

Policy and Legal Transitions  

Policies addressing fertilizer use has accelerated, signaling a shift in how governments address agriculture’s environmental impacts. A growing consensus supports halving nutrient pollution by 2030—an ambition reflected in the EU’s Farm to Fork Strategy and the Kunming-Montreal Biodiversity Framework. In June 2024, Denmark launched its Green Tripartite Agreement, bringing together government, environmental groups, and farmers to reduce agricultural emissions, including N₂O. Denmark also plans to convert 15% of farmland back to natural habitats to curb nitrogen pollution.

Legal and climate frameworks are expanding to cover all greenhouse gases. At COP29 in Baku, several countries committed to including N₂O in their next Nationally Determined Contributions (NDCs). COP28’s Declaration on Sustainable Agriculture, endorsed by 134 countries, commits signatories to integrate food systems into national climate strategies.

Legal precedents are bringing about pressure to curb fertilizer-related pollution. In January 2025, a Dutch court ordered stronger action to cut nitrogen pollution—a continuation of the Dutch “Nitrogen Crisis.” This development shows that fertilizer-related emissions are becoming a key target for regulation and corporate accountability.

Technology Transitions  

Four technology trends are reshaping fertilizer management. First, green fertilizers produced using renewable energy and electrolysis are on track to become cheaper as the costs associated with producing green ammonia—a key component in green fertilizer production—go down and production levels increases. Production emissions for green fertilizers are far lower than for conventional varieties. Companies using conventional, high-emissions fertilizers will face growing scrutiny as disclosure requirements rise. Second, sensors and digital technologies are enabling smarter fertilizer application. These tools can reduce costs and pollution by optimizing timing, placement, and application rate.

Third, researchers and companies are developing novel fertilizers that can help reduce losses and improve efficiency. These include slow- and controlled-release fertilizers that release nitrogen more slowly than conventional varieties so that nitrogen supply more closely matches crop demand, microbial fertilizers that pull nitrogen from the air and deliver it to plants’ root systems, and fertilizers coated with nitrification inhibitors that delay the conversion of ammonium in soil to nitrate and nitrous oxide, reducing the amount of nitrogen that is lost to the environment. Finally, genetically modified crops and breeding programs could lead to seed varieties that require less fertilizer to grow.

All of these technology transitions combined could create a significant opportunity to reduce climate-warming emissions, gain competitive advantages for early adopters, and investment opportunities in new businesses that could scale significantly in the decades to come.

Market Transitions 

Food companies are committing to sustainable practices, responding to rising market demand and reputational risks tied to emissions. The 2025 Food Emissions 50 Benchmark by Ceres shows several leading firms now have specific N₂O reduction targets.

To meet these expectations, companies are working with suppliers to adopt nitrogen-efficient technologies. Yara International supports farmers using practices like fertigation and the 4R stewardship framework, improving nitrogen use efficiency by 10–20%. Companies that act quickly can gain market share, while laggards risk falling behind.

Reputational Transitions 

In addition to its climate and ozone impacts, nitrogen pollution causes a variety of other environmental problems that adversely impact human health and ecosystems. For instance, ammonia (NH3) and NOx can interact with other air pollutants to form microscopic particles (PM2.5) that cause respiratory diseases and cancer. In China, the cost of nitrogen-related air pollution has reached billions annually. Nitrate (NO3-) and ammonia can cause excessively high concentrations of nitrogen in marine and freshwater ecosystems, a phenomenon known as eutrophication that causes large-scale die-offs of fish and other aquatic organisms (so-called “dead zones”). A global assessment found over 415 coastal areas affected.

Food companies and their suppliers have faced significant criticism and even legal action on account of the harms associated with nitrogen pollution in their supply chains and operations. To date, criticism has mostly focused on livestock operations, but nitrogen pollution from excessive or suboptimal use of fertilizer exposes companies and investors to similar reputational risks.

How Companies and Financial Institutions Can Mitigate Risks and Take Advantage of Opportunities  

As a first step, companies and investors should consider working with experts to identify key practices and technologies for sourcing and efficiently using fertilizer. Next, they should consider assessing their comprehensive greenhouse gas footprint from fertilizer and other sources, including N2O emissions. Once they have done that, they will be in a better position to make strategic investment and procurement decisions. Lastly, investors and companies should consider supporting policy efforts that can boost greater supplies of green fertilizer globally and the resources to help the world’s farmers transition away from practices that waste fertilizer.

Additional Actions to Take for Investors

• Prioritize investments in companies whose suppliers utilize technologies and practices that help to reduce nitrogen pollution.
• Offer lower interest rates or green financing options to companies and farmers that utilize green fertilizer or make commitments to utilize practices that prevent fertilizer waste.

Additional Actions to Take for Food Companies

• Provide financing for farmers to implement new technologies and practices that allow them to use fertilizer more precisely.
• Utilize buyer demand power to develop groups that provide offtake commitments for commodities produced with green fertilizer and/or grown with practices that cut down on fertilizer waste. Demand signals such as these have accelerated the innovation in and adoption of other green technologies and practices.
• Establish gas specific targets for nitrogen or N2O emissions and work with the actors in their supply chains to reduce fertilizer waste.