Since its enactment by the Biden Administration in 2022, the Inflation Reduction Act (IRA) has played a crucial role in advancing low-carbon ammonia projects in the United States (US). 

In doing so, the IRA, the largest investment in clean energy in US history, has fundamentally impacted investment mandates by offering subsidies and tax credits that have attracted foreign investment in “blue” and “green” ammonia projects in the US, often at the expense of other countries.  

When coupled with favourable renewable resources, natural gas prices, CCS geology, and access to existing transmission, production, and export infrastructure, the IRA has meant that the US Gulf Coast has emerged as a hot spot for US and international companies to invest significantly in large-scale ammonia production.   

However, under the Trump administration, the US low-carbon ammonia market is now facing a significant period of uncertainty. Volatile trade policies and proposed changes to the IRA are set to have a profound impact on investment appetite and trade flows for the commodity in traditional and emerging new energy markets. 

This uncertainty creates both challenges and opportunities for project proponents, investors, and traders who wish to deploy capital and gain exposure to this growing new energy market.

Overview of low-carbon ammonia

Ammonia is one of the highest-volume chemicals produced globally. The traditional Haber-Bosch process, that was developed in the early 1900s, is the single biggest carbon-emitting chemical process in the world, contributing ~1.8% of global greenhouse gas (GHG) emissions and ~33% of global chemical Scope 1 emissions.  Ammonia has a carbon intensity of 2.4 MT of CO₂ per MT of ammonia.  This is two times higher than steel and four times higher than cement. 70% of current global ammonia production is used in nitrogen-based fertilisers, a critical lynchpin for global food security.  The rest is used as a chemical feedstock (30%) in explosives, mining and construction, plastics, cleaning products, and textiles.

In recent years, the production of low-carbon ammonia, often referred to as “clean ammonia” has been touted as a key enabler to support the energy transition.  

New and emerging ammonia markets are expected to increase global ammonia demand from 201 million tons in 2024 to 310 million tons by 2040, with 26% of the market to be made up of new energy applications such as marine fuels and energy generation in Europe and Asia.

When burned, ammonia produces water and nitrogen, not CO₂. Beyond decarbonising the agricultural supply chain and hard-to-abate industries, low-carbon ammonia has shown promise in new energy applications such as:

• Power Generation – a clean fuel alternative for power generation. It can be used directly in fuel cells or as a co-firing fuel in existing coal-fired power plants, significantly reducing CO₂ emissions at the point of use, making it an attractive option to decarbonise energy generation. 
• Marine Fuel – a fuel for heavy-duty transport, particularly as a low-emission fuel for shipping, which accounts for approximately 3% of the world’s total greenhouse gas emissions; and
• Hydrogen carrier – an efficient hydrogen carrier compared to hydrogen gas which requires extreme conditions for storage, making it a viable hydrogen carrier over long distances.

While the categorisation of ammonia into colours can be contentious, there are two main types of projects which avail themselves to the IRA. Those that produce: 

• Green Ammonia – which is manufactured from a hydrogen feedstock produced via “splitting water” into hydrogen and oxygen via electrolysis, using renewable electricity (i.e. solar, wind, hydropower or geo-thermal); or
• Blue Ammonia – which is produced using hydrogen sourced from natural gas and involves capturing the CO₂ emissions generated during the traditional steam methane reforming process and storing them in depleted reservoirs or natural aquifers (CCS) (capturing up to 95% of CO₂ emissions when produced with Autothermal Reforming (ATR) technology).   

Why the IRA is important for low-carbon ammonia

There are two key provisions of the IRA that are relevant to low-carbon ammonia projects: 

• 45V – the section 45V Hydrogen Tax Credit (45V), which incentivises low-carbon hydrogen production. Under the IRA, producers can receive up to USD$3 per kilogram of hydrogen, depending on the carbon intensity of their process. This encourages renewable electricity sources for hydrogen feedstock production, making green ammonia production more economically viable.¹
• 45Q – the 45Q Carbon Capture Credit that offers production facilities a tax credit of up to USD$85 per metric tonne of CO₂ stored in geological formations or USD$60 per metric ton used in enhanced oil recovery or other utilisation methods.  This allows ammonia producers to qualify for tax credits and reduce their production costs by capturing CO₂ emissions from Steam Methane Reforming (SMR) or Autothermal Reforming (ATR) ammonia production processes.

Since it was enacted, the IRA has seen a multitude of green ammonia projects announced in the US, where proponents have advocated not only the IRA’s 45V tax credit, but also the ability for projects to leverage existing industrial export and transmission infrastructure.  The US is also perceived as a jurisdiction with favourable regulatory regime compared with other countries, where renewable electrons are cost competitive. 

In the blue ammonia space, since the IRA was enacted European ammonia players have significantly shifted their focus to the US. This trend has been motivated by: 

• affordable natural gas supply, suitable CCS geology and the ability to leverage off existing production or export infrastructure.
• restrictions in supply and a surge in natural gas prices in Europe after the Russia-Ukraine conflict.  
• the IRA being viewed (albeit initially) as a straightforward and streamlined regulatory and project approval process compared with onerous and bureaucratic regulations in Europe.
• the impact of the EU’s emissions trading scheme on the cost of carbon intensive ammonia production, which has created uncertainty around future carbon costs, and the viability of European production in the longer term where many ageing plants will require significant capital investments to decarbonise and may be mothballed.  

The IRA has also spiked a renewed interest by large oil and gas players to move back downstream in ammonia production, a space which many of their existing Asian and European LNG customers are already exploring as part of their decarbonisation ambitions.

The One Big, Beautiful Bill Act

On 22 May 2025, the United States House of Representatives passed the One Big Beautiful Bill Act (the OBBA). The OBBA seeks to pass into law a multitude of campaign promises made by President Trump, among which, is the scale back of many of the clean energy tax credits (45E, 48X, 45Y and 45V) first introduced by the IRA. The OBBA is now headed to the US Senate for consideration where changes will be debated, and passage is slated for 4 July 2025.  

US Green Ammonia is facing headwinds

Among other things, the OBBA seeks to accelerate the phase out of the section 45V green hydrogen production tax credit to 1 January 2026. If passed, this tax credit, will be terminated for facilities that begin construction after 31 December 2025. This will significantly threaten the economic viability of many announced green hydrogen and ammonia projects in the US. 

These challenges are further exacerbated by complex restrictions in the OBBA which are designed to ensure that the benefit of any tax credits do not accrue to companies connected to China, Russia, Iran, or North Korea. These restrictions specifically require companies applying for tax credits to more definitively detail supply sources and certify compliance.  This threatens many green projects who’s supply chain for solar panels, wind turbines and electrolysers are linked to China.  

This may lead to a trend for European off takers in particular that are seeking RFNBO² compliant molecules to pivot to securing offtake from other countries that are well positioned to develop these projects, such as Africa, the Middle East, Canada, South America or Australia.  

Drill baby drill – US Blue Ammonia projects are moving forward

The news for blue ammonia projects is more positive and is consistent with the Trump administration’s vocal support for the oil and gas industry.  The 45Q carbon capture credit, while not as lucrative as the 45V, remains intact under the OBBA. 

However, the transferability of the 45Q tax credits may be restricted, where construction of projects commences two years after enactment of the OBBA. Accordingly, uncertainty around the flexibility of the credits may impact the willingness of foreign companies to invest in US projects, given the risk of being trapped in investments to get the benefit of the credits over the longer term.

As a result of this, a clear trend is emerging where blue ammonia projects involving US companies that have secured long term Japanese offtake or equity support are moving the fastest in the US market.  

Japan Inc is pushing US blue ammonia projects forward

Japan has been a first mover in the Asian low-carbon ammonia market (followed closely by Korea), as its looks to ammonia as part of their future energy mix where a lack of natural resources and restricted renewable potential mean that these countries must import energy to drive their manufacturing intensive economies.  In October 2024, Japan enacted the Hydrogen Society Promotion Act (HSPA), while Korea has implemented Clean Hydrogen Power Generation Bidding Market (CHGBA).  The key objective of these schemes is to support the objective of carbon neutrality by 2050, ensure security of supply of ammonia to Japan and Korea, build strong global supply chains with reliable partners, limit ammonia price exposure and contribute to the Japanese and Korean economies. While the HSPA is not prescriptive, the indicative threshold for what constitutes low-carbon hydrogen is 3.4kg of CO₂ per kg of hydrogen or lower, and specifically for ammonia is 0.87kg CO₂ equivalent per kg of ammonia. Such thresholds are far less onerous than what is emerging under European policy.

Both initiatives create contract for difference (CFD) schemes that aim to subsidise the price differential between conventional fuels and low-carbon ammonia supply for up to 15 years.  In addition, in 2025 the Japanese Government (METI) is set to announce support for hubs that will facilitate ammonia import infrastructure being built in industrial areas such Namikita, Tokuyama Hokkaido and Fukushima. 

This policy support has led to significant Japanese interest in large US blue ammonia export projects where existing infrastructure, favourable gas prices, CCS geology, and the 45Q tax credit combined with the availability of the Japanese offtake support via the CFD scheme, is driving final investment decisions. 

Japanese equity participation / offtake also offers up options for concessional financing from the Japan Bank for International Cooperation (JBIC), which will support project financing. It is expected that similar investment appetite will emerge from South Korea via the CHGBA as their CFD scheme and competitive offtake bidding market matures, in addition to concessional financing through the Korean Export-Import Bank (KEXIM).

This trend is demonstrated by:

• (Bluepoint) the recent USD$4 billion FID reached by CF Industries, Mitsui and JERA in April 2025 to build the largest blue ammonia plant to date in Ascencion, Louisiana. 
• (Bayton) ADNOC acquiring a 35% stake in ExxonMobil’s Baytown blue ammonia plant in Texas that is expected to reach FID in 2025; which is exploring partnerships with Marubeni, JERA and Mitsubishi; and 
• (Beaumont) Woodside’s ambition to be a first mover and build on its Asian energy business through the acquisition OCI’s blue ammonia plant in Beaumont Texas, which is under construction and will begin production in 2025.

Status – Major US Blue Ammonia Projects 

The table below outlines the status of major blue ammonia projects in the US Gulf Coast, indicating Japanese offtake support moving towards established US companies looking to develop large blue ammonia projects, while investment decisions have been delayed by European focused projects. 

Project	Location	Proponent(s)	Offtake Support	CAPEX	Volume MT per annum	Reg. Support	Status	Technology
Blue Point	Ascencion, Louisiana	CF (40%) Jera (35%) Mitsui (25%)	CF (40%) Jera (35%) Mitsui (25%)	USD4 billion	1.4 million	45Q, CFD (Japan). JBIC finance.	FID April 2025  Construction 2026 Production 2029	ATR, plus CCS (>95% capture)
Baytown	Baytown, Texas	ExxonMobil (65%) ADNOC (35%) Mitsubishi equity EOI.	Marubeni 250k tonnes JERA Mitsubishi Trammo	Not disclosed	1 million	45Q (or 45V?) CFD (Japan). JBIC finance.	Expected FID 2025 Production	ATR, plus CCS (low emissions lifecycle – 98% capture).
Beaumont	Beaumont, Texas	Woodside (100%) Leveraging Exxon CCS hub.	Japan/ Korea discussions ongoing	USD2.35 billion	1.1 million	45Q	Under construction  Production late 2025.  August 2024 Acquired from OCI – ongoing operational support.	ATR, plus CCS (>95% capture)
Darrow Clean Ammonia	Ascencion, Louisiana	AirProducts Equity partners required.	Unknown	US$4.5 billion	Unknown	45Q	May 2025 – Investment paused. Plan sell off the ammonia production loop and carbon sequestration facilities.	ATR, plus CCS (95% CO2 capture)
Project YaREN	Corpus Christi, Texas	Yara  Enbridge Equity partners required.	Yara to (CBAM compliant).	USD5.2 to 5.8 billion	2.8 million 2ammonia synthesis loops -1.4 mil MT each.	45Q	Feb 2025 – FID pushed back to 2026. Production 2030.	ATR, plus CCS (95% CO2 capture)
BASF / Yara	TBD	Yara  BASF	Yara  BASF  As above.	Unknown	1.4 million	45Q	Feasibility stage	ATR, plus CCS (95% CO2 capture)

 

So, what for international low-carbon ammonia producers?

With the turbulence in the US, it is not surprising to see some international players, particularly in Europe, waiting for the dust to settle to see where the Trump Administration’s changes to the IRA and tariff policies land before proceeding with any significant investment decisions. 

However, high natural gas prices, the impact of the ETS and the EU’s Carbon Border Adjustment Mechanism (CBAM) and are creating challenges for ammonia production in Europe outside of certain geographies. This may mean European off takers look beyond the US for offtake support.  There is increasing interest in building out ammonia import infrastructure in Northern Europe to service emerging energy and traditional markets. 

This also creates an opportunity for the Middle East who can move quickly to capitalise on the blue and green ammonia market, to service Europe given the favourable geographical location, existing infrastructure, access to natural gas and renewables. Similarly, the Middle East is well positioned geographically to supply volumes into Korea and Japan. 

Australia may also become a more attractive proposition for ammonia export.  Its well-established energy relationships with Japan and Korean (through LNG), freight advantages, in addition to CCS opportunities means it is well positioned in the blue ammonia market. However, direct financial support or incentives for CCS have been somewhat limited to date to support blue ammonia production, which is where demand profile is growing in Japan and Korea.  Its Future Made in Australia program has been allocated USD$10 billion in funding to support green hydrogen projects (including green ammonia) to capitalise on its vast renewable potential, however other than pilot facilities no projects have reached a final investment decision. 

Similarly, countries such as Canada which has created the Low Carbon Economy Fund and the Emissions Reduction Advancement Program to provide financial support to low-carbon ammonia projects and to support blue ammonia production in provinces like Alberta – which have a freight advantage into Asia versus the US Gulf Coast – may also become more attractive to investors. 

With the changes to the IRA pending, there is also a significant risk that offtake support for green ammonia projects generally will continue to be challenging. In the absence of regulations such the Renewable Energy Directive (RED II) (which introduced standards for RFNBO), the willingness of off takers to pay a premium for green ammonia has been limited to date. This may be further exacerbated if US projects falter under the changes proposed to the IRA. 

Energex continue to monitor and actively advise new and established companies and institutional investors exploring the low-carbon ammonia market. If you would like to understand more about our advisory services in the low-carbon ammonia sector, please contact Leigh Holder lholder@energex.partners and Simon Maddren smaddren@energex.partners.

 ¹ Under the IRA the 45V tax credit is also potentially available to blue ammonia projects that reduce their lifecycle emissions by sourcing natural gas from renewable sources (i.e. biomethane and waste), or with a low methane content.

² Renewable Fuels of non-Biological Origin