Ammonia (NH₃) is the building block for nitrogen fertilizer. About 60 percent of the natural gas required to produce ammonia is used to provide the hydrogen (H) component and results in carbon dioxide (CO₂) emissions. These emissions cannot be reduced given current process technology. The remaining natural gas can be managed to increase energy efficiency and reduce CO₂ emissions. Due to the increasing cost of natural gas, Agrium has worked to increase energy efficiency to maintain its competitiveness since the early 1990s. This early action has been successful in reducing combustion CO₂ emissions.

Energy efficiency and greenhouse gas emission benchmarking done by Canada's nitrogen producers in partnership with the Government of Canada Department, Natural Resources Canada in 2003, showed our sector to be among the most energy efficient nitrogen producers in the world. The next year, the Canadian Fertilizer Institute engaged NRCan's Varennes Canmet Energy Technology Centre and their recommended consultant to carry out an analysis of two of our sector's larger production operations to assess opportunities to further reduce combustion emissions.

We continue to pursue cost-effective savings in energy that reduce greenhouse gas emissions at our facilities. We installed a cogeneration facility at our Carseland, Alberta nitrogen operations in 2002. Cogeneration makes more efficient use of natural gas to produce electricity and steam. In addition to providing power and steam to our operation, the facility exports power to the provincial power grid. As part of our potash production expansion in Vanscoy, Saskatchewan, we installed more energy efficient product dryers,which significantly contributed to energy efficiency.

For more information on this, view our sustainability report.

The International Energy Agency studied carbon capture and underground injection for enhanced oil recovery in Saskatchewan and estimated that 99.8 percent of the CO₂ injected will remain underground for at least 5,000 years. We will continue to work with government and other stakeholders to confirm the details of carbon capture and storage.

We continue to seek opportunities to capture CO₂ from our nitrogen production facilities for enhanced oil recovery, industrial use or underground storage. At our Borger, Texas operation, more than 185,000 tonnes of CO₂ were captured in each of 2006 and 2007 for enhanced oil recovery. In 2007 we signed an agreement to capture significant CO₂ emissions from our Redwater, Alberta facility for enhanced oil recovery by other companies. This project is expected to become operational in late 2011.

Agrium is a member of ICON, the Integrated CO₂ Network, a proposed system for the capture, transport and storage of CO₂ in Canada. ICON members represent a group of industry participants demonstrating climate change leadership by providing a framework for carbon capture and storage development in Canada. We believe that the nitrogen fertilizer industry is an excellent source for carbon capture and storage because the CO₂ is in a relatively pure form.

Agrium has worked with stakeholders to develop an industry-wide nutrient stewardship system that will reduce nitrous oxide (N₂O) emissions by applying the right products at the right rate, time and place. The 4R Global Nutrient Stewardship Framework can lessen the negative impact that fertilizer can have and increase the positive impact through the use of best management practices. Although only small amounts of N₂O are released as a result of nitrogen fertilizer use, their release is of concern because N2O has almost 300 times the global warming potential of CO₂.

Agrium has also developed a series of controlled release nitrogen products that reduce N₂O emissions and increase crop yields. While controlled release technology is not new to turf and horticulture businesses, ESN is the first controlled release technology developed for large acre crops such as corn and wheat. This offers a new product, helping growers provide nitrogen to crops at the right time and rate without a lot of pre-planning.

In 2007, more than 122,000 tonnes of ESN were sold. It is estimated that this reduces field N₂O emissions by about 260 tonnes or 77,000 tonnes of CO₂ on an equivalent basis. Due to the product's ability to increase yield, less nitrogen production is required. This avoids an additional 50,000 tonnes of CO₂ emissions.