Abstract
Decarbonizing energy sectors has become imperative to slow down climate change. This paper asks how the fertilizer market would react to a shift from using natural gas to renewables, focusing on the sustainability of the U.S. fertilizer supply chain. To answer, we first estimated fertilizer supply and demand elasticity, showing that demand for fertilizer is relatively inelastic, with an average value of -0.64. In contrast, fertilizer supply is elastic, with an average value of 2.0. We show evidence that natural gas price is the primary driver of the supply of fertilizers. Next, we show that a 10% price increase in fertilizers will increase fertilizer production by 20%. Yet, consumption declines by 6.4%, resulting in a loss to farmers equivalent to about 4.12 USD per acre. The evidence suggests diversifying fertilizer production input away from natural gas can alleviate these significant cost changes and benefit farmers. These benefits are in addition to transitioning the fertilizer supply chain to a more decentralized and cleaner one.