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PepsiCo, Inc. (PEP.US) and Yara International (YARIY.US) have agreed to reduce food carbon emissions.

AInvestTuesday, Jul 16, 2024 5:20 am ET
1min read

PepsiCo (PEP.US) and fertilizer giant Yara International ASA (YARIY.US) have agreed to provide low-emission fertilizers to PepsiCo's European farmers. Food and beverage companies are increasingly trying to go green.

Yara will initially supply PepsiCo's farmers with traditional products made from natural gas, but plans to increase the use of renewable ammonia or ammonia made from carbon capture and storage by 2030. PepsiCo sells snacks including Frito-Lay chips and said it would focus on potatoes before expanding to other crops.

This is the latest sign of food companies' growing interest in the impact of fertilizer use on their supply chains. Multinationals are under pressure to reduce their environmental footprint, and much of the emissions for food like wheat and potatoes may come from the fertilizers used to grow them.

Natural gas is used as a feedstock and energy source for making fertilizers. So-called green ammonia is energy-intensive, produced by combining hydrogen from water electrolysis with nitrogen using renewable energy. While companies including Yara are starting to produce green ammonia, it is not yet commercially viable at scale.

According to a Tuesday statement, PepsiCo will buy up to 165,000 metric tons of fertilizer from Yara annually by 2030. That will come from Yara's new renewable hydrogen plant in Norway, and partly from a Dutch plant that will use carbon capture and storage technology.

"Fertilizers are one of the biggest opportunities for PepsiCo to reduce its emissions, as they have a significant impact on its average carbon footprint for potatoes in Europe," the statement said.

Yara has also recently struck similar deals with companies including Simpsons Malt, potato chip maker El Parque Papas and agricultural cooperative Lantmannen.

In addition, CF Industries (CF.US), a fertilizer company, may begin producing 20,000 metric tons of green ammonia annually at a plant in Tonawanda starting in 2024, according to reports.

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