H2 NYJC 2024 Prelims

2024 JC2 H2 Economics TJC T4 ERP 2024 NYJC Prelims 1 STRICTLY FOR INTERNAL CIRCULATION Adapted from 2024 NYJC Prelims Paper 1 Question 1: Impact of Russia-Ukraine War on Various Industries Extract 1: Effects of war on the fertiliser industry The effects of the Russia -Ukraine war may reverberate through the global fertiliser industry for years to come. Post-COVID supply-chain disruptions had already pushed fertiliser prices to cyclical highs in 2021. Russia's invasion of Ukraine in February, an d the sanctions and trade supply disruptions that followed then pushed prices even higher, grain prices also increased, reaching a peak in May 2022 . Russia is a major producer of the three main types of fertilisers - nitrogen, phosphate, and potash (NPK), and a major exporter of key raw materials for fertiliser production elsewhere in the world. High fertiliser prices have boosted earnings and profitability of the 12 global fertiliser companies rated by S&P Global Ratings. This is boosting fertiliser companies' profits and credit quality for now. But this has also destroyed demand from farmers who are unable to afford fertilisers and, in turn, increased food insecurity worldwide. It also highlights the need to reduce dependence on Russia, the world's largest fertiliser exporter. Yet, investment required to end dependence on Russian and Belarussian fertilisers is being hampered by high inflation, supply shortages, and in the case of nitrogen fertilisers, uncertainties over the shape of further regulation to decarbonize the industry. Figure 1: Comparison between fertiliser and grains prices from 2021 to 2022 Adapted from USDA, Economic Research Service Department of Agriculture, 2022 and World Bank, 2022 Extract 2: Pollution generated from the use of fertilisers Farmers apply nutrients on their fields in the form of chemical fertilisers and animal manure, which provide crops with the nitrogen and phosphorus necessary to grow and produce the food we eat. However, when nitrogen and phosphorus are not fully utilised by the growing plants, they can be lost from the farm fields and negatively impact air and downstream water quality. This excess nitrogen and phosphorus can be washed from farm fields and into waterways during rain events and when snow melts and can also leach through the soil and into groundwater over time. High levels of nitrogen and phosphorus can cause eutrophication of water bodies. Eutrophication can lead to hypoxia (“dead zones”), causing fish kills and a decrease in aquatic life.

2024 JC2 H2 Economics TJC T4 ERP 2024 NYJC Prelims 2 STRICTLY FOR INTERNAL CIRCULATION Excess nutrients can cause harmful algal blooms (HABs) in freshwater systems, which not only disrupt wildlife but can also produce toxins harmful to humans. Fertilized soils, as well as livestock operations, are also vulnerable to nutrient losses to the air. Nitrogen can be lost from farm fields in the for