Assessing the Impact of Chain of Custody Models on the Long-Term Planning of Low-Carbon Ammonia Supply Chains

With growing concerns about climate change, efforts to invest in low-carbon alternatives to conventional fossil-fuel-based products are on the rise globally. As more low-carbon products are developed, current systematic methods for optimizing supply chain expansion and operations need to be redesigned due to differences in consumer preferences between sustainable and conventional products. In this work, we investigate how the choice of traceability method (i.e., the chain of custody model), which governs a consumer’s claim to a sustainable product, impacts decision-making in the expansion of low-carbon ammonia supply chains. We propose a mixed-integer nonlinear programming formulation that applies the mass balance and book-and-claim models, the two most relevant chain of custody models in the chemical industry, to an ammonia supply chain. We then present a comprehensive case study spanning 25 years that includes nine U.S. states and highlights differences in solutions between the two models, such as the extent of renewable technology expansions, ammonia distribution decisions, demand met, and the breakdown of different costs under various ammonia price scenarios. Moreover, we make key observations in the solutions provided by a rolling-horizon simulation to cases with uncertain ammonia demand. This work highlights the critical role of chain of custody models in evolving low-carbon ammonia supply chains, laying the groundwork for future research into their application and impact on other sustainable supply chains.