A Fonterra Guide to Climate Change

In preparation for emissions trading we already monitor emissions of carbon dioxide from our manufacturingoperations and report these internally. We have also set up a simulated emissions trading scheme between ourmanufacturing sites, so we already have systems in place to monitor and report emissions.Are there any other parts of climate change policy that may affect myfarm or Fonterra?The New Zealand Energy Strategy released by theprevious Labour Government in October 2007 placedcommitments on New Zealand energy to becomemore emissions friendly. It included a target of 90 percent of New Zealand’s total electricity generation to berenewable by 2025. The new Government supportsthis target, but considers security of supply as a moreimportant priority.Any move to increase renewable energy is likelyto increase electricity costs. This is due to thesubstantial national grid upgrade that would berequired to cope with a greater load of renewableenergy. There may also be a risk that new renewableelectricity generation would be more prone to theenvironmental variances that affect supply than thethermal generators it replaces.Another climate change policy of note to dairyfarmers is the Afforestation Grant Scheme (AGS).The AGS policy encourages the planting of Kyotocompliantforests on previously unforested landthrough government grants. However, to be Kyoto compliant a forest must be at least 30 metres wide and at leastone hectare in size. Under the scheme, participants will own the new forests and earn income from the timber, whilethe Government will retain the sink credits and take responsibility for meeting all harvesting and deforestation Kyotoliabilities.What actions can be used to reduce emissions, offset emissions orgenerate emissions units?There are practical management practices that can reduce emissions per kilogram of milk solids, albeit at the margin.• Methane emissions occur from natural ruminant digestion. Increasing milk production per cow will reduce theamount of methane per kilogram of milk solids and therefore reduce farmer’s emissions liabilities under theintensity method of allocation.• Practices to reduce nitrogen leaching, such as the use of a standoff pad or the use of nitrogen inhibitors, may alsoreduce nitrous oxide emissions from urine. Reducing fertiliser use will reduce nitrous oxide emissions.• Decreasing herd replacement rates will reduce the number of non-productive cattle in the herd (i.e. raising heifers),removing these emissions from the farm system.• Afforestation by farmers can generate emissions units to partly offset the costs of the ETS.Fonterra and/or suppliers can purchase any emissions units that are required to meet obligations from:• The New Zealand GovernmentIncreasing milk productionper cow will reduce theamount of methane perkilogram of milk solids9