A Fonterra Guide to Climate Change

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• Forestry owners• Clean Development Mechanism Projects, whereby a developed country can offset its emissions by helping adeveloping country to reduce its emissions• Joint implementation project, whereby a nation with a Kyoto obligation can offset its emissions by investing in aproject to reduce emissions in another nation with a Kyoto obligation• Other participants in the New Zealand market or countries signed up to the Kyoto Protocol who have extra carboncredits.C: CLIMATE CHANGE POLICY OVERSEASAre any of our overseas competitors facing an emissions cost?New Zealand will be the first nation in the world to introduce agricultural emissions (methane and nitrous oxide)to an emissions trading scheme. This is partly due to the relative role of agriculture in our national inventory ofgreenhouse gas emissions. In New Zealand agriculture makes up 48 per cent of total emissions compared to 16 percent in Australia, 6 per cent in the United States and 9 per cent in the European Union. It is also due to the complexityassociated with bringing agriculture into an emissions trading scheme and the current lack of technologies to reduceagricultural emissions.The European Union emissions trading scheme only includes energy and industrial emitters – accounting for about 45per cent of the European Union’s total emissions, compared to the current New Zealand scheme which will cover 52per cent of New Zealand’s emissions from July 2010, and 100 per cent of emissions by 2015.Australia has yet to decide on its climate change policy. Legislation for an emissions trading scheme (called the CarbonPollution Reduction Scheme) has been proposed, but not passed into law because of opposition from different politicalparties. In any case, agricultural greenhouse gases have been excluded from this scheme.Legislation to introduce an Emissions Trading Scheme has been passed by the United States House of Representativesand has now been sent to the US Senate for consideration. The scheme places a price on US emissions from 2012,and would be phased in to cover 85 per cent of US emissions by the year 2016. However the scheme would not covernitrous oxide or methane emissions from agriculture.This is the third time since 2007 legislation on climate change has been introduced to either the US Congress orSenate, and it is by no means certain that this attempt will succeed where previous ones have failed.10
Overseas competitors from developing countries, including Argentina, Uruguay and Brazil, do not face bindingnational targets for emissions reductions under the Kyoto Protocol. It is unclear whether developing countries willadopt reduction targets under any post 2012 international agreement. It is, however, viewed highly unlikely thatdeveloping countries will face commitments equal to those of developed countries like New Zealand.What international agreements are in place after Kyoto?The Kyoto Protocol provides binding targets for developed countries for the period from 2008-2012. Beyond 2012there is currently no international agreement on greenhouse gas emission reductions.The negotiations to develop a successor agreement were targeted for conclusion at the UN Climate Conference inCopenhagen in December 2009. However negotiators were unsuccessful in reaching a new global agreement onclimate change. This was largely due to unresolved differences between developed and developing countries. Pointsof contention include the balance of reduction obligations between developed and developing nations, the amount offinance required for mitigations and adaptation in developing nations, and how this will be managed, as well as othertechnical differences.The negotiations will continue through 2010, with hopes of reaching agreement at the next UN Climate ChangeConference in Mexico City in November-December 2010, or in South Africa the following year.The New Zealand Government is actively engaged in these negotiations. Prime Minister John Key has stated thatNew Zealand is an advocate for improved agricultural rules. During New Zealand’s statement to the Joint High-levelsegment at the Copenhagen Climate Conference Prime Minister Key stated, “Rules are essential for ensuringenvironmental integrity and for giving countries the confidence to set ambitious targets.“The wrong rules could significantly undermine New Zealand’s future as a food producer to the world for noenvironmental gain.” 1Fonterra has previously encouraged the Government to place a high priority on ensuring agricultural rules areapproved in future aggrements.D: FONTERRA AND CLIMATE CHANGEWhat has Fonterra been doing within its business to lower emissions?• We already monitor carbon dioxide emissions at our manufacturing sites and use them to simulate an emissionstrading system between sites. The Emissions Account compiles information about each site’s quarterly carbondioxide emissions and places a hypothetical dollar value on them. It is one of the ways Fonterra is preparing for anemissions trading environment, while also raising employee awareness about energy use and the associated carbondioxide emissions from our manufacturing sites.As a result, our manufacturing sites have made significant savings in energy use and carbon dioxide emissions inrecent years.• Since 2003 Fonterra Manufacturing has implemented an energy efficiency program in order to reduce energy useand emissions per unit of production. Since the beginning of this program Fonterra’s energy use has reduced by 15per cent per unit of production. This represents an annual reduction in CO2 emissions of 280,000 tonnes per year,and energy savings roughly equivalent to the annual electricity use of 90,000 homes.• An agreement with Toll New Zealand to make rail the main method of transportation in the Waikato, and aprimary method in the Hawkes Bay, Manawatu and Wairarapa, has also contributed to a reduction of more than9,000 tonnes of transport related carbon emissions. This complements other initiatives, such as the use of newtechnology to pre-concentrate milk at our Tuamarina and Culverden sites, and a new real-time scheduling anddispatch system for our tanker fleet.• We have also carried out a carbon footprint analysis of our five major products (butter, milk powder, milk proteinconcentrate, cheese and caseinate) to 12 major ports of destination. This has enabled us to fully understand theamount of greenhouse gas emitted in the entire supply chain. We can now pinpoint areas where reductions can bemade. The project found that current emissions are:• 85 per cent ‘On-farm’, covering inputs and outputs related to the production of milk from the farmingoperation up until it leaves the on-farm milk vat;• 10 per cent ‘Processing’, covering the transportation of milk from the on-farm milk vat and the completemanufacturing process, including packing and storage at the factory site, through to the product loaded ontotransport for delivery;1. Hon John Key, Prime Minister of New Zealand. (18-Dec-2009). New Zealand statement to the Joint High-level segment of the Conference of theParties to the UNFCCC and the Conference of the Meeting of the Parties to the Kyoto Protocol. New Zealand Government.11
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A Fonterra Guide to Climate Change

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