Global Emissions to Increase from New Zealand ETS

08/05/08 The world’s greenhouse gas emissions could potentially increase along with the revenues of offshore dairy competitors, if New Zealand’s proposed Emission Trading Scheme (ETS) is not changed.

This was the view put forward by Fonterra’s Chief Executive Officer, Andrew Ferrier, at the presentation of Fonterra’s submission to the Finance and Expenditure Select Committee.

“New Zealand is one of the most greenhouse gas efficient dairy producers in the world.

“If we have more constraints puton existing dairy production or growth of our production in New Zealand, other countries will fill the supply gap. These other countries are likely to be less carbon efficient than us and so more emissions would be pumped into the atmosphere as a result.

“Not only does this defeat the purpose of the ETS, but it comes at a real cost to New Zealand’s number one industry - which flows on to a national economic impact of around $2.7 billion.”

Mr Ferrier told the committee that Fonterra totally supported New Zealand’s efforts to reduce the world’s greenhouse gas emissions and described the ETS as a pragmatic solution to the country’s Kyoto Protocol commitments.

“However, given New Zealand is leading the world with this policy, we need to ensure the detail is driving the right behaviour to reduce emissions at every level.

“And for farmers, this means giving them the ability to manage their own farm’s emissions and be rewarded for doing so.”

Mr Ferrier acknowledged the Government’s decision to extend the timeframes for allocated credit support to trade exposed businesses, such as agriculture, was constructive. This will allow New Zealand more time to see what emissions constraints other competing markets may introduce.

But he added that shifting out the timeframes did not change the inherent problems in the principles of the scheme.

“Farmers and Fonterra will start paying the costs of energy and transport emissions at the same time as everyone else. We’re happy to do so because we have the ability to reduce these emissions, and we have been since Fonterra’s inception.”

“But, along with the rest of the world we’re still a long way off finding a way to reduce the methane emitted from animals. Without this solution, the industry can not reduce animal emissions on the farm. It makes sense that we only include these gases in the scheme when we have the ability to reduce them.”

“The New Zealand agricultural industry is leading the way in this research and Fonterra is driving it with a considerable investment. We will not be taking our foot off the pedal.”