Fonterra says climate change policy shouldn't reduce methane emissions to zero

Friday 29th June 2018

Fonterra Cooperative Group said it supports a target aimed at mitigating and stabilising methane emissions, but not seeking to reduce them to zero, in its submission on the productivity commision draft report on transitioning to a low-emissions economy.

"Agricultural emissions make up approximately half of New Zealand’s emissions and we support policies being set to help transition agriculture to a low emissions economy," it said in the recently published submission. Submissions on the commission's draft report - presented in April - were open until June 8 and the commission aims to present a final report to the government by August.

According to Fonterra, "a phased approached is required for agriculture, where there are fewer mitigation options currently available and time is required for the industry to adapt and innovate to mitigate its emissions" and if agriculture is to be included in the emissions trading scheme, it should be linked to the commission’s recommended split gas target approach, it underscored.

According to Fonterra, the commission recommends that 100 percent of agricultural emissions be included in the ETS after a transitional period to protect international competitiveness.

"We support there being a transitional period that considered international competitiveness, however, in the long-term, we consider that methane emissions should be treated separately to carbon dioxide emissions in the ETS to reflect the different targets for the gases," Fonterra said.

As methane is not required to go to zero, it does not need to be priced the same as carbon dioxide and according to Fonterra "if dairy faces a price for 100 percent of its emissions and faced a high carbon price, methane emissions would likely be reduced significantly at a great economic cost to New Zealand, farmers and rural communities."

It notes that methane could be treated differently in the ETS through free allocation or a multiple-for-1 type policies.

Regarding specific action being taken by Fonterra, it said it has committed to net zero emissions by 2050 on the way to 100 percent renewable energy for its operation emissions at its manufacturing sites.

"A significant challenge for us is one-third of our plants in New Zealand still use coal to process our milk and near-term transitions within today’s known technology and infrastructure costs require significant capital and operating expenditure," it said.

For its farmers, "we have committed to no increase in our net on-farm emissions between 2015 and 2030, and we have an aspiration to reduce global dairy emissions through enabling and sharing mitigation innovations," it said.

It also noted that the commission specifically asked whether giving Fonterra discretion to refuse milk supply where this would lead to inefficient land use and/or a significant increase in the company’s greenhouse gas emissions provide any benefit. Under the terms of the Dairy Industry Restructuring Act, Fonterra is currently required to accept the supply of milk in New Zealand regardless of any strategic or environmental objectives.

The open entry obligation also requires it accept new dairy conversions or milk growth from existing farms where this may have an adverse impact in environmentally sensitive areas, it said.

As a result, "Fonterra intends to push for a removal of the 'open entry' requirement as part of its input into the government’s recently announced broad-ranging review of DIRA."

The government has put on hold an amendment to Dira that had been prepared by the previous National-led administration and in February, Agriculture Minister Damien O'Connor said the move would allow a broader review of New Zealand's dairy sector and whether it is adding enough value to the nation's biggest export commodity.

(BusinessDesk)

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