May 4, 2009 - Dairy production in New Zealand may be reduced by five per cent, costing the New Zealand economy $650 million annually, and allowing other countries to fill the gap in global supply risking further global emissions growth, unless the existing Emissions Trading Scheme (ETS) is altered.
Fonterra CEO Andrew Ferrier, presenting the dairy co-operative’s submission to the Emissions Trading Scheme Review Select Committee, said that global emissions would increase if a greater proportion of dairy products is produced by countries where production is less carbon efficient than New Zealand.
“New Zealand is one of the most greenhouse gas emissions-efficient dairy producers in the world,” says Mr Ferrier.
“If the New Zealand dairy sector is exposed to an emissions price before our competitors and before cost-effective technology is developed to help us reduce emissions from the dairy supply chain, its international competitiveness will be compromised, allowing less greenhouse gas-efficient producers in other countries to fill the gap in global supply.
“What is the point in New Zealand losing out economically for no potential global atmospheric gain?”
An NZIER (New Zealand Institute of Economic Research) study calculated that under the existing ETS, dairy production in New Zealand would be reduced by five per cent below business-as-usual levels when agriculture and stationary energy’s allocations of emission units are fully phased-out, equivalent to $650 million less dairy production per annum. This would have a knock-on effect on New Zealand’s economy as a whole: of New Zealand’s total exports from June 2007 to May 2008 of $39.1 billion, Fonterra alone contributed $9.7 billion, or 25 per cent.
“We support an Emissions Trading Scheme, as this is the best policy approach to support behaviour change to reduce emissions. But we believe the existing scheme needs modification to ensure New Zealand makes the best possible contribution to long-term global climate stabilisation without compromising economic growth,” says Mr Ferrier.
“New Zealand dairy producers already operate at world’s best practice in terms of greenhouse gas emissions efficiency. We want to raise the bar higher and continue to lead the world by making dairy production in New Zealand even more greenhouse gas-efficient.”
An Emissions Trading Scheme that allocates emissions units according to a measure of emissions efficiency per unit of output – or ‘intensity’ – would enable Fonterra to meet the growing global demand for dairy, while still encouraging Fonterra and farmers to lift the bar higher and improve their already world-leading levels of emissions efficiency, thus contributing to a global reduction in greenhouse gases below business as usual levels. The intensity measurement would be based on best practice emissions per kilogram of milksolids on farm and per kilogram of product from manufacturing.
“This is clearly a better long-term outcome than the risks of global emissions growth from less greenhouse gas-efficient dairy competitors and the economic loss to New Zealand, both of which are the inherent dangers of the current scheme design,” says Mr Ferrier.