New Zealand is a country known for its pristine scenery and focus on environmental sustainability. Therefore, many people find it surprising that New Zealand’s per capita greenhouse gas emissions are actually higher than typical developed countries such as Japan and the United Kingdom . Unlike many other countries, 49% of these emissions are created by agriculture, specifically methane and carbon dioxide from the dairy industry. In New Zealand, the word “dairy” is synonymous with Fonterra, a cooperative of 10,500 dairy farmers and the world’s largest exporter of dairy products . Having grown up working on a farm which supplies Fonterra and spent a significant amount of time working with the company, I have chosen to focus on what Fonterra can and should do to reduce New Zealand greenhouse gas emissions.
Firstly, it is important to note that while Fonterra has a cooperative ownership structure, it should not be considered responsible for the emissions produced by dairy farmers during the production of milk. Fonterra actually has limited control over their farming practices and some argue the company has little responsibility to reduce on-farm emissions, instead saying this onus sits with the farmers themselves . However, there are a number of reasons why Fonterra has been forced into action, most notably due to customers demanding higher environmental standards across the entire production chain. In addition, the New Zealand government is likely to remove agricultural emission exemptions from the domestic carbon trading scheme according to their most recent discussion document, something which will force farmers to bear the financial burden of any increases in emissions . This article is divided into two parts; what Fonterra can do to reduce on-farm emissions and what Fonterra can do to reduce farm to customer emissions.
Around 85% of dairy related emissions originate on-farm, mainly caused by animal digestion and fertiliser application . While many argue that Fonterra has an obligation to assist farmers in the reduction in these emissions, there is much debate around how best to do this. For example, creating regulation for farmers is unlikely to succeed given previous farmers response to similar moves in the past . Almost all on-farm emissions are in the form of methane and nitrous oxide, produced in significant quantities by ruminant animals such as cows and the application of fertilisers. There are a number of potential ways to reduce these emissions including genetic improvements to animals, improved fertiliser application efficiency and modifying animal diet composition . However, based on current technology, the costs of these changes are significant, mostly in the form of reduced milk production. For example, it is estimated that a 20% reduction in emissions could cause farm operating margins to decrease by 8 – 30%. Where many agree that Fonterra can play a key role is in reducing the magnitude of these costs through research and development of new technologies. Fonterra has already taken significant steps to do this, including funding an 18-month carbon emission footprint to accurate measure where on-farm emissions are originating . However, given the high stakes, many argue the company should be doing more in this space.
Internally, Fonterra has made significant progress toward reducing greenhouse gas emissions. As with many food production companies, steam and energy are key inputs. In the past, much of this energy was generated using coal. Since 2003, the company has invested in energy conservation initiatives and moved toward natural gas and electricity for manufacturing facilities, resulting in a 14% reduction in total energy usage. Carbon dioxide emissions have declined by 320,000 tons since 2003 despite growing production . The distribution chain is also responsible for emissions, mainly caused by trucks transporting milk from farms to factories. Here, Fonterra has invested in a technical fuel injection solution called GoClear, which can reduce truck emissions by 70 – 90% .
In summary, it is hard to dispute that Fonterra has done a significant amount to reduce its own carbon emissions. However, given the high stakes and significant public interest, the company should do more to assist farmers in reducing on-farm emissions also.
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