Business

Fonterra’s climate change fudge

Rod Oram looks this week at Fonterra's apparently ground-shifting announcement about reducing its net carbon emissions to zero by 2050. He writes Fonterra's caveats mean the plan is not as impressive as it looks.

At first glance, Fonterra made on Tuesday a massive pledge to tackle climate change.

“We are committed to helping New Zealand achieve its Paris Climate Agreement commitments. That’s why we’ve set new targets to reduce both our on-site and on-farm emissions. We’ve set a target of net zero emissions for our global operations by 2050, with a 30 percent reduction by 2030 from a 2015 baseline,” said Robert Spurway, Fonterra’s Chief Operating Officer Global Operations.

But those targets apply only to Fonterra’s own operations, which amount to only 10 percent of the greenhouse gas (GHG) emissions generated by its total supply chain. They do not cover the other 90 percent of its footprint, which is generated on-farm by its farmer-shareholders who supply more than 20 bn litres of milk a year to it.

The co-op’s on-farm commitment is irresponsibly meagre.

“Fonterra has also set an interim target of climate neutral growth to 2030 for on-farm emissions in New Zealand, which means any growth in milk production will have its resulting carbon emissions reduced or off set,” the co-op announced.

Increments won't do it

Yes, reducing on-farm emissions is a serious technological and economic challenge for conventional food producers the world over. But incremental change won’t solve their deep unsustainability. Nor will it save them from the intense competition developing fast from new food technologies with minimal adverse environmental impacts.

These include cellular agriculture (such as growing meat from stem cells or growing milk from milk proteins without using cows), contained agriculture (such as growing vegetables in hydroponically-fed, LED-lit, buildings that serve as ‘vertical farms’) and plant-based proteins that look, smell, taste and cook like meat from animals.

Two recent reports have highlighted how urgent it is for the conventional agricultural sector to radically reinvent itself. The first is by Dr Andy Reisinger and Dr Harry Clark, the deputy director and director of the NZ Agricultural Greenhouse Gas Research Centre, in Global Change Biology, a leading international science publication.

Livestock farming around the world contributed about 23 percent of total climate warming in 2010, Reisinger and Clark concluded. This is the “lower bound” of the full impact, because their estimate did not include the emissions from the growing of feed such as soya beans.

“The unambiguous answer is yes, it’s essential to reduce livestock emissions in order to reduce climate change consistent with what countries signed up to under the Paris Agreement,” Dr Reisinger says.

“If we’re serious on a global level about limiting warming to 1.5 or 2°C then reducing livestock emissions has to be a part of the effort, otherwise the task becomes even more difficult than it already is.”

The second report reveals for the first time how big a contribution to climate change is made by the world’s three largest meat producers (JBS of Brazil and Tyson and Cargill of the US) and the two largest global dairy producers (Dairy Farmers of America and Fonterra).

The farming and processing operations of these five companies generated 578 m tonnes of C02 equivalent last year. This was equal to the GHG footprint for all the fuel products made and sold by ExxonMobil, as this graphic shows.

This analysis was conducted by three research organisations, the Institute for Agricultural and Trade Policy in the US, Grain in Spain and the Heinrich Boll Foundation in Germany.

This analysis was conducted by three research organisations, the Institute for Agricultural and Trade Policy in the US, Grain in Spain and the Heinrich Boll Foundation in Germany.

Their analysis shows that Fonterra’s footprint (including its shareholders’ farming) was 42 m tonnes of C02 equivalent in 2016. This was just over half New Zealand’s entire GHG emissions. They used rigorous methodology including, for example, data from the UN’s Food and Agricultural Organisation.

Fonterra's sizeable impact on climate change

If the top 20 meat and dairy companies in the world were a country, they would be the 7th largest emitter, ahead of major industrial countries such as Germany. If Fonterra was a country, it would rank on this analysis just behind Norway, which itself is not far behind Sweden and Switzerland.

However, Fonterra disputes the GHG footprint the report ascribes to it, which is based on the FAO’s average for processors in the Oceania region of 1.88 kg of CO2 per kg of fat- and protein-corrected milk. Fonterra says the figure for its milk is 0.85kg of CO2 per kg of milk, based on analysis it commissioned from AgResearch. This works out at 17.3m tonnes of CO2 equivalent last season for the milk, plus a further 1.7 m tonnes for its manufacturing operations. That equates to only 24 percent of New Zealand’s total emissions.

But AgResearch’s analysis doesn’t mesh well with government data. Those show that ruminant livestock account for 49 percent of NZ’s total GHG emissions. If Fonterra’s share was only 22 percentage points (counting only its farm emissions), then the other 27 points would have to accrue to the 15 percent of the dairy sector which competes with Fonterra, plus all sheep and beef farming, which seems a disproportionately large share.

Clearly more analysis is needed to determine which organisations are responsible for what emissions in the farming sector.

But that’s a trivial issue. The overwhelming problem is beyond dispute. Fonterra is forecasting no reduction in on-farm emissions by 2030. Instead, any reductions in emissions per litre of milk will be nullified by increases in milk production. It’s only commitment is to offset any emissions above current levels by the likes of forestry plantings.

Fonterra’s no-hope scenario is directly contradicted by a report commissioned by GLOBE-NZ, an all-party grouping of our backbench MPs. The analysis by Vivid Economics of the UK was published in March. The report is compelling.

It shows how science and better farming practices will reduce emissions and contribute to the pathways by which we can achieve our 2030 Paris target on the way to reaching the global target of net zero emissions by 2050.

Likewise, Jan Wright, then the Parliamentary Commissioner for the Environment, examined the same reduction technologies in her report on climate change and agriculture published last October.

The September 22 edition of this column reported on these encouraging developments.

Fonterra's plan not nearly enough

If Fonterra fails to cut its emissions, and the rest of dairy, sheep and beef farmers follow suit, then New Zealand has absolutely no hope of meeting its 2030 Paris commitment by emissions reduction. The only way would be by very expensive purchases of credits at home and abroad, mostly funded by taxpayers. But there’s doubt among climate change negotiators internationally whether such credible foreign credits will be readily available.

“It’s now clear that the world cannot avoid climate catastrophe without addressing the staggering emissions from the largest meat and dairy conglomerates,” say the authors of the report on major meat and dairy companies.

Yet, they expected those companies “to spend much time and money talking about efficiency, while expanding production” when they spoke at the annual UN climate negotiations which are just finishing in Bonn.

Indeed, that was exactly the message that Fonterra’s group environmental manager, Francesca Eggleton, gave at Bonn. “We envision a future where data is driving more nutrition for a smaller environmental footprint,” was the conclusion of her speech.

Our entire farming sector has absolutely no strategy for reducing its emissions. Yes, research is underway but on a funding pittance compared with the enormity of the challenge.

Other actions are equally modest. For example, DairyNZ, the sector’s farmer-funded research body, launched last year “Dairy Action for Climate Change” in partnership with Fonterra, and with the support of the ministries for primary industries and the environment.

It has no concrete goals other than to “contribute to meeting New Zealand’s 2030 emissions reduction target.” Among its main performance indicators are to identify 12 “climate change dairy farmer champions from across New Zealand”, host six discussion groups, train 60 rural professional to measure emissions and for Fonterra to undertake a GHG recording pilot on up to 100 of its suppliers’ farms.

Thankfully, Fonterra is being a bit more ambitious on the remaining 10 percent of its GHG footprint that is generated by its own operations. Over recent years it has made good progress on energy efficiency, and with this week’s announcement it has finally committed to eventually stop using coal to power the plants that dry about one-third of its milk.

It will work towards using biomass (such as wood waste from forest harvests) and electricity to displace coal. Both initiatives will deliver lessons to be shared with other industrial users in their manufacturing processes. EECA, the government’s energy efficiency agency, is closely involved in this work.

Still burning coal in 2070...

While it will be able to convert some boilers to at least dual fuel (biomass and coal), Fonterra won’t commit to no new coal-fired boilers until 2030. Given such equipment has a working life more 40 years or so, theoretically Fonterra could still be burning some coal in 2070.

Plainly, Fonterra still hasn’t got its head around climate change. One particular factor clouds its judgement. It says its farmers’ operations have an emissions intensity which is only half of the average for the global dairy industry. One of their great advantages is pastoral farming compared with feedlot farming among many of their competitors.

But this is just the same argument that the Australian coal industry uses. It says its product has a future because it is higher quality and lower emissions than its competitors’. It’s even coined a name for it, HELE coal.

This ignores the fact that all coal is facing strong and growing competition from zero emissions fuel, and from countries’ climate change policies. Such clean competition and regulatory pressures are only just emerging for dairy companies, but those will ramp up fast in the years ahead.

Meanwhile, pressure is building on some of our dairy competitors overseas to cut their emissions. The leader is California. It passed a law in September that requires its livestock industry to cut its emissions of methane, a highly potent GHG, by 40 percent of 2013 levels by 2030, with three-quarters of that reduction coming from dairy farms.

Worse, we’re lagging far behind California overall. As a nation, our GHG emissions have risen by 21 percent since 1990, but California’s are nearly back to 1990 levels. By 2030, the state aims to cut its emissions by 40 percent from 1990 levels. But we’re only aiming for an 11 percent cut.

Our international commitments are meaningless, though. On our current trajectory, we are missing them by miles.

Thus, Fonterra is playing a highly irresponsible and very risky game with its future and the country’s by trying to fudge its impact on climate change with its 10 percent solution.