Fonterra Rorts the ETS

from Jeanette Fitzsimons

It is perhaps no surprise that our friend Fonterra, as the second biggest coal user in NZ (and a substantial user of gas as well), is among the “dirty dozen” largest users of fraudulent ETS credits identified by the Morgan Foundation in their brilliant piece of research Who’s the Real Cheat Here? Climate Cheats II: The Dozen Dirty Businesses.

What is surprising is that in Zella’s creative graphic below, using figures from that report, Fonterra doesn’t look too bad. It comes tenth in the Morgan list and holds fewer shonky credits than the oil and electricity companies. Fonterra’s 1.2 million units, although still huge, compare favourably with BP’s 6.1 million units.

the-dirty-dozen-infographic-2

But Fonterra is worse than they look and here’s why:  

The ETS rules give free credits to “trade exposed” companies whose overseas competitors don’t have to pay any price for their carbon emissions. Fonterra is eligible for free credits equal to 60% of its process emissions.

These credits, worth up to $25 per unit on the international market, are paid out courtesy of the NZ taxpayer. Fonterra was expected to use them in part-payment for their emissions.

But they didn’t. Instead, like many other companies benefitting from this largesse, Fonterra cheated. They sold the credits at full price and bought dirt cheap credits from places like Russia and Ukraine which did not represent actual emissions reductions – in other words, they were fraudulent. They used these junk credits to pay their ETS obligation to the Government.

This was not illegal under the law as it stood, even though the companies and the NZ Government knew the credits were junk. The rest of the world knew and mostly clamped down on the practice a few years ago. New Zealand was the last country to follow. The general public did not know until this year.

And let’s not forget the ‘two-for-one’ policy, where companies in effect only have to buy enough credits to cover half their emissions. So BP, Z Energy or Genesis buy enough to cover just 50% of their emissions, and Fonterra only 20%. The Government has recently announced that the two-for-one policy will be phased out, albeit very slowly.

So not only did Fonterra benefit from free credits covering 60% of its emissions, it made a substantial profit from its pollution by selling these and buying fraudulent ones. The others did too, but the oil and electricity companies didn’t get any free ones to gamble with.

What’s more, most of the emissions from the dairy industry are entirely exempt from the ETS. There is no price on the methane from the cows or the nitrous oxide mainly from soils that together make up about half of NZ’s emissions. So that’s the other reason Fonterra looks better than it is,

Don’t be fooled by the dairy industry’s assertions that we are wrong to call them exempt. They point out that, like everyone else, they do pay for emissions from their transport fuel, on farm diesel and some of their processing energy. But the really big elephant in the room is the methane and nitrous oxide – and right now they’re getting off scot free on those

True carbon accounting would show the dairy industry as by far the biggest contributor to climate change in this country. With concessionary policies like this, it is not surprising that Fonterra has no economic incentive to quit coal, replace with wood waste, and focus on producing quality high value products from less milk rather than bulk commodities. Until government policy changes, it is up to the public and its customers to insist that Fonterra does better.

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