"We recognise that climate change is real and that global emissions must be reduced. Fonterra will continue to target a 20% reduction in emissions intensity right across its supply chain by 2020," says Fonterra's Group GM Global Sustainability, Bruce Donnison.
"But at the same time, we have been concerned that applying additional carbon costs on agriculture here, when they are still not faced by the majority of producers elsewhere in the world, simply undermine the competitiveness of the New Zealand agricultural sector - our most important export sector."
He says with current global financial conditions, the decision to hold the one for two obligations (one New Zealand Unit for every two tonnes of emissions) was timely, particularly given the agricultural sector's consistent and considerable contribution to exports. It also recognised New Zealand's comparative efficiency in producing low carbon food for a growing global population.
Donnison stressed the review would not be taken as a signal to ease up on efforts to mitigate agricultural emissions.
"The bulk of emissions are on farm and we need to tackle them there. We have consistently held the view that providing information and supporting our farmers to reduce emissions will always have more impact than increasing carbon costs.
"Our farmers have contributed nearly a quarter of the $43 million being invested by New Zealand in mitigation research and want practical solutions. This work will continue, as will the efforts being made in Fonterra's milk processing plants to drive down emissions, especially through energy efficiency."
Donnison says New Zealand Fonterra dairy farmer suppliers were already directly paying their way in the ETS, with $3,700 a year in carbon costs for fuel, energy and their share of the carbon costs being paid by Fonterra for processing emissions. This compares to a typical household's costs of around $133 a year.
"Without the decisions announced today, and if prices rose back to the expected $25 per New Zealand Unit, the ETS would have cost the average dairy farmer $8000 per annum from 2015."