The environment commissioner warns that the Fonterra restructuring law threatens to increase emissions and reduce the quality of fresh water

The environment watchdog says a proposed law change that underpins Fonterra’s dominant market position threatens to increase climate and freshwater pollution, and should be paused until further analysis can be done.

However, the government appears unaffected by these concerns, and says it does not plan to consider potential environmental impacts before changing the law through Parliament.

that Amendment Bill Presented in Parliament on Tuesday would allow Fonterra to change its capital structure, including easing capital requirements for its farmer shareholders. Doing so will make it easier for new farmers to join the cooperative, and motivate existing farmers to stay, thus solidifying its already dominant position in the market.

This will also close the connection between the Fonterra shares traded between farmers and those traded in the outdoor unit fund, essentially increasing the farmers’ control over the cooperative.

Read more:
* Cabinet approves support for Fonterra’s capital restructuring
* Enhancing the quality of our dairy herd is vital to the future of the sector
* ‘Ridiculous’ that Fonterra is still bound by legislation that tilts the stadium towards its competitors
* Why Fonterra needs to change its capital structure

The changes, supported by the vast majority of Fonterra’s farmers, are in response to an expected decline in the national milk production, largely due to environmental regulations.

While Fonterra could restructure without changing the law, doing so could risk legal challenge. The government agreed to amend the Fonterra law, while adding more oversight over Fonterra’s milk price-fixing arrangements.

“Long-term sustainability, fair pricing in the local market and value creation in the New Zealand dairy industry are part of the balance we are aiming for,” Agriculture Minister Damien O’Connor said on Tuesday.

“The past two decades have seen new entrants bring competitive innovation to the industry and we want that to continue.

“The continued success of our dairy industry is vital to both New Zealand’s continued economic recovery, and to protecting New Zealanders from the sharp edges of the global economic downturn.”

Some environmental experts and officials have pointed to what could be unintended environmental consequences that would undermine government policies to combat climate change and reverse freshwater pollution.

With Fonterra’s footprint so large – it processes about 80% of New Zealand’s milk – even a modest incentive for its farmers to increase production would risk increasing the size of the national dairy herd, with implications for the climate and freshwater.

locker paper As for the bill, he cited this concern, saying it was “likely to support an increase in emissions.” However, no climate forcing analysis was performed, because climate influences were considered indirect and difficult to quantify.

The Cabinet paper concluded that any increase in climate pollution would be a “secondary and marginal effect that is likely to be more than offset by current and planned government policies, as well as Fonterra’s investment intentions”. Fonterra has pledged to spend About 1 billion dollars on sustainability initiatives by 2030.


Fonterra factors in the levels of fat and protein in milk when purchased from farmers.

The bill has attracted scrutiny by Parliamentary Commissioner for the Environment (PCE), Simon Upton, who has called for further analysis of the environmental consequences.

“I’m mean [the changes] It carries the potential for negative environmental consequences and must be properly understood before any modification is undertaken,” he wrote in a letter to O’Connor.

The environmental risk lies in the possibility that the changes will increase the overall profitability of the farm, thereby stimulating an increase in the size of the national dairy herd. A larger dairy herd will increase greenhouse gas emissions and put more pressure on freshwater resources.”

Upton said the sheer size of the current dairy herd means that small increases in its footprint “could have significant negative environmental impacts”.

He did not accept the logic of the government’s paper that “current and planned policies” would offset any increase in emissions.

Even if this were true, emissions cuts from ‘current and planned policies’ would happen regardless of whether it was true. [the law] Amended “.

Simply put, increasing emissions will negate the currently planned emissions reductions. Fonterra will do less than it can and will shift the burden of reducing emissions to other sectors of the economy.”

O’Connor’s line officials recommended preparing a climate impact assessment, as well as conducting a separate freshwater assessment, which must be made public before the amendment bill proceeds. Even if they did not change the outcome, he said, they would provide important information for MPs to understand the consequences of their decisions: “This is about transparency.”

The petition appears to have been rejected.

In response to Upton’s letter, O’Connor acknowledged his concerns, but argued that environmental impacts would be too difficult to design in advance.

“The government is aware that Fonterra’s capital restructuring may have flow effects on greenhouse gas emissions and fresh water quality,” he wrote.

However, the magnitude and likelihood of any effects are highly uncertain. It depends on a set of factors, interactions, and other variables that may accumulate or compensate for each other in a group at any time.”

Any modeling will require assumptions about many variables – among them global demand for dairy products, social licensing, and dairy sector investments – each of which has a great deal of uncertainty.

“I am not convinced that the results of any such model would be robust enough to separate (and attribute causation to) the potential environmental effects of Fonterra’s capital restructuring,” O’Connor wrote.

Noting that the amendment would increase transparency about Fonterra’s milk-pricing arrangements, O’Connor said the government has allocated nearly $339 million to develop technologies to reduce agricultural emissions. The law will also be reviewed periodically.

The first reading of the amendment is likely to take place in the coming weeks, with a selection committee process later in the year.

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