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Chief executive Andrew Ferrier said yesterday from July 1 Fonterra would have to account for its fuel use, manufacturing emissions and processing activities by either not using fuel or generating greenhouse gases or buying carbon credits to offset those emissions.
The first year would cost the company $25 million and increase each year thereafter, he said in a press conference.
In the past five years Fonterra had reduced by 34% the energy used per tonne of dairy product produced, Mr Ferrier said.
The savings equated to the energy used by a city the size of Hamilton.
Carbon dioxide production was 300,000 tonnes lower, due largely to transportation efficiencies, and 90% of waste was now recycled.
On-farm productivity had improved 1% a year for each of the past 20 years, he said.
Mr Ferrier said inland store hubs at Hamilton and Mosgiel would further improve transport efficiency.