Sustainable Energy Roundtable Series January, 2005 Pfizer Greenhouse Gas Management Program...
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Transcript of Sustainable Energy Roundtable Series January, 2005 Pfizer Greenhouse Gas Management Program...
Sustainable Energy Roundtable Series
January, 2005
Pfizer Greenhouse Gas Management Program
Experience
Sustainable Energy Roundtable Series
Agenda
• Rationale for Voluntary Goal
• Lessons Learned from EU Markets
• Feasibility of Trading with Kyoto Signatories
Sustainable Energy Roundtable Series
Company Profile
• $45 B in global pharmaceutical sales in 2003• $ 7 B biomedical research spend in 2003• Product sales in 150 countries• 81 Manufacturing plants in 32 countries• 122,000 Colleagues (32,000 in mfg.)
– More than 25 languages
• Top-tier Consumer and Animal Health Groups
Sustainable Energy Roundtable Series
U.S. EPA Climate Leaders • Joined in May, 2002• Established Public Goal May, 2003
• Dow Jones Sustainability Index (DJSAM) score for Climate Strategy Increased from 47 to 82
Goal1) “By 2007, Reduce CO2 Emissions by 35% Relative to Revenues
Compared to 2000.” 2) Increase Clean Energy Technology by 2010 to 35% of Total Electrical
Requirement
Sustainable Energy Roundtable Series
2003 Pfizer CO2 Emissions by Region
USA (incl. Puerto Rico)69%
Europe21%
Japan4%Asia Pacific
4%
Africa/MidEast1%
Latin America/Canada1%
•US: High Reliance on Coal, Six of Top Eight Sites in US & PR
•Europe: Greater Nuclear Power, Higher Energy Costs
•% by Group
•PGM 67%
•PGRD 19%
•Fleet 9%
•Capsugel 2%
•Corporate 2%
•TOTAL 2003 EMISSIONS:
•2,791,568 MT CO2
Sustainable Energy Roundtable Series
Greenhouse Gas Management Strategy and Rationale for Voluntary Program
• Makes Good Business Sense:– Increase Internal Efficiency: Over $15 million recurring
savings and 180,000 MT CO2 Reduction• Low cost/no cost energy conservation projects
• Capital intensive energy projects (with payback)
• Increase capacity utilization (facility consolidations)
• Corporate Responsibility– Proactive response to the issue of climate change
• Alignment with Global Regulatory Trends
Sustainable Energy Roundtable Series
Pfizer Progress Toward Goal: CO2 Emissions per $1,000,000 Revenue
0
10
20
30
40
50
60
70
80
2000 2001 2002 2003 2004 2005 2006 2007
Met
ric
To
nn
es C
O2
per
US
Do
llar
Sustainable Energy Roundtable Series
Experience with EU ETS
• Kyoto Protocol– EC and Member States committed to reduction of 8% below 1990 GHG
levels by 2008 - 2012– Primary driver for EU to develop its regulatory scheme
• EU Emission Trading Scheme (EU ETS)– Cap and Trade of CO2 for large facilities – Carbon tax to be imposed on all other facilities – Option for small facilities to join ETS and avoid tax (“opt in” provision)
• Will require detailed financial analysis– Member States developing trading guidelines
• Other “carbon” taxes on fuels being applied by specific Member States, separate from EU ETS
Sustainable Energy Roundtable Series
EU ETS Regulatory TimetableOctober 25, 2003 • EU issues Emissions Trading Directive
January 1, 2004 • GHG emissions permits submitted for sites subject to Directive
March 31, 2004 • Draft National Allocation Plans (NAPs) for Member States to be submitted to EU (UK, IRE, FIN, NL already in)
January 1, 2005 • Phase I of trading program begins (ends Dec 31, 2007)• €40 per tonne penalty for cap exceedance• Trading only within EU; can avoid penalty by buying credits
January 1, 2008 • Phase II begins; penalties increase to €100 per tonne• Trading outside EU with Kyoto Countries? RGGI?• Possible inclusion of non-CO2 gases
October 31, 2004 • Final allocation to be notified to each installation operator for the Phase 1 period
February 28, 2005 • Final allocation issued to each operator (annual basis)
Sustainable Energy Roundtable Series
EU ETS key issues:
• Direct vs. Indirect Emissions– Reduction of direct emissions at facilities expensive– Provides no added incentive for demand-side management– Windfall for electric generators?
• How will new entrants be treated? • High indirect costs due to higher energy costs and carbon
taxes (anti-competitive)• Opt-in for unregulated facilities• Guidance on trading limited• No central market clearinghouse established• Unclear if price signal will lead to greater innovation• National Allocation Plans (NAPs) not finalized yet
Sustainable Energy Roundtable Series
European Union
UK Country 3
Activity 2CombustionInstallations
Chemical Sector 2 Sector 3
Installation 3Sandwich Installation 2
Country 2
GHG Emissions AllocationsCountry allocations determined by Kyoto Protocol.
Sector and entity allocations determined by national governments (NAP)
National Emissions BudgetsMember States assign allocations (expected to be 65%-90% of actual emissions) to each sector that is involved in an activity included in the EU ETS.
Activity
Sector
Installation
Sustainable Energy Roundtable Series
Carbon Trading Feasibility Outside US
• Active global markets• US firms may purchase credits but may
not sell credits generated in US• Most reduction opportunities for Pfizer in
US• No incentive to participate
Sustainable Energy Roundtable Series
Summary
• Public voluntary GHG goal drives energy conservation and cost savings
• As a global company, commitment to goal shows leadership in climate change issue
• Too early to gauge effectiveness of mandatory programs• Direct vs Indirect emission issue needs to be addressed• No reason for Pfizer to engage in global CO2 markets if
excess reductions cannot be sold in Kyoto signatory countries