Transcript Pfizer Greenhouse Gas Emission Reduction Goal

Pfizer Greenhouse Gas
Management Program
Experience
January, 2005
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Agenda
• Rationale for Voluntary Goal
• Lessons Learned from EU Markets
• Feasibility of Trading with Kyoto
Signatories
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Company Profile
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$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
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U.S. EPA Climate Leaders
• Joined in May, 2002
• Established Public Goal May, 2003
Goal
1) “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
• Dow Jones Sustainability Index (DJSAM) score for Climate
Strategy Increased from 47 to 82
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2003 Pfizer CO2 Emissions by Region
•TOTAL 2003 EMISSIONS:
•2,791,568 MT CO2
Asia Pacific
4%
Japan
4%
Africa/MidEast
1%
Latin America/Canada
1%
•% by Group
•PGM
67%
•PGRD
19%
•Fleet
9%
•Capsugel
2%
•Corporate 2%
Europe
21%
USA (incl. Puerto Rico)
69%
•US: High Reliance on Coal, Six of Top Eight Sites in US & PR
•Europe: Greater Nuclear Power, Higher Energy Costs
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Greenhouse Gas Management Strategy and
Rationale for Voluntary Program
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Makes Good Business Sense:
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Increase Internal Efficiency: Over $15 million recurring
savings and 180,000 MT CO2 Reduction
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Corporate Responsibility
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Low cost/no cost energy conservation projects
Capital intensive energy projects (with payback)
Increase capacity utilization (facility consolidations)
Proactive response to the issue of climate change
Alignment with Global Regulatory Trends
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Pfizer Progress Toward Goal: CO2 Emissions per $1,000,000 Revenue
80
Metric Tonnes CO2 per US Dollar
70
60
50
40
30
20
10
0
2000
2001
2002
2003
2004
2005
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2006
2007
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
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EU ETS Regulatory Timetable
October 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)
October 31, 2004
• Final allocation to be notified to each installation operator for the
Phase 1 period
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
February 28, 2005
• Final allocation issued to each operator (annual basis)
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
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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
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GHG Emissions Allocations
Country allocations determined by
Kyoto Protocol.
European Union
National Emissions Budgets
Member 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.
Combustion
Installations
Activity
Sector
Installation
Chemical
Sandwich
Installation 2
Country 2
UK
Sector 2
Country 3
Activity 2
Sector 3
Sector and entity
allocations determined by
national governments
(NAP)
Installation 3
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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
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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
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