Pfizer Greenhouse Gas
Management Program
Experience
January, 2005
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
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
Sustainable Energy Roundtable Series
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
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
•
•
•
•
Corporate Responsibility
–
•
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
Sustainable Energy Roundtable Series
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
Sustainable Energy Roundtable Series
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
Sustainable Energy Roundtable Series
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
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
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
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
Sustainable Energy Roundtable Series