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Pfizer Greenhouse Gas Management Program Experience

Pfizer Greenhouse Gas Management Program Experience. January, 2005. Agenda. Rationale for Voluntary Goal Lessons Learned from EU Markets Feasibility of Trading with Kyoto Signatories. Company Profile. $45 B in global pharmaceutical sales in 2003 $ 7 B biomedical research spend in 2003

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Pfizer Greenhouse Gas Management Program Experience

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  1. Pfizer Greenhouse Gas Management ProgramExperience January, 2005

  2. Agenda • Rationale for Voluntary Goal • Lessons Learned from EU Markets • Feasibility of Trading with Kyoto Signatories

  3. 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

  4. 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

  5. TOTAL 2003 EMISSIONS: 2,791,568 MT CO2 % by Group PGM 67% PGRD 19% Fleet 9% Capsugel 2% Corporate 2%

  6. 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

  7. 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

  8. 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 EU ETS Regulatory Timetable

  9. 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

  10. GHG Emissions Allocations Country allocations determined by Kyoto Protocol. 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. Activity Sector and entity allocations determined by national governments (NAP) Sector Installation

  11. 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

  12. 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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