Monday, July 15, 2024

Government partners with Fonterra to cut coal use in $790m investment deal

The Government has announced it will contribute $90 million to a $790 million funding deal with Fonterra to cut coal use at its dairy factories, delivering significant emissions reductions for New Zealand.

Fonterra has committed to undertaking a complex range of projects to cut coal use across six manufacturing sites – resulting in approximately 2.1 million tonnes of earlier CO2e reductions – as part of an approximate $790 million investment to meet revised decarbonisation targets. 

Prime Minister, Chris Hipkins said the reductions were the equivalent to taking around 120,000 cars off the road.

Mr Hipkins announced the plans alongside Minister of Energy and Resources, Megan Woods, and the Minister of Climate Change, James Shaw at Fonterra’s Hautapu site today.

“This hugely significant commitment means the dairy sector will dramatically cut its coal use quicker – this is not just critical for our environment, but for our economy too,” Mr Hipkins said.

“By partnering with Fonterra to reduce emissions we’re helping to maintain New Zealand dairy’s competitive edge, as international consumers and food manufacturers demand further climate commitments.

“In my recent trade missions, I’ve heard first-hand the importance of New Zealand’s climate credentials to our exports. This partnership is an investment in our future economic prosperity.”

The Prime Minister said the investment enables Fonterra to accelerate their emissions reductions, with an expected halving of their coal use by 2030.

“The current international environment is challenging for Fonterra and farmers, so we are teaming up to reduce more emissions faster,” said Mr Hipkins.

“The Government is getting runs on the board with our Emissions Reduction Plan. These partnerships with big emitters are reducing pollution, helping build momentum and ensuring we are keeping up with our international competitors.

“It demonstrates our Government’s commitment to climate action now, and how much further and faster we can go if we make investments sooner, rather than later,” he said.

Under the partnership Fonterra, New Zealand’s largest dairy producer and exporter, will undertake an emissions reduction programme across its entire business, with a particular focus on the remaining coal sites used to process dairy.

The Government will co-fund up to $90 million from the Government Investment in Decarbonising Industry (GIDI) Fund, which is paid for through the Emissions Trading Scheme.

“Government backing has unlocked a revised and critical new target – achieving a 50% reduction in carbon emissions by 2030 – which is an increase on its original target of 30%, measured from a 2018 baseline,” Minister Woods said.

“This will help to meet our domestic and international emissions reduction obligations by 2030.

“This approach sees the Government investing in New Zealand to help businesses cut their emissions, rather than sending that money offshore to buy overseas offsets – expected to cost into the billions – in a few years’ time.

“This agreement, second in magnitude to the cuts secured at NZ Steel, delivers 1.17 million tonnes of CO2e cuts, 2.69% of the total emissions reductions required in New Zealand’s second emissions budget between 2026 and 2030,” she said.

The Minister said Fonterra was anticipating a combination of energy efficiency, biomass, existing heat pump technology and newer innovative solutions will deliver the reductions.

“What is clear again today is that our energy choices and the technologies involved are going to play a central role in transitioning to a low-emissions economy, and we don’t have to de-industrialise to decarbonise,” said Minister Woods.

“The private sector will do much of the heavy lifting. And in fact – already is. However, we too – as Government – have a role to play.

“This is about accelerating change at scale – in a way that will also strengthen our economy and retain jobs.”

Climate Change Minister, James Shaw described the deal as “momentous” for the sector.

“This is a decarbonisation deal of national significance. It is expected to deliver over seven per cent of the targeted cuts to pollution from the energy and industrial sectors, in our second emissions budget, and over four per cent of our third emissions budget,” he said.

“I congratulate Fonterra, one of New Zealand’s largest emitters, for showing what can be done, what must be done.

“With a programme spanning multiple Fonterra sites, this will put New Zealand in a better position to reach net zero by 2050. But we cannot be complacent. We have to do everything we can to radically reduce our reliance on fossil fuels, in order to avoid the worst of climate crisis.”

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