It is perhaps no surprise that our friend Fonterra, as the second biggest coal user in NZ (and a substantial user of gas as well), is among the “dirty dozen” largest users of fraudulent ETS credits identified by the Morgan Foundation in their brilliant piece of research Who’s the Real Cheat Here? Climate Cheats II: The Dozen Dirty Businesses.

What is surprising is that in Zella’s creative graphic below, using figures from that report, Fonterra doesn’t look too bad. It comes tenth in the Morgan list and holds fewer shonky credits than the oil and electricity companies. Fonterra’s 1.2 million units, although still huge, compare favourably with BP’s 6.1 million units.

But Fonterra is worse than they look and here’s why:  

The ETS rules give free credits to “trade exposed” companies whose overseas competitors don’t have to pay any price for their carbon emissions. Fonterra is eligible for free credits equal to 60% of its process emissions.

These credits, worth up to $25 per unit on the international market, are paid out courtesy of the NZ taxpayer. Fonterra was expected to use them in part-payment for their emissions.

But they didn’t. Instead, like many other companies benefitting from this largesse, Fonterra cheated. They sold the credits at full price and bought dirt cheap credits from places like Russia and Ukraine which did not represent actual emissions reductions – in other words, they were fraudulent. They used these junk credits to pay their ETS obligation to the Government.

This was not illegal under the law as it stood, even though the companies and the NZ Government knew the credits were junk. The rest of the world knew and mostly clamped down on the practice a few years ago. New Zealand was the last country to follow. The general public did not know until this year.

And let’s not forget the ‘two-for-one’ policy, where companies in effect only have to buy enough credits to cover half their emissions. So BP, Z Energy or Genesis buy enough to cover just 50% of their emissions, and Fonterra only 20%. The Government has recently announced that the two-for-one policy will be phased out, albeit very slowly.

So not only did Fonterra benefit from free credits covering 60% of its emissions, it made a substantial profit from its pollution by selling these and buying fraudulent ones. The others did too, but the oil and electricity companies didn’t get any free ones to gamble with.

What’s more, most of the emissions from the dairy industry are entirely exempt from the ETS. There is no price on the methane from the cows or the nitrous oxide mainly from soils that together make up about half of NZ’s emissions. So that’s the other reason Fonterra looks better than it is,

Don’t be fooled by the dairy industry’s assertions that we are wrong to call them exempt. They point out that, like everyone else, they do pay for emissions from their transport fuel, on farm diesel and some of their processing energy. But the really big elephant in the room is the methane and nitrous oxide – and right now they’re getting off scot free on those

True carbon accounting would show the dairy industry as by far the biggest contributor to climate change in this country. With concessionary policies like this, it is not surprising that Fonterra has no economic incentive to quit coal, replace with wood waste, and focus on producing quality high value products from less milk rather than bulk commodities. Until government policy changes, it is up to the public and its customers to insist that Fonterra does better.

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Several new Fonterra plants have been officially opened in the last week or two, though they have all been running for a few months. Together they suggest the company may finally be giving some weight to the “value” component of its mantra, “Volume, Value, Velocity”.

We have criticised Fonterra in the past for its push for more, more and more milk, leading to farm intensification, more water pollution and more greenhouse gases. So it’s only fair we issue a cautious bouquet when they balance that with added value.

Bill English has just opened the new Reverse Osmosis plant at Edendale, the largest dairy factory in the southern hemisphere. Reverse osmosis is a widely used technology which purifies water or concentrates liquids by passing them through a membrane under pressure.

Whole milk can be concentrated down to 40-50% of its original volume, which should mean a saving of more than half the coal needed to dry it to powder or to MPC (milk protein concentrate). Certainly the changes at Edendale, which include an MPC plant and another making anhydrous milk fat (industrial butter) have added considerable value to each litre of milk with no additional coal boiler, even though an additional 1.4 million litres a day of milk are being processed.

Imagine the impact on Fonterra’s coal use if all their large plants used reverse osmosis prior to drying. It would also make it easier to source and handle the waste wood which must eventually replace that coal.

In the same week Steven Joyce opened a $72m expansion at Clandeboye which doubles their production of mozzarella cheese, making enough to top 300 million pizzas a year. Leaving aside the question of just what they have done to speed up the process from 3 months to 6 hours, this is a much higher value use for milk than bags of powder.

An $11m upgrade at Hautapu has doubled the production of lactoferrin, a milk-derived protein known in the industry as “pink gold” which fetches up to $1,000/ kg. Te Rapa factory is reported to have doubled its production of cream cheese.

All this points the way to a much smarter strategy than constant growth in bags of milk powder, with high environmental impact for low prices. Why, then, persevere with the huge expansion of coal fired milk drying at Studholme when there are demonstrably smarter ways to invest capital?

Perhaps Robert Spurway, Global Affairs manager, is having another think – he was reported last week saying that there is “no specific timeframe” for the Studholme plant, and Fonterra is not committed to it. Certainly it is hard to see where the extra milk will come from, with prices showing no sign of recovering and many farmers reducing production to save costs. This year’s milk production is expected to drop by at least 3 and maybe 5%.

With the benefits of adding value at existing plant now well demonstrated; with less milk flow and unhappy farmers, now would be the right time to call it quits and announce that Studholme will not go ahead, but that instead the capital will be invested in making more value for farmers from the milk they already produce.

The post Is Fonterra Seeing the Light? appeared first on Coal Action Network Aotearoa.

With the world committing at Paris to strive to keep global warming down to 1.5 degrees, the pressure is on Fonterra to stop increasing its coal use and start a gradual phase out. It cannot afford the reputational damage that will result from building its huge new drying plant at Studholme, increasing its coal use to some 600,000 tonne a year.

There is another way that could be more profitable for the company and especially for its farmers, while lightening its environmental footprint. The key is to substitute “value” for “volume”.

On 30 November NZ Farmers’ Weekly ran a big article where they lauded their achievements in energy efficiency, and complained that to get off coal was too big a challenge. We disagree.

See my response in last week’s issue: https://farmersweekly.co.nz/article/energy-challenges?p=24

The post A win-win strategy for Fonterra appeared first on Coal Action Network Aotearoa.

Fonterra’s coal use is under scrutiny in South Island media after Robert Spurway, Global Operations Manager, replied on Tuesday to my column in the Christchurch Press.

Waimate locals and Coal Action Network activists make their statement in front of Fonterra’s Studholme plant

We are calling for Fonterra to use wood waste instead of coal in all its new boilers at its milk factories.

Mr Spurway says coal is the “only viable source” of heat to dry milk in the south Island, and begins his arguments by setting up a typical straw man.

CANA is not saying that “a switch to entirely wood fired burners would be simple”. Of course it will take some years, and that is why Fonterra should have started yesterday. At the very least, it is essential to start now, with any new burners being designed for renewable fuels. Then the oldest burners, which date from the 1970s and are probably the least efficient, can gradually be refurbished or replaced by purpose-built wood burners.

Within the timeframe required for the transition it is likely that new electric technologies will have matured to the point where they can be considered alongside wood. We will bring you more on that in a future blog. But for now, the place to start is the huge volumes of forestry residues that are not being used for anything.

Let’s not make the transition harder than it needs to be, by building burners now that will soon have to be changed. Because transition there must be – and soon. Most of the coal that is currently discovered and economic to burn must stay in the ground if we are to avoid catastrophic climate change. This is not an option, depending on how inconvenient it might be – this is the bottom line for the future of our society.

Fonterra is planning a ten-fold expansion of its Studholme milk factory near Waimate,  all to be coal-fired.  Ironically, Mr Spurway is correct when he says that no other wood fired boiler of the size needed at the plant exists in the South Island (though his “50 times” is a huge exaggeration).  That is simply because no other company has boilers that large! However, they do exist elsewhere.

Initial information about the Studholme proposal is that there will be four boilers powering two milk driers. The combined heat output, including the existing 15 MW boiler, is proposed to be 115 MW. This suggests four new boilers of 25 MW each.

The largest South Island wood fired boiler we have seen is 4MW, about one sixth of what is intended at Studholme. However, in the North Island, the Kinleith mill has a wood-fired combined heat and power plant of 40 MW. It works fine. Even larger ones exist in Europe. For example, in Scandinavia, where wood waste is the primary source of industrial heat, there are some of more than 60MW.

Fonterra is very proud of its efforts to improve energy efficiency and reduce coal burned per litre of milk dried. We should not be fooled by that. While this progress is commendable, and has saved the company money, Fonterra’s output is growing so fast that, on Mr Spurway’s own figures, even a 16% improvement in efficiency is dwarfed by a 26% increase in coal use to fuel the expansion of the last five years. The climate doesn’t “see” increased efficiency – it only sees increased emissions, and reacts accordingly.

The next claim, that the taxpayer-funded free emissions credits amount to “less than 2 per cent of total annual emissions” is, frankly, puzzling. The Ministry for the Environment website records exactly how many free credits are issued to them, and on what basis. The total is 35,123 units, each equivalent to a tonne of carbon emitted. Of course they get no free credits for their transport fuel or their electricity – neither does anyone else. But for the emissions they do have to pay for, they get two for the price of one, like other industry. In any case, the price of carbon under the ETS is so low as to be meaningless.

To the outside observer, there is still no sign that Fonterra is “starting to move into more renewable forms of energy” as Mr Spurway claims – and we have been looking for such signs for years now. On the contrary, the company’s coal use has been rising rapidly and will take another jump up if Studholme is built to run on coal.

It is good that Mr Spurway recognises that Fonterra has a “responsibility to all New Zealanders for the impacts of (their) decisions”. Those impacts currently include contributing to accelerating climate change, with more severe storms, droughts, floods and sea level rise. Farmers will be particularly hard hit by climate change, and dairy farmers with their huge need for water, even more so.

If Fonterra wishes to retain a good reputation and a social licence to operate, it needs to start reducing its carbon dioxide emissions, rather than planning a big increase with new coal boilers.

The post No alternative to coal, Fonterra? Really?? appeared first on Coal Action Network Aotearoa.