French food group Danone said it would spend $40 million on upgrading its Balclutha milk powder facility to make it carbon neutral.
Danone said the upgrade would make the Balclutha facility the New Zealand dairy industry's first carbon neutral plant.
The company said it it would spend $30 million on building a state of the art biomass boiler, to be fuelled by woodwaste from surrounding plantation forests.
Danone said its new boiler would reduce the plant's carbon dioxide emissions by 20,000 tonnes a year. The existing boiler runs on LPG.
The Balclutha plant processes raw milk sourced from 18 local farms into powder that is used as the base for production of its Nutiricia infant milk formula (IMF) brands, including Aptamil and Karicare.
Boilers play a big role in converting milk into a dry powder through heat and about 85 per cent of the entire plant's energy consumption comes from steam production.
Cyril Marniquet, Danone's New Zealand operations director, said the company, group-wide, wants to become carbon neutral by 2050.
French engineering company Veolia design and manage construction of the biomass boiler, Danone said in a statement.
Danone's investment in the plant also includes the installation of a new water treatment plant to more efficiently treat water waste.
The multi-national acquired the Balclutha spray drying plant from Gardians and its Airport Oaks, Auckland, blending, packing and canning facilities from Suttons in 2014.
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Since then, the company has invested $150 million to double production capacity of finished infant formula products in New Zealand.
Danone also has a warehousing facility in Auckland and a 49 per cent holding in Yashili New Zealand, which runs an infant formula plant in Pokeno.
"Biomass" or "bioenergy" is energy from plants or plant bi-products.
When energy is released through combustion, carbon dioxide (CO2) and other by-products are also released.
The the CO2 released is largely offset by that which was absorbed in the original growth of the biomass, which will be captured in the growth of new biomass to replace the biomass being used.
Danone's biomass boiler at Balclutha will be fuelled by by-products or residue of forestry activity that may ordinarily go to waste.
"These lumber production by-products, while traditionally disposed of or burned, are valuable sources of heat, steam, and/or electricity when used in a biomass boiler system," it said.
There are four commercial forests within a 50-kilometre radius of the Balclutha plant.
Early this month, Fonterra, a major coal user, said it would would stop installing new coal boilers - 11 years ahead of its previously advised plan.