Weaning New Zealand's primary sector off fossil fuels could cost the industry and the agri-sector hundreds of millions of dollars.

Alliance Group, the country's second-largest meat exporter and largest lamb processor, confirmed it would be ending the use of coal at all of its seven plants within 10 years and was at present examining other fuel options across its network.

It had budgeted capital expenditure of $60 million-$70 million for the transition, it told a select committee hearing on the Zero Carbon Bill in Dunedin on Monday.

David Surveyor, chief executive of Alliance Group, said energy requirements were sourced across a range of fuels.

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"Levin and Dannevirke operate on natural gas, Nelson utilises diesel, while Smithfield in Timaru, Pukeuri in Oamaru and Mataura and Lorneville in Southland use coal.''

Competing meat co-operative Silver Fern Farms (SFF) would not be drawn on cost, but it is understood the company has made a similar commitment and confirmed it had spent about $5 million on energy reduction and efficiency projects since 2017 alone.

Head of communications and sustainability Justin Courtney said six of the company's 14 plants still used coal-powered boilers, along with natural gas, woodchip and a bio-fuel boiler, which it had installed at its biggest plant at Finegand in 2008 at an estimated cost of $7 million.

Mark Patterson (left), Dr Liz Craig, Scott Simpson and Michael Woodhouse listen. Photo / Linda Roberston
Mark Patterson (left), Dr Liz Craig, Scott Simpson and Michael Woodhouse listen. Photo / Linda Roberston

In its submission yesterday, SFF said it had committed to a 30 per cent "absolute'' reduction in its greenhouse gas (GHG) emissions, measured by per tonne of product, by 2030.

However, in an earlier submission to the steering committee, minerals and mining sector organisation Straterra said it was important to put the use of coal in perspective.

"Thermal coal still has an important role to play in maintaining the international competitiveness of the agri-sector while contributing around 5 per cent of our emissions.

"It also plays an essential role in providing energy security in New Zealand in dry years, when gas shortages occur and as a result of adverse weather events.''

Further, the Straterra report notes that there are no commercially viable technologies to make steel at scale without coking coal.

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Fonterra, the world's fifth-largest dairy company, uses about 500,000 tonnes of coal every year. The company has implemented a "sinking lid'' policy and will not be installing any new coal boilers or increasing its capacity to burn coal at its 32 manufacturing sites across New Zealand.

Fourteen of its sites, including 11 in the South Island, process energy from coal.

According to Robert Spurway, Fonterra's chief operating officer global operations, coal still meets about 40 per cent of Fonterra's energy requirements, with 36 per cent from natural gas, 16 per cent from the electricity grid and a further 8 per cent from diesel (about 46 million litres), for tankers.

"We see our transition out of coal as an investment in the future rather than a cost. Like most New Zealanders, we would like to replace coal immediately but that's not feasible. A staggered, site-by-site approach is prudent as we juggle significant considerations.

"We need to ascertain what is the best replacement for each site and then manage the transition while remaining competitive internationally so as not to adversely affect exports and the country's economy.''

Courtney agreed that a staged approach was needed.

"We've already committed to addressing processing emissions and with the support of the energy efficiency and conservation authority [EECA] and Enviro-Mark, are developing an emissions-reduction plan and revised targets that align with a science-based target.

"We have focused our attention on reducing emissions from areas including operational process heat, wastewater emissions, freight transport and refrigerants, while ensuring we remain internationally competitive. We are investing in this transition to low-carbon-emission processing. This will include, among other priorities, a consideration of alternative energy sources to coal.''

Surveyor said sustainability went well beyond carbon emissions.

"Alliance has tracked the carbon emissions from our plants for a number of years. However, we now produce a broader assessment which includes the likes of air travel and company vehicles. Our plants have annual performance targets for fuel and electricity use.''