This Pro Talks interview is made with the support of Spark and NZGIF
WATCH THE VIDEOS: Backers reveal plans for a new fertiliser, to be produced in New Zealand, that should significantly reduce nitrous oxide greenhouse gas emissions
Bruce Smith grew up on the Aotearoa Station, an 1,800 hectare sheep and cattle farm south of Te Awamutu. When he left school, he went and worked on cropping farms. He remembers applying the fertiliser.
"To be blunt it used to be a prick of a job because it's always dusty and you're trying to get it on, on time, and getting it on between the rains," says the TNUE Ltd director. "Putting fertiliser on is a job you only want to do once if you can."
Now, the government's green investment bank is investing $2.5m equity to support the construction of a plant outside Taupō, to manufacture a new low emissions nitrogen fertiliser. It's so new that developer TNUE hasn't yet given it a brand name. Building is to start later this year, and the company plans to open the factory by the middle of next year.
NZ Green Investment Finance chief executive Craig Weise, in a Newsroom Pro Talks interview, says the bank has a number of agriculture investments in the pipeline, starting with its one-third share in the low emissions fertiliser company.
"That hasn't hit the headlines yet, but you'll hear more about that later in the year," he says.
"What I would say is that we're pretty excited about the innovation itself. It certainly has both a carbon benefit, but also other environmental benefits that are pretty pleasing to see coming to market, and I think will help with efficiency, also. And that's one of the stories that's embedded in this new economy, is that a lot of the things and innovations that come actually have multiple benefits."
The Fertiliser Association says nitrogen use has increased over time due to the intensification of dairy farm systems in combination with an increased area in dairying. However, production methods have also improved and the emphasis on environmental accountability is increasing. This has led to marked improvements in production per unit of nitrogen applied.
In 2018, greenhouse gas emissions associated with nitrogen fertiliser represented 6.1 percent of all agricultural emissions and emissions from applied lime and dolomite accounted for another 1.3 percent, according to the Ministry for the Environment and the National Greenhouse Gas Inventory.
Bruce Smith says the new fertiliser will cut nitrogen fertiliser emissions significantly. Because it will be made in New Zealand, it won't have to be slowly shipped across the Pacific to our farms. And in good news for this generation of dusty farmers, he says it will only have to be applied once, not three times.
Rural New Zealand can expect to see fewer top-dressing pilots buzzing overhead. "You can't keep everyone happy!"
"Efficiency drives everything. So if you can get more efficiency out of the fertiliser, you automatically reduce emissions. And there you have the headline of our story." – Bruce Smith, TNUE
Smith and his business partner already have another business distributing Smartfert low emissions nitrogen fertiliser imported from Malaysia – but research and trials show their new unnamed Kiwi-made fertiliser is more efficient still.
"We took that concept, and basically did a deep dive into the science around controlled released membrane of fertilisers, and what you can do with it. What we're able to do with this technology is tailor controlled release to be in line with the plant's demand."
His new company, at least, does have a name. TNUE stands for Total Nutrient Use Efficiency. "Efficiency drives everything. So if you can get more efficiency out of the fertiliser, you automatically reduce emissions. And there you have the headline of our story."
"By improving efficiency, you're reducing nitrous oxide emissions; you have potential there to reduce the livestock methane emissions simply because of the efficiency of their pasture; and also the efficiency of nitrate leaching."
"It is good for the environment, it is good for the farmer's profit, and it's actually very good for the people because putting nitrogen fertiliser on is very, very stressful, because you've got to get it on at the right time, because it's very water soluble. This product, you put it on any time."
Agricultural science consultant Dr Doug Edmeades has overseen much of the testing.
"Improving nutrient use efficiency is an important research theme worldwide," Edmeades says. "This includes finding fertilisers that are more efficient. This is motivated by economics and important environmental considerations."
He says controlled release nitrogen fertilisers are a major component of that work. The concept is to develop fertiliser that releases nutrients at the rate required for plant uptake. If this is achieved, then the losses of nitrous oxide, as gas or leaching into the environment, will be reduced.
"Research with the products Bruce Smith has developed has achieved ‘proof of concept’ in the lab," he explains. "The glasshouse and field trials indicate increases in nutrient use efficiency of five to 50 percent.
"The practical consequences include using less fertiliser to achieve the same yields, getting greater yields from the same input or applying fertiliser less frequently."
TNUE's ownership is evenly split three ways: the shareholders are Smith's company, NZ Green Investment Finance, and private investment vehicle WBC Barn Ltd.
WBC director James Brummer-Taylor says such investment is critical. "For my part as an investor, I see investment into economically viable agri technologies as essential to New Zealand’s longterm food and climate security," he says. "Fertilisers which increase nutrient use efficiency mean more nutrients go to the plants and consequently less losses to atmosphere (volitisation) and ground (leaching and runoff)."
For NZ Green Investment Finance, the $2.5m invested in TNUE Ltd is just a fraction of the $173m it has committed to climate projects and products since the Government set it up as an arms-length green investment bank four years ago.
Craig Weise, who has experience in finance working in Washington DC and New Zealand, has $400m of government capital to invest – and he is aggressively pursuing private capital. Last year for every $1 of public capital, the organisation attracted about $1.30 from private finance as co-investment.
"I think the question you're asking is a bit different and a bit higher level: nationally, as we transition, where are we going to need to put investment to make this work?
"We're not like the rest of the world, right? And that's an interesting part of our challenge. And because we're part of a network of green banks globally, we have these conversations. And I think we can't underestimate the different challenges that we've got," Weise says.
"When you look at our emissions profile, roughly half of that is in agriculture and half of that is in everything else, right? So you can't not address the agriculture question if you really are serious about getting emissions down.
"For most of our investments, we actually measure them using an estimated lifetime emissions reduction from the investment, on standard methodologies for what carbon benefit it provides, essentially.
"Keep in mind, our mission is actually to accelerate investment, right, that is focused on these outcomes. And so if investors weren't willing to accept those risks, at the expected rate of return provided, they would not act. And so we take that very seriously."
There are some, including the Act Party and NZ Initiative think-tank economist Dr Eric Crampton, who argue that the best mechanism for smooth and speedy emissions reductions is the market, via the emissions trading scheme. Others would rely entirely on the big stick of government.
Weise argues both have flaws and speed constraints – so we need a mix of regulatory and market solutions to accelerate change.
He says the trading scheme, like any market, is not perfect. “Those imperfections will reveal themselves."
That’s why NZ also needs regulation, and a government-owned green bank to leverage both public and private investment: “The question is, how can we actually get more capital through the system to these challenges in a timely way to make a difference?"
"Climate has a time implication that's quite different than other challenges we face historically. We need to act, and we need to act very quickly," Weise says. "I'm quite optimistic about the regulatory reforms, I think that they will eventually have a huge impact – but we actually can't afford the 10 to 15 years that it will take for that to fully materialise, if we want to meet our climate goals."
"Personally, I think it's very appropriate to have a multi-pronged policy response … We're thinking about how we deal with it, and we're thinking about how we deal with it really quickly, before it deals to us.”
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