Fonterra will stop using coal to fuel the milk processing boiler at its Te Awamutu dairy plant next season.
The site uses a combination of fuels to process milk, including coal.
Following a trial last year it will switch from using coal at the end of this season, starting the 2020/21 season powering the plant's boiler with wood pellets.
The change would reduce the co-operative's carbon emissions by 84,000 tonnes per year, sustainable energy and utility manager Linda Thompson said.
"That's the equivalent of taking around 32,000 cars off the road and will reduce Fonterra's national coal consumption by approximately 10 percent," she said.
Two other North Island sites still use coal.
Thompson said the dairy giant was working towards net zero carbon emissions by 2050.