Fonterra has announced plans to phase out the use of coal at its Stirling cheese plant in Otago by August next year.
The plant will move to using wood biomass to fire the site - making it the company's first 100 percent renewable thermal energy site.
The co-op is looking to phase out coal all together by 2037.
Fonterra spokesperson Richard Gray said by switching to wood biomass, the site's annual emissions would reduce by 18,500 tonnes of carbon dioxide a year.
"Sustainability is at the heart of our strategy, and this project is something that will be good for the environment and local community.
"As well as the site being coal-free, there are additional environmental benefits the new boiler will bring, including reduction in wastewater, noise, solid waste to landfill, and air discharge emissions."
Gray said the coal boiler at the plant was used to create steam, which was used in the production of the 55,000 tonnes of cheddar cheese each year.
"The steam is used as part of the process for making cheese for processing the weigh and for heating the likes of hot water to carry out the cleaning processes that we go through each day.
"So when we replace the boiler with a new biomass boiler, that will perform the same function of producing the steam to do that processing and cleaning function."
Stirling is the third significant fuel switching project the co-op has undertaken in as many years - the move means eight of Fonterra's 29 sites still use coal.