CP Foods goes coal-free as EU readies carbon tax

Thai agribusiness giant Charoen Pokphand Foods says it has eliminated coal power from its domestic operations, laying the groundwork to reduce emissions at its overseas farms and food processing plants and taking precautions against rising energy costs and future European carbon tariffs.

While a third-party audit is still underway, the company says it has stopped purchasing coal, on which it previously spent about 350 million baht ($10.5 million) a year. Renewable energy from biomass and solar power rose to 30% of CP Foods’ energy use last year, while that from fossil fuels like oil and natural gas fell to 26%.

“What we are doing at this moment is a precaution because CBAM is coming,” said Peerapong Krinchai, executive vice president for engineering at CP Foods. European Union countries, which are a major export market for the company, have provisionally agreed tariffs on carbon-intensive imports under the Carbon Border Adjustment Mechanism, or CBAM.

“If we can reduce the carbon emissions within our system, we reduce our carbon footprint so that our products can be certified to ship to Europe, or even into the U.S. or Scandinavia,” said Peerapong.

Exports from Thailand accounted for just 6% of CP Foods’ revenue in 2021, but international operations accounted for 63%, including those in Europe and the U.S.

CP Foods gained an edge in the European market last year as the war in Ukraine prevented that country from exporting food products. “Their margin in Europe usually is better than ours. They usually get 5%, and CPF 3%,” said CEO Prasit Boondoungprasert.

That contributed to annual revenue growth of 20% in 2022 for the Thai company, although revenue will normalize to 8% to 10% this year, according to Prasit.

But the war has also raised the cost of livestock feed like corn by 55%, Prasit acknowledged. While energy comprises only 5% of CP Foods’ production costs, raw materials account for 60%, and inflation in both inputs raised the company’s total costs by 10% last year.

The prolonged period of high prices for liquefied natural gas has stymied progress toward reducing the share of oil in CP Foods’ energy mix, Peerapong said.

The impact of climate change on farm productivity has also pushed up prices, particularly the effect of uncertain rainfall on CP’s shrimp farms, Prasit said.

CP Foods is Thailand’s largest food processor and holds a dominant share in the country’s food supply chain, from farming and manufacturing to retail. Globally, food and agriculture account for a quarter of greenhouse gas emissions. Both executives said CP Foods is looking to influence its extensive supplier network to shrink the environmental footprint of about 6,500 small and midsize businesses.

“The challenge is not that they don’t want to give [emissions data] to us, the challenge is they don’t even know themselves. We have to help them to start collecting the information and develop a net-zero strategy,” said Prasit. The company is looking at new technologies like blockchain to integrate emissions tracking in its supply chain database, with a target of zero net carbon emissions by 2050.

In December, parent company CP Group said it would work with Japan’s Toyota Motor to develop hydrogen power. Methane from food waste can be used to produce hydrogen, although the process still emits some carbon dioxide.

“We need to invest hundreds of millions of baht to improve our processes,” said Prasit. “But the difference in emissions is 40 times less than coal.”

While the company has not set a figure for renewable energy investment, as the technology is constantly changing, Prasit said the company is considering a joint venture in Saudi Arabia to establish a food production hub in the Middle East, possibly valued at 1 billion baht.

CP Group is Thailand’s largest conglomerate, with businesses running the gamut from retail to telecommunications. Agribusiness is one of the conglomerate’s main sources of revenue.