A vision into the future at an electric vehicle charging station at a Z Energy station. (Photo by Fiona Goodall/Getty Images)
A vision into the future at an electric vehicle charging station at a Z Energy station. (Photo by Fiona Goodall/Getty Images)

The BulletinNovember 28, 2019

Can a petrol retailer be truly committed to fighting climate change?

A vision into the future at an electric vehicle charging station at a Z Energy station. (Photo by Fiona Goodall/Getty Images)
A vision into the future at an electric vehicle charging station at a Z Energy station. (Photo by Fiona Goodall/Getty Images)

Z Energy is New Zealand’s largest petrol retailer, yet its CEO says he’s dedicated to mitigating climate change. Alex Braae spoke to Mike Bennetts about how that apparent contradiction can work. 

For the boss of a retail business, Z Energy CEO Mike Bennetts spends a lot of time talking down his own product. In a perfect world, he says, he’d rather not be selling petrol. 

Z Energy, New Zealand-owned and the country’s largest petrol retailer, claims to be different to other fossil fuel companies. They don’t directly drill or extract oil, they were one of the founding members of the Climate Leaders Coalition, they have been pushing sustainability initiatives since 2010, have invested in electricity, biofuels and ride-sharing companies, and envision a future in which they’re no longer a fossil fuel company. 

Not everyone is buying it. When we announced that Z Energy were going to be sponsoring The Bulletin, a few readers got in touch to register their anger and disappointment. Some of their criticisms were very pointed – and fair as well. Underlying them all basically was the idea that Z’s claims to being a climate leader were bullshit, and that The Spinoff had compromised itself by accepting their money. 

It is easy to understand why those perceptions exist. Why should the public trust the motives of a petrol company, when the industry has been such a well-documented sponsor of greenwashing and climate change denial? 

When I went to interview Mike Bennetts, there was one very revealing answer that summed up how he is, at least, a different sort of company executive. I asked him about the Extinction Rebellion protests back at the start of the year, in which BP’s Auckland offices were occupied. Or rather, the hallway outside their offices was occupied, because the front doors were slammed shut, with only a mid-ranking functionary sent out to hear and ignore the protest demands.

Z Energy CEO Mike Bennetts (Image: Supplied).

Bennetts revealed that he fully expected Z Energy’s Wellington offices to be targeted in the latest round of Extinction Rebellion protests. Had that happened, and were he there at the time, what would he have done? The answer was simple – he would have gone straight down to the front door, looked the protesting people in the eye and listened to what they had to say. 

He’s disarmingly frank in this way, but also, so what? Mike Bennett’s company sells fossil fuels. Does it matter that he’d happily have a respectful discussion with those who are furious at him for it?

Bennetts argues that it does, because it means he is well placed to understand the urgency and alarm around climate change. Does he agree with the idea that many young people will have – that he is prioritising current shareholder value over their futures? 

He said he understood why they felt that way. “I enjoy sitting with young people and hearing what they have to say. I’ve got two daughters, they’re in their early 20s but they’ve influenced how I look at things. And I ask them, what do you think we should do? Should we run at a loss, to provide an alternative? Do you think we should sell a product that nobody’s going to want to pay a premium for? Should we stop selling fossil fuels tomorrow, and sell the company to someone else?” 

They’re questions that don’t have simple answers. Fossil fuel use is deeply embedded in every aspect of the modern economy. Figures published by Stats NZ in 2017 showed industry and trades used 402 million litres of petrol each year, and more than 2 billion litres of diesel. Those are staggering figures, for just one area of the economy. That doesn’t even begin to include the impact fossil fuels have on everyday life for the vast majority of New Zealanders.  

Take Tauranga for example; 97% of the city’s population currently relies on private cars to get around. It’s fair to assume that were petrol cars to immediately become unusable, more people in Tauranga would switch to using the paltry public transport options that are available. It’s also fair to assume that the vast majority of the city would simply be screwed – not to mention that if fossil fuels were to disappear overnight, every major city would run out of food within days. 

That probably comes across as a strawman argument, given no serious people are suggesting that vast swathes of the country should be forced to risk starving to death in order for fossil fuels to be eliminated. But it underlines another crucial point about all of this, which is that none of the systems that would allow serious decarbonisation of the economy are currently in place. That includes economic systems. 

“The problem is we’re economically wedded to fossil fuels, that’s the guts of it,” says Bennett. “There’s no magic wand to change that, so we have to nibble around the edges for a period of time first.” Among those edges Z is currently nibbling at are the emissions incurred in their company operations. Those are coming down sharply, and they’re on track to reduce them by 30% from 2017 levels by the end of 2020. 

It’s not nothing, and every company reducing their emissions by the same amount would have a noticeable impact on overall emissions. But it sidesteps the much more substantive question, which is Z’s place in the overall structure of fossil fuel use – they make money off selling it. 

Z Energy’s major investment to date to change the underlying structural picture is their plant in Auckland to make biodiesel from tallow – basically inedible meat fat by another word. They spent more than $30 million getting the plant operational, and it is now producing fuel, after being dogged by cost overruns and issues starting production since it was first announced in 2015.   

The end users for this product are companies like Fonterra that currently have to operate many heavy vehicles. Electric engines aren’t yet a solution here, because while electric engines are now more than adequate to power private vehicles, they’re not grunty enough to pull a milk tanker over long distances. By using Z’s biodiesel mix, which as per government standards is still 95% diesel, the emissions from heavy vehicles can be cut by 4%. At best, in its current set up the plant could produce 400 million litres of this blend of biodiesel a year, a target which hasn’t yet been reached.

Z Energy’s biodiesel plant (image: supplied).

Again, it’s not earth-shattering, and in and of itself won’t do much. But it’s still 4% better than the alternative, and is a fuel source that can be swapped into existing engines immediately. There is potential for it to be scaled up, as Z currently only uses 15% of the country’s total tallow reserves. There’s also a lot of waste wood created by forestry that could be plugged in as well. 

And yet Z are not forging ahead with massively scaling production. Why? Money, or the lack of it. “We would spend the money if we were confident, or when we were confident, that people would pay the premium required to remunerate the additional investment in the plant, rather than just continue to use the existing fossil fuel supply chain.” 

The structural incentives to stop using fossil fuels also don’t exist in any realistic sense at the moment. Chief among them is the price of carbon – effectively, what polluters have to pay in order to operate. The Productivity Commission last year argued it should be $200 a tonne for New Zealand to reach net-zero emissions by 2050 – an “entirely legitimate policy response,” says Bennetts. The carbon price is currently closer to $25 a tonne. For every $25 a tonne of carbon, the price of 90 octane goes up by about 6 cents per litre, and the flow-on effect would push prices up across the economy. 

Right now, Z Energy is leaving more than a little bit of money on the table. Their underlying net profit plunged in the latest round of annual results, down 69% to $22 million. The main reasons for that have been a weak NZ dollar, and stronger competition in the retail market. New Zealanders might still drive in absolute droves – and overwhelmingly petrol cars at that – but Z haven’t been creaming it in the same way. Bennetts is adamant that more environmentally-friendly changes to the company won’t fall by the wayside, despite their operational costs. 

Does Z actually want to change, or is this all just greenwashing? As with many of these questions, the answer will be in the eye of the beholder. He says he wants more action taken, by everyone, including his own company.  

“We’ve got to be making progress today, because we’re running out of our carbon budget. Our 2050 budget is exhausted by 2030 if we continue on the current trajectory as a country. And that’s why we’re quite vocal about this – action needs to be taken now. Every day, every month, every year we wait is another day, year or month that we won’t make up.” 

This content was created in paid partnership with Z Energy. Learn more about our partnerships here

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