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Emissions reporting is an essential part of industries’ responsibility and sustainability actions.
However, there is substantial variation in emission reporting practices and data accuracy between countries, regions and mills. And in many cases, data is not even available.
However, Fastmarkets has an alternative to offer: an estimated carbon emissions benchmark. The carbon emissions benchmarking tool in Fastmarkets Analytical Cornerstone includes estimated Scope 1 and Scope 2 emissions for all benchmarked pulp and paper mills as well as their machines and products.
The data enables benchmarking of operating mills and provides insights into a mill’s sustainability performance. This can be utilized for decision making in areas such as investments and marketing.
The pulp and paper industry is energy and raw material intensive. However, it is still one of the lowest industrial emitters of greenhouse gases. In 2023, the pulp and paper industry accounted for approximately 0.6% of European greenhouse gas emissions.
Globally, the pulp and paper industry accounted for approximately 6% of global industrial energy consumption and 2% of direct industrial carbon emissions in 2022. Furthermore, the pulp and paper industry reduced its carbon emissions by over 50% between 1990 and 2023.
Nevertheless, there are large variations in energy consumption between grades, mills and regions.
The world is currently highly unpredictable and uncertain. Recent geopolitical and economic situations have been hot topics in the industry. This is because they force industries to adapt to the ongoing changes.
However, despite the varying trends, sustainability is here to stay. Sustainability is the predominant driver that determines how industries perform in such a carbon-intensive world.
To align with climate goals, such as “net zero” carbon emissions by 2050, industries are committed to reducing carbon emissions. The European Commission’s long-term strategy for net zero by 2050 assesses the carbon volumes needing direct removal from the atmosphere. It also sets objectives and policy measures aimed at helping industries achieve these goals.
The growing importance of emission reduction is steering the pulp and paper industry toward more sustainable practices and innovative solutions. These include adoption of advanced technologies and modern equipment and systems that enhance raw material and energy efficiency. Another key solution is switching to renewable energy sources.
Emissions reduction has become a vital choice for industries to succeed in a continuously changing environment. Industries investing in sustainable solutions and measures are likely to thrive in the long term. These investments help them to distinguish themselves from other market participants.
Emissions by the pulp and paper industry derive primarily from the combustion of the (often fossil) fuels needed for energy production. These emissions, indicated as Scope 1 emissions, are directly owned and controlled by companies, and a reduction in these can be considered as the first step of decarbonization.
Companies and/or mills can impact their Scope 1 emissions reductions by either reducing energy consumption or by consuming less fossil fuel.
Chemical pulp mills in Europe have relatively low emissions thanks to their ability to burn black liquor for energy production. Paper mills integrated with chemical pulping can benefit from the energy produced at the adjacent pulp mill.
Consequently, most non-integrated paper mills have higher emission levels than integrated paper mills. Most paper mills have multiple energy-saving opportunities. However, measurements and analytics are needed to identify processes and equipment wasting energy and any potential reductions.
In the long term, improvements to inefficient processes will bring cost savings as well as emissions reductions.
Mills also need electricity to produce pulp and paper, which can be generated at the mill or purchased from the grid. One major source of indirect emissions is purchased electricity, which is included in Scope 2 emissions.
How cost or emissions efficient it would be for a company to produce its own electricity versus purchase from the grid depends on a mill’s own fuel mix, which generates Scope 1 emissions, or on the carbon intensity of purchased electricity, which is counted as Scope 2 emissions.
The most ideal case would be access to carbon neutral green electricity. Pulp mills can utilize black liquor and other biomass to produce electricity through co-generation and are often major suppliers of carbon neutral green electricity.
In most European regions, green electricity is available for those who want to minimize their Scope 2 emissions. Sweden and Norway, for example, rely largely on hydro power.
Meanwhile, solar power is gaining a greater share along with wind power in electricity generation in Spain. Portugal relies mostly on wind and hydro power except in warmer months when fossil fuels contribute a larger share of its electricity generation.
France, on the other hand, has a substantial amount of nuclear power. Among European countries, Poland has the most carbon-intensive electricity generation as it still relies heavily on coal.
However, it has managed to reduce its emissions by gradually increasing the share of wind and solar power over the past decade. Unfortunately, green electricity is not available everywhere, so flexibility in the fuel mix is key, whether it is self-generated or purchased electricity.
When looking at the fuel mix of European mills, we see tremendous variability between grades. With benchmarking, a deeper insight into mills’ energy structures and strategies can be gained.
Fastmarkets Analytical Cornerstone benchmarking tool can provide companies with insight into their energy consumption and carbon emissions — and not just by each mill, but also by each machine and product — as well as an understanding of how their mills, machines and products perform compared with other players in terms of energy, emissions and cash cost efficiency.
As an example of a product with minor variations, recycled containerboard presents more consistency in terms of mill and machine configuration than other products and is therefore a great comparison for carbon emissions benchmarking. When comparing cash costs of European recycled containerboard producers, most European mills present a similar cash cost structure; the one exception is Russian mills, which are on the left side of the curve because they have relatively low cash costs due to access to cheap energy.
There are some variations in labor and maintenance costs between European mills depending on the capacity, operation and location of the mill. Nevertheless, energy costs seem to be a key driver as access to energy varies between mills and is highly volatile.
Carbon emissions are directly linked to each mill’s energy consumption or more closely to its fuel mix and energy supply. The majority of recycled containerboard mills generate more Scope 1 emissions with the exception of a few mills that have almost entirely Scope 2 emissions.
Although Russian mills have relatively low cash costs, they land on the right side of the emissions curve, due to high emissions levels from using natural gas. Mills with significantly low emissions use biomass, waste-based materials or other low-emitting sources in their energy production.
Some mills also utilize biogas, rejects and waste to improve their energy and cost efficiency, which further improves their overall competitiveness.
Many countries have regulations or carbon systems, like the EU Emission Trading System, that require industries to report their emissions. Non-compliance can result in heavy fines and other consequences such as sanctions.
Pulp and paper companies monitor and typically report their emissions on a yearly basis in their environmental or sustainability reports. However, there is no clear standardized practice for reporting emissions.
Many pulp and paper companies report their emissions only at the group level rather than at the mill level. By disclosing only group-level data, companies can cover individual mills that may have high emissions levels or a poor environmental performance.
This may be due to strategic, practical and regulatory reasons. It may be strategically sensitive to disclose the detailed data of a poorly performing mill as competitors and stakeholders can use the information for benchmarking or issuing criticism that affects the reputation and brand image of a company.
There can be many reasons behind a poorly performing mill that may not be obvious, such as the size, age and capacity of the machine, as well as the fuel source.
In addition to a lack of mill-level reporting, most companies report only their Scope 1 emissions leaving out the Scope 2 and the even less observable Scope 3 emissions, which include all other indirect emissions generated in the company’s value chain, such as purchased chemicals, packaging, etc. As with mill-level reporting, reporting of Scope 2 or Scope 3 emissions is not mandatory in many countries.
Scope 2 and Scope 3 emissions also present more complexity in data measuring, calculating and gathering. Therefore, many companies may prefer the simplified reporting of presenting aggregated data of emissions.
Emissions reporting pushes companies to re-evaluate their operations and identify inefficiencies in their processes. This enables decision making for efficiency improvements that simultaneously achieve both energy and cost savings.
Transparent reporting builds stakeholder and public trust. Investors, customers and consumers are demanding accountability for sustainability, not only in the production stage but throughout the value chain from raw material supply to product delivery, usage and disposal.
Sustainability has become a crucial factor in decision making, and it is almost imperative for companies to be committed to emissions reduction. Additionally, reporting and reduction of emissions offer companies opportunities to use their small carbon footprint as a marketing tool to enhance their reputation and differentiate themselves in a competitive market. Furthermore, emissions reporting is essential for strategy planning and tracking progress toward the decarbonization objectives of net zero by 2050.
Interested in learning more about the Fastmarkets Analytical Cornerstone and its carbon emissions benchmarking capabilities? Request a demo today.