4 May 2022
This blogpost series by the European Liberal Forum engages with policymakers, industry experts and academics to contribute to a better understanding of how to shape the “Road to net-zero” in the context of the EU sustainable transition.
By Jori Ringman, Director-General of the Confederation of European Paper Industries (Cepi)
In early 2020, in anticipation of the announcement of the Fit for 55 package, the European Pulp and Paper Industry published a 2030 Industry Manifesto. In it, Cepi stated the goal not just to achieve compliance with the target indicated by the EU to cut greenhouse gas emissions by at least 55% by 2030 but to go even further. The pulp and paper industry has a strategic interest in supporting an economy that does away with fossil fuels and replaces fossil-based materials with biomaterials sourced from sustainably managed forests. Yet, when Fit for 55 was finally unveiled, we found it an incomplete toolbox, lacking the means and tools to reach its ambitious targets.
To begin with, energy efficiency has recently been emphasised as a priority as it is the most cost-effective and quick way to reduce the consumption of energy from fossil sources. Energy efficiency is most often understood as individual factories streamlining their production processes, when in fact the same can be done across the entire energy value chain through cross-sector integration while safeguarding the element of cost-effectiveness and speed in the transition.
The Fit for 55 package does not offer much in terms of energy system integration and risks missing the opportunity of using its leverage effect on decarbonisation. To make the best out of this important building block towards carbon neutrality, market-based network access arrangements are needed in order to guarantee synergies between energy vectors and enable efficient use and conversion across liquid and gaseous fuels, heat and power.
Given the current economic situation, investing in energy efficiency and CO2 abatement is not only a financial challenge but also a question of the availability of technologies when several sectors are going through shortages. European manufacturers will need enough chips and smart technology to equip factories and achieve 2030 goals.
Longer-term solutions to our energy conundrum are partly out of our hands. Electrification will often require pulp and paper mills to be allowed to connect to the grid, while decarbonised gases are only a solution if they are available in the pipeline at affordable prices.
Currently, 62% of the energy used in the pulp and paper industry is renewable. The sector has also reduced its absolute CO2 emissions by 36% between 2005 and 2021. Both performances are best in class, but we want to go even further and double down on emission reduction. By the end of this decade, we need to reduce our emissions by 61% compared to 2005, which cannot happen without cross-sector integration, appropriate funding, and long-term safety for investments in climate-mitigating technologies.
A strange approach to EU ETS and biomass
In relation to investment conditions, what companies in our sector experience is that Fit for 55 is not going far enough in shifting the sustainability gears in industrial production. The EU ETS must continue rewarding investments in reducing carbon emissions, by switching to renewable energy sources such as biogas or biomass from forestry residues and residues from bio-industrial processes. Free allowances, used to invest in clean energy, should be granted based on the product benchmark, regardless of how decarbonisation is achieved.
The proposal made by the Commission to exclude from the EU ETS installations where biomass contributes to more than 95% of the total energy sources contradicts the logic of supporting the industrial transition to renewable energy. It keeps installations from contributing to reaching climate neutrality, becoming self-sufficient and reaching higher shares of renewable energy.
Sectors which have the potential to contribute to the advent of a circular, sustainable and fossil-free economy should be able to benefit from a stable and predictable business environment. This is particularly important when it comes to continuing to progressively decarbonise our energy sourcing and while competing globally with other sectors that are not subject to the same compliance costs and pressures that our European companies are experiencing – across a wide range of sectors.
Finally, Climate policy is incomplete if aspects linked to product consumption are not addressed. The bioeconomy holds the potential to keep the economy running. At the time when the EU progressively decreases its consumption of fossil fuels and materials that are mainly extracted outside the EU. However, it seems that many elements are being kept in place to protect the old economic model based on fossils. For example, if forests are earmarked to compensate for the emissions of the EU’s most polluting sectors, this allows fossil emissions to continue and new carbon to keep being released into the atmosphere, fueling the risk that the switch from the old economic model to a new one does not take place fast enough. Europe’s ambitious 2030 and 2050 targets will not be met under such conditions.
This is one of the reasons why, in the architecture of Fit for 55 and connected legislation, it is essential to consider that forests’ climate benefits go beyond the carbon sink. They include the carbon storage and substitution effects linked to forest-based products such as paper, wood-based textiles, and construction products. The substitution effect by itself is just as relevant as the sink. It reduces EU emissions by another 10%, or 410 Mt CO2 equivalent per year, by replacing fossil-based or CO2-intensive materials with wood-based products. These figures only describe what is the current situation. If consumers are empowered to choose the low-carbon product instead of the fossil-intensive one, this could have a significant – and immediate – additional effect on climate mitigation.
Forest-based bioeconomy is sourced, manufactured and recycled in Europe with European technologies. From innovative packaging to circular textiles, from food ingredients and pharmaceuticals to electric car battery materials, everything made from fossil materials can be made from wood. Given a fair chance, this sector can be the key to achieving a circular, climate-neutral Europe.
Pulp and paper might be the best example of an industry that has, for many decades, played by the book and done everything it could to become sustainable, and yet today, reaching the 2030 targets seems impossible. Both the economics of investing in clean energy and products and the full carbon accounting of resulting emissions reductions have not been fully considered by the EU Commission. This is why we are eagerly awaiting the many legislative decisions that will be taken in the coming months regarding energy system integration, the safeguard of our capacity to invest in green technology and the future of the bioeconomy.
*Cepi statistics compiled through its Climate Change and Energy Committee, 2021.
Since June 2019, Jori Ringman is Director-General of the Confederation of European Paper Industries (Cepi). Since joining Cepi in 2005 he has been advancing and exploring circular low carbon bio-economy in the sector. Prior to 2005, he was a civil servant at the European Commission and a political advisor in the European Parliament.
DISCLAIMER: Published by the European Liberal Forum. The opinions expressed in this publication are those of the author(s) and do not necessarily represent those of the European Liberal Forum.