Pulp and paper in a net-zero transition

This discussion paper presents a short summary of the conclusions from a study carried out by Material Economics in 2019 – Industrial Transformation 2050 – Pathways to Net Zero Emissions from Heavy Industry‘ – and draws out the main implications for the pulp and paper industry. It has been written by Material Economics on behalf of the Finnish Innovation Fund Sitra and the Cambridge Institute for Sustainability Leadership, CISL.

The pulp and paper industry will be profoundly affected by the broader industrial transformation to net-zero emissions of CO2. The traditional challenge has been to provide an answer to how the remaining fossil CO2 emissions will be eliminated. This remains critical, but it may not be the most important issue.

The main impact of a net-zero transition on pulp and paper companies may instead be through entirely different channels, presenting both challenges and opportunities.

In a net-zero transition, pulp and paper companies will operate in changed input markets, with electricity demand increased to the tune of thousands of TWh in the EU alone, and large new claims on forest resources that put pressure on companies’ access to raw materials. Demands on products will change too, with expectations on a more circular economy. More positively, there could be a large potential upside for those who can provide attractive and renewable materials to replace today’s hard-to-abate, fossil options. This could extend further, with entirely new business opportunities in “carbon management”.

These changes  will pose fundamental questions for pulp and paper companies. Practically all areas of company strategy will be affected, from raw materials and energy sourcing, through to R&D and product portfolio choices.

There is no question that the pulp and paper industry could make a major contribution towards an economy with net-zero CO2 emissions. However, capturing this potential will depend on policy that has yet to be developed. We have identified five major areas where policymakers need to reconsider current policy frameworks:

1. Creating lead markets for low-CO2 materials.
2. Accounting for the possibility of materials substitution.
3. Comprehensively reviewing the impact of climate policy on bio resources.
4. Developing a policy framework for negative emissions and sinks.
5. Considering life-cycle analysis carefully in policy design – future solutions should not be assessed based on backwards-looking information.