On July 14, 2021, the European Union (EU) Commission dropped a massive piece of legislation on energy and climate laws known as the ‘Fit for 55’ package, which has already stirred debate across individual industries and countries. The goal of this package is to reduce greenhouse gas emissions by 55% by 2030 in order to make the 2050 carbon neutrality objective achievable. Previously, the goal was set at a 40% reduction by 2030 which, at the rate the EU is currently going, is estimated to reduce emissions by only 60% by 2050.
The implementation of this new package not only increases the feasibility of the target, but it also smooths the trajectory, which helps relieve the heavy burden that would be placed on future generations to catch up and achieve carbon neutrality. The Fit for 55 package is comprised of a set of initiatives that target different sectors of the European economy to ensure this goal is met. Some of the revised initiatives include:
Source: European Commission
Overall, the Pulp & Paper industry is well positioned to adapt to the Fit for 55 mandates, as many companies already have targets that exceed the general EU targets. However, those who are lagging will be forced to accelerate their existing goals in order to catch up. While individual company goals to reach carbon neutrality also align with the industry’s sustainability goals, there are still some challenges this legislation creates, such as:
This is a very demanding package, and there’s no doubt that it will impact the industry. As we can see in the figure below, a number of grades within the Pulp & Paper industry emit varying levels of carbon emissions — with the Tissue and Towel segment emitting the most, and Market Pulp emitting the least per ton of produced pulp or paper.
EU Carbon Emissions by Major Grade – Gate-to-Gate 1Q2021
Source: FisherSolve™ Next
However, the degree of these impacts will vary depending on location as well. As we can see in the chart below, there’s a significant difference in the relative amount of carbon emitted in different countries. This, in combination with the capacity of each grade produced in each country, will create a range of effects across Europe.
Carbon Emissions by EU Country – Gate-to-Gate Q12021
Source: FisherSolve™ Next
There is still a long road ahead for the EU before implementing the Fit for 55 package, especially as the plan garners criticism for not going far enough in terms of replacing/eliminating fossil fuels. However, it is still crucial for industry participants to keep an eye on how this package develops in the coming months and what — if any — changes are made to the final product. While there’s no definitive answer as to how this legislation will impact the Pulp & Paper industry, it’s important to start planning now for potential outcomes and situations that could impact your company’s performance and bottom line.