The European Union has set a target to reduce its greenhouse gas (GHG) emissions 43% by 2030 compared to its 2005 level(i). 45% of all European Union GHG emissions are from sectors covered by the European Union Emissions Trading System (EU ETS). The EU ETS works on the ‘cap and trade’ principle, setting an allowance for the volume of GHG that can be emitted each year by power plants, manufacturing plants, and other companies. Companies can buy or sell their GHG allowance depending on whether they have enough credit to cover their actual emissions. Over time, the cap is lowered so overall emissions can float down to target levels.
When comparing costs between Poland and Sweden we can expect the competitive cost gap between the two countries to decrease, vanish, or even flip.
What kind of conclusions can we draw from GHG emissions regulatory turbulence in the EU? It will be impossible to create a set of regulations that treat all countries, grades, and companies fairly. Therefore, the pulp and paper industry should brace for disruption and individual companies and mills should look carefully at how carbon costs will affect their overall competitive positions.
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