Green legislation will produce gray hairs for some: a flurry of new and revised European environmental legislation will keep paper producers busy for years.

For Europe's pulp and paper industry, the array of environmental regulations is already vast. But in the days, months and years to come, the number of green issues is set to increase and the guidelines, if anything, will get stricter.

As with most things environmental, the issues involved and the implementation of "solutions" are always more complex than they first appear; so it is fair to say that European producers are under a lot of pressure in the green arena. So much so, in fact, that Europe's premier paper association, the Confederation of European Paper Industries (Cepi), put environmental issues at the top of the agenda during its recent annual meeting in Brussels, Belgium.

In her address to the meeting, Cepi Director General Marie Arwidson laid out her organization's priorities as the group works toward positioning pulp and papermaking in a a more positive environmental light. Arwidson identified several major issues, including:

* climate change

* renewable energy sources

* wood supply

* revision of the European Union (EU) packaging directive * the sixth framework program on research

* the forest-based and related industries forum

* global cooperation

All of these represent big issues; the confederation is tackling an extremely heavy workload, given the range of environmental initiatives being mooted or implemented at both state and European level.

NO HIDING PLACE 

Almost every aspect of the paper cycle comes under some form of environmental scrutiny, and many feature in some green initiative or other. Arwidson's presentation echoed this point, indicating that forest products play a key role in the climate change debate and the new regulations based on the Kyoto Protocol. Forestry is already well regulated; once the trees are harvested, European pulp and paper production is also subject to many rules on emissions, chemical usage, noise levels and so on, with more to come. In the next stage of the supply chain, customers and distributors are under pressure to minimize packaging, for example, and to meet or exceed rigorous recovery and recycling targets.

Cepi's deputy director general, Annick Carpentier, pointed out some of the challenges the organization faces in trying to lobby for appropriate legislation for pulp and paper producers. "Take the Draft Emissions Trading Directive, which requires member states to set targets for specific production sites. But then there is the question of whether the targets will be absolute and the whole problem of the co-existence of negotiated national agreements on emissions. The key question for us is the link to negotiated agreements. That has to be sorted out," Carpentier said. "Then there is climate change and energy efficiency. Energy is a key cost for paper producers--25% of the total manufacturing cost in some cases. But the industry has already made great strides to be energy efficient. Primary energy consumption has fallen by some 12% over the past decade, which is a great improvement. But this industry is also growing at about 2% year on year as consumption increases, so in absolute terms our CO2 emissions are up. Does that mean that we are not doing well enough? Or does it mean that we will be penalized for having done the work ahead of other sectors?"

WRESTLING WITH RES

Other EU initiatives are also causing unease. For instance, it is quite possible that a European directive to boost the use of renewable energy sources (RES) to produce "green" electricity could distort the market in such a way that paper producers are hit by higher prices for their raw materials as other industries attempt to exploit certain materials--notably timber, but recovered paper as well.

The target of the directive is to increase RES from 6% to 12% of gross energy consumption by 2010. That implies the overall share of electricity produced from "green" sources will climb from 14% to 22% in that period. Yet if the draft does not take into account the paper industry's concerns, then a sector that currently produces 17% of the EU's RES production and 28% of the region's biomass-based energy could be among the hardest hit financially by this attempt to boost renewable energy sources.

"If RES is designed to reach binding targets, that implies that there are likely to be subsidies of some kind for electricity generated from renewable energy sources," Carpentier explained. "Our industry is the biggest single user of renewable energy sources, mainly in the form of wood and biomass, so there is likely to be more pressure on the availability of our raw materials, which would mean higher prices."

TRADING PLACES

One of the biggest green issues on the horizon for European producers is the Kyoto Protocol on climate change. Since the United States has already said it will not ratify the Kyoto deal and several other large pulp and paper producing nations appear likely to get more lenient treatment because they hold "carbon sinks," Europeans worry that the latest proposals on so-called emissions trading will put them at a distinct disadvantage to overseas producers. With the legislation still making its way through the bureaucratic process, it is too early to say exactly how damaging emissions trading will be to the competitiveness of European producers, but there is no doubting the nervousness of companies across the region.

The basic concept involves creating a registry of site-specific permits that allow companies to emit a certain amount of C[O.sub.2] equivalent. These allowances would then be traded between companies and production sites to provide a financial incentive for groups to reduce the overall emission levels of greenhouse gases from Europe in accordance with targets established at Kyoto. A "learning-by-doing" phase is scheduled for emissions trading over 2005-2007, but by 2008 member states will be able to apply hefty penalties for non-compliance. According to the European Commission, penalties will be approximately two times the market value of the allowances for each metric ton illegally discharged, plus a requirement to make up the shortfall. The system will also require monitoring and verification.

Cepi sums up the sector's concerns about the policy as follows: it is likely to:

* penalize growing industries through setting absolute targets on installations. Moreover, there is a lack of clarity in the consideration of growing industries

* further penalize energy intensive industries already subject to harsh international competition and high energy taxes

* penalize installations that have already taken early energy efficiency measures

* dismantle national negotiated agreements through which whole sectors of industry are currently undertaking ambitious improvement measures.

The confederation is actively seeking changes in the policy document, including a link between emission trading and negotiated agreements and a formula that incorporates complementary energy taxation rules.

UPM-Kymmene Environment Vice President Hannu Nielsen noted, "Emission trading is potentially a sound complementary tool for national and EU policies and measures, as well as the industry's self-commitments or negotiated agreements, provided it is limited to organizing the trade of carbon in the most cost-effective way. The EU trading scheme should not aim at setting targets for each installation. It should rather build on existing national policies so as not to jeopardize the efforts undertaken by the various member states and limit growth in Europe."

Yet, despite the best lobbying efforts of Cepi and others, it is somewhat late in the process for the European Commission to fundamentally change the rules of the game. In all probability, the system will be site-specific; the complex discussions will come with trying to run this system alongside nationally agreed-upon guidelines and the various energy tax regimes operating across different states within the EU. Whatever happens, it is going to cost money, and paper producers are likely to pick up the bill.

PACK IT UP

The packaging market has also seen a burst of environmental legislation. A revision of the European packaging directive has prompted a small measure of optimism among packaging producers, since the legislation may soften its stance against packs that could not be re-used.

Cepi holds that the original directive discriminated against recyclable packaging--a position that could not be justified in environmental terms, said Cepi, because it disregarded key factors, such as the use of renewable resources, recyclability, biodegradability and transport factors.

Cepi's position is in favor of waste prevention, but not at the expense of greater environmental impact. Since the new rules appear to promote re-useable packaging only when other factors, such as the transport burden, are allowed for, then Cepi sees this as a step in the right direction.

The European Federation of Corrugated Board Manufacturers, Fefco, has also welcomed the apparent move toward a more flexible waste hierarchy within the legislation. In a recent statement Fefco noted, "The [European] Parliament has begun to acknowledge the important environmental impacts of re-use, particularly those associated with transport. This could trigger more flexibility in EU waste management policy, paving the way for the corrugated packaging industry to put forward its claim for equal treatment for re-use and recycling."

Fefco Secretary General Jean Pierre Lardillon added, "Our objective is to end the current discrimination against fiber-based packaging and push for equal treatment for re-use and recycling."

ON TARGET

What we do know about the revised directive are the new five-year targets--to June 2006-for specific material groups. The new material specific recycling targets replace a 15% blanket minimum on all materials and have been set as follows:

* glass-60%

* paper and board-55%

* metal-50%

* plastics (mechanical and chemical recycling)-20%.

This is no small issue, either in operational or financial terms. As a recent bulletin from the packaging trade group, European, noted, the packaging directive has had major cost implications for the industry. since its introduction. "Extrapolating from a SOFRES study on the impacts of the Packaging and Packaging Waste Directive in four member states, DG Environment suggests that the total financing need for the packaging recycling systems across the EU amounts to somewhere between Euro 5 billion and Euro 8 billion per annum. This represents about 0.1% of European GDP, 5% of total environmental expenditure and 15% of total waste management expenditure.

DG Environment also said that total waste disposal costs avoided because of the directive are similar. These are estimates, but there has clearly been a massive transfer of costs from the public sector to the packaging and packaged goods industries. Municipal waste management costs are passed on to the householder; industry's costs will be passed on to the consumer if market conditions allow, but may have to be absorbed in part where price increases are not possible."

Clearly, recycling is a major issue for Europe's producers, but even before the revised directive was published, the industry was working hard to meet its own self-imposed targets. Late last year, Fefco joined Cepi, the European Recovered Paper Association (Erpa) and others in signing a declaration that aims to take the European recycling rate to 56% by 2005.

With the latest figures showing the recycling rate at 49.8%, the bodies are clearly taking on a significant challenge. In practical terms, the commitment translates to an additional 10 million metric tons of paper to be recovered in 2005 over today's rate.

READY, SET, ENGAGE

However, it is also clear that pulp and paper producers will have to come up with more initiatives in this vein if they are to improve their green credentials. The industry must continue to make progress on its own--and in conjunction with governmental and non-governmental organizations at all levels--if it is to remain competitive. Any attempt to hide, refuse to engage or fail to argue a strong case for the sector will result in imposed decrees that cripple the industry's competitiveness in such a way that plastic options make even greater headway.

This would be a great shame. Any reasonable person recognizes that, of all the industry sectors, pulp and paper is among those most likely to achieve true sustainability long into the future. As such, it should be one of the darlings of the green movement, not--as it appears presently--its sworn enemy. But the industry has a long way to go to convince a wider public of that.

DRINKING IT UP: IPP and the beverage carton

Integrated Product Policy (IPP) is a concept exercising minds among several trade groups, especially on the packaging side. At this early, developmental stage, packaging organizations are keen to get their points across.

Notable among them is the Alliance for Beverage Cartons and the Environment (ACE). Director General of ACE Kevin Bradley is among those who fear that the prescriptive solutions outlined in the IPP drafts will stifle innovation and lead to bureaucracy, while doing little to reduce consumption or produce more environmentally friendly packages. Bradley argued that IPP suffers from "policy confusion," caught in the middle of a raft of other environmental policy packages being unleashed on industry in the same time frame.

That said, if IPP becomes policy--and there seems no reason it wouldn't--then ACE proposes a life cycle management approach as one of the few realistic ways to implement IPP in the beverage packaging sector.

"A life cycle management approach to products can deliver solid environmental improvements, while ensuring that the pros and cons of prevention, re-use and recycling of packaging are fully accounted for in each specific case said Bradley.

CLIMATE CHANGE

--the paper industry's response

Climate change is set to drive further changes in European environmental legislation. As a result, the Confederation of European Paper Industries (Cepi) has tried to detail the energy use patterns and demand curves for the sector to gain a better understanding of the sector's current consumption needs.

The "Energy Profile 2001" provides an exhaustive overview of key energy indicators for the sector. The confederation hopes that highlighting the sector's consumption patterns will make it easier to convince legislators and others that pulp and paper is not just a heavy energy user, but also an energy efficient industry.

Other recent initiatives designed to help people better understand the industry is an update to the organization's popular Comparative Matrix of Forest Certification Schemes. This publication outlines the latest thinking on forest certification issues and highlights the differences and similarities encapsulated in various certification schemes operating across the globe.

In addition, Cepi has updated its members-only environmental legislation database. For anyone who doesn't know their IPP from their IPPC or their EPER from their EMAS, this site is invaluable. The Delpi database is accessed through Cepi's web site (www.cepi.org) and includes links to the confederation's position papers on various issues.

GREEN BRIEFS

* Proposed legislation on chemicals use could place severe risk assessments obligations on the sector, according to Cepi. Producers could be liable to undertake risk assessments on almost all the chemicals they use on a day-to-day basis. Consultants are said to be smiling broadly at the prospect.

* Utilization of recovered paper in Europe rose by 6% last year to 41.1 million metric tons. Cepi also reported that apparent collection climbed 3.9% to just under 43 million metric tons.

* Across Europe, recycled fibers accounted for 39% of raw materials, with virgin fiber at 43%. "Other pulp" made up 2% of the total, with non-fibrous materials (fillers, etc.) contributing the remaining 16%.

* The Alliance for Beverage Cartons and the Environment (ACE), Cepi, Cepi Eurokraft, the International Confederation of Paper and Board Converters in Europe (Citpa), Eurosac, Fefco, Groupement Ondule, the Kraft Institute, and ProCarton presented a paper to the European Commission lobbying for a better deal on the proposed Integrated Product Policy (IPP) legislation--the latest in a long line of EU measures that will affect the industry. One source described the IPP draft as "not very good."

* A recent initiative by the Belgian government to increase the scope of the revision of the packaging directive met with little support from fellow member states.

* The European packaging trade group, European, reports that the Dutch government is proposing a Euro 0.20 per bottle deposit on beverage cans and small PET bottles, and refill quotas for glass and large PET bottles. If cleared, the deposit would come into force in 2004, with the value of the deposit being greater than the cost of the packaging. Dutch producers argue that this will lead to widespread fraud.

* European also reports that the Danish government is set to lift its infamous "can ban" by the middle of this year. Lifting the ban on metal beverage cans is likely to end a complicated and long-running legal case brought by the European Commission against of Denmark (see www.european.be).

* Cepi and Jaakko Poyry are forecasting that water usage per metric ton of paper (LWC) produced will be less than 5 [m.sup.3] by 2010.

* The recycling rate for beverage cartons across Europe is now over 20%, according to ACE.

(Editor's Note: Greece, Ireland and Portugal are exempt from these targets because they previously secured an extension on meeting the terms of the original directive.)

Jim Kenny is contributing editor/Europe, for Solutions! magazine, and is based in Brussels, Belgium. He is the former vice president of editorial for Paperloop andtoday heads his own company, DSI. Contact him by phone at [phone], or by e-mail at [e-mail]