CPEI ( Confederation of the European Paper Industry ) issued the following important announcement in Brussels on April 28:
CEPI represents the European pulp and paper industry and directly convenes some 895 pulp, paper and board mills in Europe through its 18 member states, employing more than 180,000 people. Our industry is investing in excess of $5 billion a year to increase our production while reducing our carbon footprint.
Currently, due to the energy price problem caused by the Russian-Ukrainian war, our factories have to make the difficult decision to temporarily suspend production throughout Europe. Reducing the functioning of our industry is a real threat to our competitiveness in the global marketplace. Our industry has been facing high energy costs since the summer of 2021. For a few months now, we have seen energy prices continue to be high, even increasing by as much as 8 times. Existing forecasts suggest conditions are unlikely to improve in the coming months. The lasting impact of the ongoing war crisis and the recent collapse of the energy system is deeply worrying. It jeopardizes our industrial presence in Europe, let alone the ability to invest in further industrial transformation by 2030 to meet climate goals.
The CPEI acknowledges that the European Commission is working to discuss policy options with member states to ensure security of energy supply and deal with high energy prices. We take this opportunity to react to some possible solutions to the devastating impact of unbearably high energy prices on European pulp and paper operations. In the context of the publication of the "Security of Supply and Affordable Energy Prices" newsletter, CEPI expects the European policy framework to facilitate the following solutions:
1. Guarantee natural gas supply for industrial production purposes
In order to prevent gas shortages in Europe, EU and national policymakers should investigate all opportunities to alleviate current gas consumption in order to increase storage capacity. This can be achieved by reducing the use of natural gas for conventional or stand-alone generation without hampering the underlying electrical load, supply security and excluding industrial CHP operators. The International Energy Agency (IEA), in its 10-point plan to reduce the EU's reliance on Russian gas, assessed that an additional 7 billion kWh of electricity from existing dispatchable low-emission sources could result in a reduction of 13 billion cubic meters of electricity consumption from natural gas Meter. In addition, according to the International Energy Agency, gas demand in the power sector will be further reduced through the conversion of gas to coal: an increase of 12 billion kWh of coal-fired power generation will reduce gas demand by 22 billion cubic meters in a year.
In the event of possible shortage of natural gas supply, the industry should be able to use natural gas rationally in order to maintain its normal production level. Disruptions to the supply chain could have a significant impact on our industry. Various pulp and paper products, including packaging and basic household products, depend on the supply of natural gas. This includes the delivery of food and medicine, including demographics in the face of the current complex crisis.
2. Provide flexibility in complying with environmental regulations
One of the options for maintaining operations in the face of energy shortages is to temporarily switch from natural gas to less environmentally friendly energy sources such as oil or coal. In this emergency, national authorities should be able to provide flexibility for the industry to comply with environmental legislation. It is worth noting that a temporary switch from natural gas to coal or oil burning may reduce gas demand but also increase EU energy-related emissions.
Another option to continue operations in the event of a natural gas shortage is to opt for fuels such as LNG, LPG or H2
. This shift will also require quick decisions by authorities to ensure these proven solutions are available to the industry.
3. Introduce a minimum gas reserve scheme to ensure security of supply
As the International Energy Agency explains, natural gas storage plays a vital role in meeting seasonal demand fluctuations and providing insurance against unexpected events that cause price spikes. In the current geopolitical situation, the role of strategic natural gas reserves has become more important.
CEPI welcomes the swift action of the European Parliament to support an increase in gas reserve levels of at least 80% by 1 November 2022. We hope that Member States will continue to discuss the Committee's recommendations openly to ensure a level playing field. However, it is important to ensure that the ambition to accelerate the replenishment of natural gas reserves does not lead to higher energy prices or limit the supply of natural gas to manufacturing. In the newly established natural gas transportation and storage system, it will be necessary to ensure that the industry is not affected by higher logistics tariffs.
4. Negotiating services for joint EU gas purchases to ensure affordable gas supplies
Access to affordable and clean energy in 2030 is one of the core requirements of CEPI under the 2030 policy framework. The European Commission rightly states that "the EU should act together to harness its market power through negotiating partnerships with suppliers". Europe should ensure that the gas industry remains affordable by establishing a joint gas procurement process. We can assume that the EU can exercise its market powers to secure gas import contracts. The industry should engage in discussions with a possible task force on 'concentrated demand' for EU purchases of common gas. While significantly diversifying the EU's gas supply and contracts, efforts should be made to recommend an affordable gas price for it and should take precedence over solutions that intervene with market mechanisms.
Restrictions on retail and wholesale prices for electricity and natural gas may be considered when the market fails to adequately respond to unexpected and unforeseen developments. In the current exceptional circumstances, people may consider exploring emergency measures. But if introduced at any time, potential interim measures would need to be coordinated at EU level in order to take into account country-specific circumstances without distorting the actual state of the European market.
When it comes to the upcoming REPowerEU programme, CEPI welcomes the proposals made by the European Commission:
● Simplify and shorten permitting times for renewable energy projects
● Promoting the development of European Power Purchase Agreements (PPAs)
● Help to further develop the industrial chain of heat pumps, which may be the solution for further carbon reduction in paper production
● Accelerate the deployment of innovative, cost-effective renewable electricity in the industrial sector
● Propose and implement innovation funds to support electrification, including through an EU-wide carbon contract scheme
CEPI encourages the European Commission to investigate how to accelerate the installation of innovative zero- and low-carbon equipment, including not only electrolyzers, next-generation solar or wind technologies, but also the premier breakthrough technologies in manufacturing.
The European Commission should reconsider its approach to the use of bioenergy in the industry. The “Fit for 55” emission reduction package (Note: The “Fit for 55” emission reduction package is a set of proposals to revise and update EU legislation and implement new initiatives until 2030 aims to ensure that EU policy is in line with the Council The climate targets agreed with the European Parliament. This package of recommendations aims to provide a coherent and balanced framework for reaching the EU’s climate targets) and will help the sector gain access to sustainable indigenous energy. Currently, 62% of the energy mix of the European pulp and paper industry comes from sustainable biological feedstocks. This makes our industry the largest industrial user of renewable energy, which increases our autonomy and security of energy supply.
The pulp and paper industry is also a producer of methane fuels. The goal of doubling biomethane production by 2030 is a welcome opportunity to reduce European gas demand. However, policy frameworks need to ensure that sustainable bio-based feedstocks, such as forest waste and residues, are not distorted by their use in filling the free market.