Paper360 - January/February 2010 - (Page 12)

CARBON TRENDSPOT TING the CARBON CHALLENGE THE NORTH AMERICAN FOREST, paper and packaging industry has been at the forefront of the carbon emissions debate ebate and pending legislation that would impose a cap-and-trade system JOHN DIXON U.S. carbon cap-and-trade system is on the horizon, as evidenced by President Obama’s budget projections for 2012 onward, which include US$ 80 billion per year of revenue from government sales of carbon allowances. The Clean Energy Jobs and American Power Act (Kerry-Boxer), which is expected to be voted on in late 2009 or early 2010, lays down more stringent reduction requirements than the Waxman-Markey act which passed the House in June. It attempts to create a carbon cap-and-trade bill acceptable to a broad cross-section of states and business interests (most notably, the U.S. Climate Action Partnership). Issues central to the debate include the magnitude and speed of targeted reductions, industries included, eligible offset types and quantities, and point of regulation, as well as the role of broader cleanenergy measures which the bills firmly postulate must be integrated with carbon measures. Although the House bill recognizes the carbon stored in managed timberland, there remains little direction in how the offset credits will be applied. For example, if a paper company has held 250,000 acres for the past 25 years, will an offset be calculated on the existing timberland or will it be applied only to net new acreage? On the regulatory side, various legislative efforts have proposed a grab-bag of regulators to police the markets. The Supreme Court’s April 2007 decision in Massachusetts v. Environmental Protection Agency gave the EPA authority to regulate carbon dioxide (CO2) as a pollutant under the Clean Air Act. In April 2009, the EPA also released its long-awaited “endangerment” finding on CO2, citing greenhouse gases (GHG) as pollutants. In September, the EPA issued the Final Mandatory GHG Reporting Rule, which requires annual GHG emissions reporting from almost 10,000 facilities (85% of emissions) including pulp and paper mills, beginning in 2010. These two actions set the stage for far more robust, direct regulation of GHGs, although it remains to be seen how this regulation will intersect with legislative efforts. CROSS BORDER CARBON MARKETS The Western Climate Initiative (WCI) is more ambimbitious than other programs and targets a 15% reducduction below 2005 levels in 2020 for seven U.S. states tates and four Canadian provinces. A notable feature of WCI f (and of member state California’s landmark legislaislation Assembly Bill 32), is how the program identifies tifies the point of regulation (PoR)—the category of entity ntity within each sector that is charged with complying with carbon regulation. Within the WCI program, the PoR will typically be the emitting sources, electrical generators, paper mills, and industrial process emission sources. Importers of electricity will also be treated as a PoR using a First Jurisdictional Deliverer approach. Suppliers of transportation, residential, commercial, and industrial fuel will be required to surrender allowances equal to the GHG emitted when their customers burn the fuel. In March 2007, the Canadian federal government published Turning the Corner, which outlined the plan for an intensity-based cap-and-trade scheme. With the change in the U.S. administration, there are suggestions that the Canadian federal government will focus on developing a cap-and-trade scheme that will be consistent with the U.S. carbon market, in order to avoid the issue of “border adjustments,” which might otherwise be charged on Canadian exports to the U.S. IMPLICATIONS FOR THE INDUSTRY There are several challenging issues at stake for the industry under the proposed legislation including: • Competitiveness. Imposing stringent regulations and allowance fees on North American producers will provide a competitive advantage to those located in countries with lower regulatory standards. • Profitability. Under a cap-and-trade system, the industry will have to absorb increases in energy cost and the purchase of carbon credits to offset emissions. According to AF&PA, “allowance prices of US$ 50 per ton at auction would cost pulp and paper manufacturers US$ 3.6 billion or more Paper360º January/February 2010

Table of Contents for the Digital Edition of Paper360 - January/February 2010

Paper360 - January/February 2010
Over the Wire
Outlook: North America 2010
Confronting the Carbon Challenge
Improve Your Energy Efficiency
Feature: Paper Machine Clothing
Around the Industry
Association News
Improving Print Performance
Tracking Tension
Dateline: London
Index of Advertisers

Paper360 - January/February 2010