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A world model of the pulp and paper industry: Demand

,
energy consumption and emission scenarios to 2030
§
L. Szabo´
a,
*, A. Soria
a
, J. Forsstro¨ m
b
, J.T. Kera¨ nen
b
, E. Hyto¨ nen
b
a
Institute for Prospective Technological Studies (IPTS), Directorate General Joint Research Centre, European Commission,
c. Inca Garcilaso s/n, Expo Building, E-41092 Seville, Spain
b
Technical Research Centre of Finland (VTT), P.O. Box 1000, Vuorimihentie 5, Espoo, Finland
1. Introduction
Global climate change issues are high on the agenda for both
the scientific community and policy makers. According to the
fourth assessment report of the Intergovernmental Panel on
Climate Change (IPCC), significant reduction effort in green-
house gas (GHG) emissions is needed in order to limit long
term global temperature increase. Although most of this
temperature rise would take place in the second half of the
century, actions should be taken in the near future in order to
adopt the necessary steps for the massive infrastructure
change required, and to give the right signals to the sectors
responsible for most of the anthropogenic GHG emissions.
The pulp and paper sector faces a threefold challenge from
the climate change perspective. On the one hand, it is a very
energy-intensive sector. Producing 1 tonne of paper requires
5–17 GJ of process heat, depending on the paper type and on
the technology applied. Therefore the energy content of the
different paper grades is comparable to that of other energy
intensive products, such as cement or steel. On the other
hand, the most important natural resource for paper-making
is biomass, mainly wood and other fibre resources, the use of
whichis by internationally accepted definitions assumed to be
CO
2
neutral. Anadditional factor – whichmakes the modelling
of the sector even more complex – is that self-generated
electricity and heat play an important role in the energy
balance of the sector. These three aspects make the sector
unique from an energy modelling and climate change
perspective, and put it in the focus of attention of the climate
research.
According to its relative importance, numerous attempts
have been made in the literature to model the pulp and paper
market at the global scale and with an outlook to its long term
energy consumption and GHG emissions. These global forest
sector models are the Global Forest Products Model (see
Tomberline et al., 1998) of FAO, the Global Forest Sector Model
e nv i r o nme nt a l s c i e nc e & p o l i c y 1 2 ( 2 0 0 9 ) 2 5 7 – 2 6 9
a r t i c l e i n f o
Published on line 6 March 2009
Keywords:
Pulp and paper sector
Climate change
Bottom-up modelling
JEL classification:
L73
Q54
a b s t r a c t
This article introduces a bottom-up global model of the pulp and paper sector (PULPSIM)
with a focus on energy consumption and carbon emissions. It is an annual recursive
simulation behavioural model with a 2030 time horizon incorporating several technological
details of the industry for 47 world regions. The long time horizonand the modular structure
allow the model users to assess the effects of different environmental, energy and climate
policies in a scenario comparison setup. In addition to the business as usual developments
of the sector, a climate commitment scenario has been analysed, in which the impacts of
changing forest management practices are also included. The climate scenario results
reveal that there is a significant carbon reduction potential in the pulp and paper making,
showing a number of specific features: the central role of the fibrous resource inputs and the
potential impact of increased waste wood and black liquor based heat generation.
# 2009 Elsevier Ltd. All rights reserved.
§
The ideas expressed in this paper are those of the authors and do not necessarily represent the views of the European Commission.
* Corresponding author. Tel.: +34 954 488236; fax: +34 954 488279.
E-mail address: laszlo.szabo@ec.europa.eu (L. Szabo´ ).
available at www.sciencedirect.com
journal homepage: www.elsevier.com/locate/envsci
1462-9011/$ – see front matter # 2009 Elsevier Ltd. All rights reserved.
doi:10.1016/j.envsci.2009.01.011
of the European Forest Institute (EFI-GTM) (Kallio et al., 2004),
and the World Forest Products Model (WFPM) of JIRACS (2003).
While the first two models are based on mathematical
programming, the last uses a simulation approach. The EFI-
GTMmodel mainly focuses on the forest industry (Kallio et al.,
1987), and is based on the model developed in the IIASAduring
the late 1980s.
Numerous references in the literature model certain
segments of the markets, focusing either on an individual
country or on certain characteristics of the sector. Thus
national or regional models exist for various countries. The
most recent one has been developed for the USA (Ruth et al.,
2000; Davidsdottir and Ruth, 2004) and is based on an
econometric analysis. It specifies a dynamic model for the
paper sector, analysing the impacts of different climate
policies (carbon taxation and investment-led policies).
Another regional model is NAPAP partial equilibrium eco-
nomic model of the North American region developed by the
USDAForest Product Laboratory (see e.g. Ince, 1998), that gives
long term outlook (till 2050) for the sector based on a price-
endogenous linear programming system. Mo¨ llersten and
Westermark (2003) investigate the CO
2
reduction potential
for the Swedish paper industry, based on different carbon
emission reducing measures. Farahani et al. (2004) present an
article dealing with the techno-economic potential of a new
technology – the black liquor gasification-combined cycle
(BLG/BLGCC) – on the pulp and paper sector in the US and
Sweden. According to their findings, the excess electricity that
this new technology can produce may lead to a significant
reduction of CO
2
emissions in the sector. Technologically
detailed analysis on black liquor gasification can be found in
an article by Eriksson and Harvey (2004), in which the
performance of the BLG technology is compared in different
mill powerhouse configurations.
Another interesting series of publications are activity-
based analyses. Farla et al. (1997) make a cross-country, cross-
time comparison of energy efficiency developments in the
pulp and paper sector in eight OECD countries. They find that
energy efficiency improvements played a key role in limiting
energy consumption during the 1973–1991 period. The articles
of Bra¨ nnlund et al. (1998) and Bruvoll et al. (2003) implement a
nonparametric frontier method (DEA—data envelopment
analysis) that allows to measure the effects of environmental
regulations on the performance of the individual firms in two
Scandinavian countries.
The main purpose of this article is to present a global paper
and pulp model (PULPSIM) that attempts to capture both the
technological aspects and the market developments of the
sector.
1
The overall objective of constructing this model is to
synchronize the technological details with an appropriate
economic frameworkona global level. Inparticular, inorder to
analyse specific policies, e.g. in the context of climate change
policies, more attentionis paid to the detailed modelling of the
energy consumption and the GHG emission of the sector.
Therefore in order to overcome some of these boundaries,
the specification of the PULPSIM model incorporates the most
important market interactions, both on the demand and the
supply sides, including the trade issues. Demand for the final
paper grades are derived through the ‘intensity of use
hypothesis’ (see e.g. Van Vuuren et al., 1999), according to
which the per capita income determines the commodity
intensity of the different regions. This dynamic evolution of
commodity intensity is essential in long term models, as the
relationship between income and consumption is not deter-
mined by a single elasticity, but it is redefined over the full
time horizon. This provides witha more sensible picture of the
commodity demand and, moreover, it allows reflecting the
substitution away from the commodity, as the use of
alternative materials could take a higher share over a long
time scale.
The next element incorporated in the PULSPSIM model is
international trade, based on product separation within paper
grades. The imported and domestically produced products are
differentiated and their demand shares reflect these price
differentials. Not only the final products and the forest
resources are traded in the model, but many of the
intermediate goods, such as sawmill products and chemical
pulps as well. Importing and exporting regions are also
distinguished according to the past developments of the
markets.
2
This approachhas its ownlimitations, mainly that if
a region is classified as an importer, it will stay in this group in
the whole period. Another method widely used in empirical
trade modelling is the product differentiation by origin
approach with a constant elasticity of substitution (CES)
function, however it still does not solve the small share
problem: those countries, which have small shares of imports
will continue to have small shares inthe future, as it is difficult
to drive them out from the CES function corner solution. In
order to model the major world trade flows, four regional
markets (Africa and Middle East, America, Asia, Europe) were
set up. World market prices include distance dependent
transport costs, as this cost element could play an important
role in some product and market segments. The global trade
market is cleared through the allocation of import demand to
exporters (see Section 3 for details). These allocation proce-
dures are constructed to check that capacities and the needed
resources are available.
The mentioned market modules introduce the economic
rationale in the model in a long time scale, with an attempt to
provide with a reasonable ground for assessing different
policy options or scenarios withlong termimpacts, suchas the
carbon constrained future scenarios analysed in this article. It
has to be noted however that our approach is still not
accounting for the paper-containing products export and
import, so it is most probably underestimating the importance
of the trade effects in the continuously growing international
trade market of the paper products.
This article is structured in five sections. The next section
discusses the main features of the pulp and paper sector at the
global scale. Section3 describes the PULPSIMmodel. InSection
4 the most important features of the reference scenario are
introducedconcerning the future development of the pulp and
1
The PULPSIM model has been written in VENSIM 5.4 software.
It operates on a year to year recursive simulation basis, running up
to the year 2030.
2
Individual countries, however, could be exporter in one pro-
duct and importer in another grade according to their past
records.
e nv i r onme nt a l s c i e nc e & p ol i c y 1 2 ( 2 0 0 9 ) 2 5 7 – 2 6 9 258
paper market. This section includes the analysis of a climate
commitment scenario, and also summarises the results of the
sensitivity analysis of the model, while Section 5 concludes.
Appendix A in Supplementary Data gives more details on the
material and energy flows of the sector, Appendix B in
Supplementary Data provides with a technical model descrip-
tion, while Appendix C in Supplementary Data presents the
full sensitivity analysis.
2. Pulp and paper industry overview
Section 2.1 gives a focused description of the technologies/
processes used in the sector, with an insight to the materials
used, as they are the determinant factors explaining the
differences in energy consumption. Section 2.2 presents the
trends in the global paper supply together with the patterns in
the international trade in various paper products and
resources.
2.1. Paper-making processes
The forest industry comprises fibre-based chemical industry
producing pulp, paper and fibre based board and sawmills
industry producing sawn wood, plywood and wood based
panels. The industry is a capital intensive one, and the
production technology is based on well known principles and
readily available technology. Thus, the future of the global
structure of the forest industry is expected to be based on the
availability of suitable raw material and the cost patterns in
different areas.
Paper making consists of many and complex processes, but
the two most important steps are pulping and paper finishing,
and the technology choice depends on the final use (or grade)
of the paper. The two mainmethods of pulping are mechanical
and chemical processing. These pulps are not substitutes but
complements in papermaking. Their qualities differ and they
are used in different grades of papers. Pulping methods differ
from each other also in energy and wood use. Chemical
pulping uses twice as much wood per tonne compared to that
of mechanical pulping. Modern chemical pulp mills are self-
sufficient in their energy consumption as half of the wood is
dissolved and used as fuel in the chemical recovery phase.
Mechanical pulping uses wood very efficiently but at the
expense of much higher electricity consumption. Depending
on the local situation the global competitiveness can be
improved by choosing the suitable product and processing
option.
The mechanical and chemical wood processing industries
are interlinked through the common resource base and
because the by-products of the mechanical processes can be
used as raw material in chemical processing. In addition,
woodcanbe useddirectly as a fuel. All these competing uses of
wood have their effects on the pulp and paper sector when
simulations extend to the future.
Inadditionto wood, recycledpaper forms animportant raw
material input in the paper-making process. For example
Europe has a leading position inreuse, as more than50%of the
paper is recycled. Although recycling is both economically and
ecologically sound, recovered paper cannot be efficiently used
in all paper grades, nor can it be used indefinitely. In spite of
this, paper recovery is expected to grow fast in the future in
order to keep up with the demand increase. This will most
probably lead to a continuous price increase of recovered
paper. Limitations for fibre recovery are set by fibre length,
quality and usability. Fibre shortens up every time it is used
and at some point, usually after 4–6 cycles, it is too short to be
used in papermaking. Therefore a certain amount of virgin
pulp input will always be needed to meet the quality demand
set for the products. In the mix of resources for paper making,
recycles fibre typically replaces for mechanical pulp in
newsprint and in some board grades. Because of its economic
and environmental advantages, more and more recycled fibre
is expected to be used as raw material in the paper making.
2.2. Present trends in paper consumption and trade
North America, Europe and Asia account today for more than
90% of total paper and paperboard consumption (360 million
tonnes in 2004), with almost equal shares amongst them.
Oceania, Africa and Latin America together account for less
than 8%. World paper and paperboard demand is expected to
grow about 2.1%/yr until year 2020 and the growth will be
fastest in Eastern Europe, Asia (except Japan) and Latin
America (Jaakko Po¨ yry Ltd., 2006; Diesen, 1998). This growth
rate covers high variation amongst the countries: in the
developing regions it is expected to exceed 4%, while in the
mature markets (North America, EU, Japan) this rate is
expected to be around 0.5–1%. This means that developing
Asia (mainly China) will play a crucial role in the future paper
market.
The pulp and paper market is a heterogeneous and
extensively interlinked market. It means that international
trade not only takes place in all the different product
categories, but also in semi-products and raw materials as
well. In addition to the fibre resource, the chemical pulp and
the recycled materials are also traded internationally. Pulp
and paper producers specialise: some of them are only
engaged in pulp production, while others manage the full
production cycle from fibre resources to final paper grades. As
a result, one can observe a situation where many countries
specialise in certain final products, and still rely on imports in
other paper categories. This means that the paper and pulp
market is highly interconnected through international trade,
which increases the complexity of the modelling work. Supply
is dominated by ten countries, giving around 60% market
share in the sawn-wood, pulp and paper production. Six of
them cover more than half of the exports in these products,
which show the high concentration level of resource supply
and production.
Fig. 1 illustrates relative positions of the ten most
important countries within the market. The USA and Canada
are present inall markets withsignificant shares, whichis also
true for Sweden and Finland but with considerably less
proportions. Apart from them, Germany is a major European
player represented on the export markets of the final paper
products. While Russia is a important actor in the resource
markets, its weight in pulp and paper making is lower. China
faces similar challenges in paper making as in many other
energy intensive products, such as iron and steel and cement:
e nv i r onme nt a l s c i e nc e & p o l i c y 1 2 ( 2 0 0 9 ) 2 5 7 – 2 6 9 259
while its production capacity is significant, it still relies to a
great extent on imports to cover its rapidly growing demand.
There are two issues in this market picture with direct
implications for the pulpand paper model. First, the modelling
approach should incorporate multiple markets for all the
productionchain, fromthe fibrous resource, throughthe semi-
products to the final product markets. Following this route
allows the modeller to capture a realistic picture of the whole
paper market, including the energy consumptionof the sector,
which is distributed in all of these production steps. This calls
for a modularly structured model, which is built up in the
PULPSIM global pulp and paper model.
The second issue highlighted in this market overview is
the resource and capacity availability. As the main wood
resource owners (Russia, North America and Latin America)
and the ‘emerging’ markets in paper consumptions are
distinct from the traditional producing centres, the risk of
emergence of supply bottlenecks with sudden price peaks in
certain segments of the markets (e.g. in recycled pulp,
fibrous resources etc.) is high. Additionally the wood and
other fibrous biomass have limited resource potential if they
are produced in a sustainable manner. According to the
results of the Global Fibre Resource Model of FAO (1998)
Russia and North America are the main wood based fibre
resource owners together with Latin America. However, in
this latter one the available potential will be more restricted,
as according to this study the ratio of natural forest not
available for harvesting is the highest, ranging from 60 to
90% in the countries belonging to the region compared to the
50% world average. This availability is restricted by geo-
graphical inaccessibility as well as by the assumed sustain-
able forest management practices. This resource faces a
competing use (biomass to electricity, biomass to liquid
fuels) and it has to face markets with enormous growing
potential. This demand growth comes not only from the
developing regions, but also from developed countries which
are expected to increase their demand for biomass. This is
the case, for instance, in Europe which pursues environ-
mental policies aiming at multiplying biomass use in the
long term, which in turn puts pressure on the resource
resulting in an increasing price trend. The setup of PULPSIM
model reflects these potential bottlenecks within the paper
sector, however does not account for the other competing
uses of biomass yet. This connection will be provided when
the model is merged with the POLES model (see Criqui, 1996
for an introduction to POLES).
3. Model overview
This section describes the functioning of the model in a non-
technical way.
3
In the model the world is divided into 47
countries/zones. Some of them correspond to an individual
country; some others are aggregation of several neighbour-
ing countries sharing similar socio-economic characteris-
tics. The 47 zones are grouped together, for reporting
purposes, into 5 regional markets, corresponding to Europe,
Asia, North America, South America, and the Rest of the
World (ROW), including Africa, Middle East, Oceania, Japan,
Russian Federation and Rest of the new Independent States
(RIS).
3.1. Material and technology characterisation
Paper product classifications are usually made according to
the intended use of the product, e.g. printing, tissue, case,
writing papers. However from the energy consumption point
of view, the pulping method used is the key determining
factor. As most of the statistical information is mainly
collected by use categories, even the product categories (paper
grades) should be selected carefully for the model in order to
capture the variation in energy consumption and to match the
required categories the statistics not necessary provide.
Considering all these factors, modelling three paper grades
– newsprint, fine and board – have been selected in PULPSIM as a
compromise. Newsprint means both newspaper
4
and all types
of mechanical papers (i.e. papers containing mechanical pulp),
fine means coated and uncoated wood-free papers including
tissue papers, and board embraces all types of wrapping,
packaging and board papers.
More categories would mean more precision in the product
part of the model, but it would have been increasing the model
complexity and the difficulties in verification, while most of
the differences inenergy consumptionare still capturedby the
chosen categories. With these three categories the main
differences in energy consumption are captured (see Table 1),
while the generally used paper categories canbe classifiedinto
these grades in a straightforward manner, according to the
pulp type used for the paper grade.
Differences in energy use in paper making are mainly due
to the variation in pulp shares used in the distinct paper-
making processes. Pulps differ substantially in resource use.
Mechanical pulp uses a lot of electricity but only about half of
the wood compared to that of chemical pulp. Mechanical
pulping produces heat as a by-product and it is used as drying
steam in paper processing.
Fig. 1 – Pulp and paper market shares in 2002 (based on
data from the Finnish Forest Research Institute).
3
Description of the main model equations can be found in
Appendix A.2 in Supplementary Data.
4
Newsprint paper is nowadays being made almost 100% out of
recycled paper. But as in the model several paper grades are
merged (e.g. magazine papers) under the name ‘‘newsprint’’, a
11% share of chemical pulp use is assumed in this grade as well
(see Supplementary Data, Fig. 6).
e nv i r onme nt a l s c i e nc e & p ol i c y 1 2 ( 2 0 0 9 ) 2 5 7 – 2 6 9 260
In chemical pulping, half of the wood material remains
dissolved and used as fuel. Recycled paper pulp uses only a
fraction of energy compared to the other pulps. All the wood
residues of the processing chaincanbe used as fuel. InTable 1,
the average pulp and energy consumptions are shown for the
different grades.
Raw wood use, energy use and by-product fuels produced
showhigh differences amongst the different paper products in
Table 1. Boardproductionwitha large recycledfibre share leads
toverysmall rawwoodandenergyuse. Newsproductionstands
out with its electricity consumption and fine paper production
has the largest wood and steam consumption. On the other
hand, its fuel production reflects the amount of wood used.
The autonomous energy efficiency improvements (AEEI-s)
foundinthe literature report values inthe range of 0.3–0.5%for
the sector, while the total energy efficiency improvements
reported for the 1980s and 1990s were in the range of 1–1.6%
(Farla et al., 1997; Martin et al., 2000).
The table gives a clear indication that the chosen level of
disaggregation is necessary in order to capture energy
consumption in the sector with the appropriate accuracy. It
also suggests that the three pulp categories (mechanical,
chemical, recycled) must be included in the model in order to
address different impacts on the different paper grades with
energy taxation and carbon constraints. Raw wood use differs
by a factor of almost four times between the different paper
grades, and energy use differs by a factor of two. Eliminating
this distinction using average numbers on energy consump-
tion would undermine the ability of the model to account for
the different impacts on the different products in the future.
As the detailed material flows and processes are core assets of
the model, a more detailed description is given in Appendix A
in Supplementary Data.
3.2. Paper demand and global trade
Commodityintensityisfrequentlydescribedasafunctionof the
national per capita income, as their consumption patterns
follow a Kuznets-like inverse U-shaped curves. These types of
functions have been considered for various materials for
different regions, many of them being energy intensive
products. Studies related to this field are numerous, see e.g.
Van Vuuren et al. (1999) for steel, Mannaerts (2000) for paper,
aluminium, steel andvariouschemical productsandSzabo´ et al.
(2006) for cement. This approach was also followed in deriving
the paper consumption in the PULPSIM model. The GDP per
capita, the lagged value of the paper consumption per unit of
GDPandtheproduct pricedeterminepaper consumptionfor the
different regions. Using the ‘intensity of use hypothesis’ for
paper demandmeans that demandisnot onlydrivenbyasingle
income and price elasticity. Using two behavioural parameters
on the per capita income (see parameter alpha and beta in
Appendix B.2.1 in Supplementary Data for the formulation)
allows for capturing the saturation level at different income
levels. This means that after a certainlevel income growthdoes
not entail morematerial consumptionper unit of GDP. Reaching
this point income growth is decoupled from more intensive
material consumption. Obviously, this approach has its limita-
tions as well. As the estimation or the main parameters are
based on the historic data, sudden shifts (e.g. newly emerging
technologies) could also change consumption patterns radi-
cally. In the case of the pulp and paper sector the wide-spread
diffusion of electronic offices and practices the printing paper
use was expected to shrink, however there are only few
countries that experiencedthis reductioninlevels (e.g. Sweden,
Japan) in the last few years. Additionally printing paper
represents only a smaller share in total paper consumption.
Total demand for each product consists of domestic and
import demands. Both are forecasted according to global
consumption trends and domestic capacity available. The
global market is clearedthroughallocating the import demand
onto exporters. The allocation is carried out by applying a
simple computing algorithm that replicates with satisfactory
results supply allocation under scarcity conditions. If the
exporters cannot meet the import demand then the global
total import demand is rationed and the scarcity is distributed
for all, according to a taˆ tonnement process.
The international trade module has a two-stage hierarchical
system. It is hierarchical, as first the import quantity is
determined for each 47 model regions, as a share of the total
domestic demand. It is a dynamically updated share, where
the driver is the distinct price development of the domestic
and international markets. Second, the export is shared out
among the exporting regions of the given product, which
depends on the shares of exports of the earlier period, and on
their cost-competitiveness. Additionally the import algorithm
is two-staged, as import from closer markets and from the
global market is split. Since the transportation costs play an
important role in the total import costs, regional supply gets
first priority, and the remaining non-satiated demand is met
by import from the global market.
As not only the final goods are traded internationally the
model captures trade in the other goods as well, including the
rawmaterials (rawwood, recycled paper and sawn-wood) and
in an intermediate product (chemical pulp). For each traded
product, the import and export regions are defined.
5
In the
model, a country can only be either an importer or an exporter
of a traded commodity. But a country can be an importer in
one market and an exporter in another.
3.3. Production module and capacity planning
The process module is the core of the PULPSIM model,
determining the production routes of the different pulp and
Table 1 – Material and energy use in paper making.
Pulp shares News Fine Board
Mechanical pulp 0.60 0.00 0.13
Chemical pulp 0.11 0.74 0.14
Recycled paper pulp 0.23 0.14 0.62
Raw wood use, m
3
2.3 3.9 1.1
Energy, MWh
Electricity 2.2 1.4 1.4
Steam 1.6 4.6 2.4
Fuels produced 1.0 3.5 0.7
5
Four trading zones were set up: Africa and Middle East, Asia,
America, Europe. The grouping of the individual countries to the
zones is shown in Appendix C in Supplementary Data.
e nv i r onme nt a l s c i e nc e & p o l i c y 1 2 ( 2 0 0 9 ) 2 5 7 – 2 6 9 261
paper-making technologies. It uses an iterative optimisation
routine to fulfil its threefold task. First, it ensures the
technological material balance, where fixed coefficient mate-
rial use is assumed. Second, it takes care of balancing
production in such a way that domestic production (if exists)
covers domestic demand for domestically produced paper
grades, intermediate demand of raw materials and inter-
mediate goods and export demand for the various paper
goods. Third, the routine searches for bottlenecks on the
production chain, which would limit the production possibi-
lity frontiers. In the short term these bottlenecks can result in
shortages in some segments of the production chain.
As data on the time structure of capacities is generally
missing for many of the modelled regions a vintage approach
of capacity accounting and planning was unfeasible to
introduce inthe model. Instead, the average economic lifetime
of the equipments (ranging from 14 to 20 years) was used to
account for the average lifetime of the machinery pools, which
were contracted every year by the average retirement share. A
backward looking expectation approach
6
was used to deter-
mine the expected demand in the t + 10th years, and the
comparison of the expected demand and the expected
capacity availability will determine the need for newproduction
capacity. Inthe model it is assumedthat capacity is maintained
during its lifetime, but old capacities are upgraded (retrofitted)
if it’s cost-effective compared to building newcapacities. Both
the investment and variable costs are considered at any point
in time to determine the economic rationale of both options
(that are not mutually excluding), and depending on the type
of equipment available for potential retrofitting towards an
upgraded technology, the associated retrofitting costs and the
investment costs required for new installation. Investment
and retrofitting costs are annualised throughthe economic life
of the equipment.
The requirement for newcapacity is based on the expected
production, installed capacity and retired capacity. The
installed and retired capacity is a straightforward aggregation
over time, while for estimating the expected production, a
trend of the last years’ production is used.
The specific investment costs of the retrofitting are
assumed to be a share of the overnight investment costs in
new capacity, this share depending on the specific technology
considered and the economic lifetime of the replaced and
replacing equipment.
The total production cost of a given process is the sum of
costs of the resources and the fixed and variable costs of
production. Fixed costs comprise annualized investment costs
and fixed operation and maintenance costs, which are
assumed to be a given share of the investment costs. The
exogenously prescribed variable costs include variable opera-
tion and maintenance costs, whereas resource costs include
fibrous raw material, i.e. wood, recycled paper, market pulp,
and other production inputs, such as chemicals, filling
materials etc.
The price of a resource differs from the production costs if
the demand of the resource approaches to the supply limit, in
which case its price increases. This price rise affects the costs
of the processes that use it. In this way the higher price goes
through the production chain and the end product price rises,
affecting its demand in the next time step.
3.4. Energy consumption and carbon emissions
Every process is (dynamically) characterised by a specific fuel,
steam and electricity consumption. The values of these
coefficients are based on the techno-economic characterisa-
tion of the different production routes. Typically, specific
energy demand decreases when new technological solutions
are taken in use.
Energy demand is divided into three categories: electricity,
heat (steam), fuel. These demands form three different
balances. The model development faced more limitations
when constructing the energy consumption module. The
International Energy Agency Energy Balances (2006) give
detailed information on the fossil fuel, combustible renewable
and waste energy and electricity used in the pulp and paper
sectors for the OECD countries. It also provides data for the
non-OECD countries, however it seems to be less reliable, as
many of the renewable and waste energy use is missing. An
additional constraint was, that data needed on the technology
level, where only rough estimations were available for the
developing regions. To overcome this problem, in the missing
regions the average energy use values of Table 1 were used
with a weighting scheme, where the weights are given by the
shares of the different technologies in place to closer match
the reported total energy use. This undoubtedly gives bias to
our energy consumptionestimations and it only highlights the
pressing needs for more reliable data in the field. The third
statistical limitation was on the shares of on-site and grid
based electricity consumption, as IEA does not split the
electricityuse inthesector. Inthe model average efficiencies for
the recovery boilers are assumed, which improve in time
according to the average industrial boiler efficiency improve-
ments of POLES, and only the remaining electricity need is
bought from the grid. This question becomes more important,
whenaccounting for the total carbonemissionfor the sector. In
the model a full accounting approach is used, so in case of grid
electricity, emissions are also calculated, based on the POLES
projectionsonthefuturefossil fuel mixof electricitygeneration,
and these emissions are attributed to the sector. Naturally, this
calculation is valid only for the stand-alone version of the
model, when coupled with POLES in the future, this split has to
be made. Anadditional bias inthe model is that considering the
present functioning of the European Emission Trading Scheme
(ETS), the carbontaxes onelectricity is paid by the power sector
and not the by sector demanding the electricity.
7
Heat balance forms the core of the energy production
model. Electricity generation by CHP, if applied is a by-product
of steamproduction. In pulp mills the main energy generating
unit is a soda recovery boiler. It uses spent cooking liquor, or
6
Based on the average of the last ten years growth rates of the
demand, and assuming that this rate is maintained in the future.
This myopic approach reflects the uncertainty the investors face
concerning their future expectations. Obviously pursuing a per-
fect foresight approach is unrealistic here.
7
The extent to which power producers could pass the price
increase of the carbon taxation on the consumer is out of the
scope of this study.
e nv i r onme nt a l s c i e nc e & p ol i c y 1 2 ( 2 0 0 9 ) 2 5 7 – 2 6 9 262
black liquor, as a fuel. This boiler is a central part of the
chemical recovery device. In additionto the black liquor, wood
wastes and bark frommechanical processing are used as fuels
in separate boilers to produce steam. Black liquor and wood
wastes are used first. After these, fossil fuels come in last to
meet the rest of the demand. All the fuels that are usedfor heat
production can also be used for electricity generation.
The emissions considered here are only those due to the use
of fossil fuels. In the version of the model described in this
paper, only CO
2
emissions have been accounted for. If the
emissions are taxed, the price of each fossil fuel is modified
according to their carboncontent. The newrelative prices flow
through the production system as higher energy cost, raising
product prices accordingly.
3.5. Model data and calibration
Data of the model come from various information sources
listed in the references of this article, with the FAOSTAT
database being the most relevant to our work. Historical
values on pulp and paper production, trade are available there
for all paper grades and sub-product categories. This database
could also serve as the basis for the calculationof the apparent
consumption.
Future paper demand is calibrated on the historic values
following a procedure, where the logic of the intensity of use
hypothesis (introduced in Section 3.2) was reversed, and the
parameters alpha and beta (in Appendix B.2.1 in Supplemen-
tary Data) were calculated to minimise the deviation from the
historic consumption trend by using the GDP (in ppp terms)
and population values. Trade shares and production shares
are also calibrated to the historic values, however the long
termdriving parameters (trade elasticity, price elasticities) are
exogenous. This called for a sensitivity analysis of these
parameters, where the main findings are presented in Section
4.3 and the detailed tables are placed in Appendix C in
Supplementary Data.
The historic trends in these main driving variables, and
their future projections for the Business as Usual scenario are
summarised in Table 2.
4. Model simulation results
4.1. Business as usual scenario
The Business As Usual (BaU) scenario shows an uninterrupted
growing trend for the world paper demand. The average yearly
Table 2 – Socio-economic variables and the energy/carbon intensities in the reference.
1980 1990 2000 2010 2020 2030
Population (million person)
OECD 1110 1178 1230 1261 1281 1288
Developing 3309 4060 4807 5530 6216 6794
GDP/capita (Ks)
OECD 14.0 17.4 20.4 25.7 31.6 37.8
Developing 2.0 2.4 3.4 4.9 6.6 8.4
Paper Cons/GDP/capita (kg/Ks)
OECD – 8.6 8.6 8.6 7.5 6.6
Developing – 5.1 5.1 5.0 4.9 4.7
Heat demand/paper prod (toe/t)
OECD – 0.3 0.3 0.3 0.2 0.2
Developing – 0.7 0.8 0.8 0.8 0.7
CO
2
emissions/paper prod. (tCO
2
/t)
OECD – 0.7 0.7 0.7 0.7 0.7
Developing – 0.7 0.8 0.8 0.8 0.7
Fig. 2 – Regional paper demand and supply.
e nv i r onme nt a l s c i e nc e & p o l i c y 1 2 ( 2 0 0 9 ) 2 5 7 – 2 6 9 263
growth rate is projected to be 2.1%, with the highest average
growth rate in Asia (4.1%) and the lowest in Europe (1%). In
spite of their high growth rates, South America and the Rest of
the World regions will still account for a small proportion of
the world total paper consumption in 2030. Undoubtedly Asia
will be the key actor indriving the future paper demand. China
and India will be accounted for most of this growth, where
China alone will represent more than 50% of the total Asian
demand in 2030. Fig. 2 illustrates these trends in paper
demand and supply for the aggregated regions of the model
and for the main paper grades. Amongst the grades board
papers show the highest increase (2.8%/year), while the
growth rates in the fine and news paper category are more
moderate.
In paper production the trends are similar to those of the
demand side, where the international trade to some extent
modifies the picture. Global trade also shows a strongly
increasing trend between 1.5 and 4% annual growth rates in
the different paper categories, and the trade patterns also
change significantly. The resource owners, mainly Latin
America and Russia steeply increase their shares in the raw
material part of international trade, they account for 75% of
raw wood export by 2030. Asia also becomes more active on
the end products part, increasing its share 30% on certain end
product paper in the export market. Due to its very intensive
demand growth, Asia also covers a significant share of its
consumption by import, so Asia is projected to be an
important actor on both side of international trade.
The pattern of energy use also varies significantly across
regions.
8
While Europe is only slowly increases its total energy
use in the sector, which is in line with its production trends,
the Asian and American regions show dynamically growing
energy demand in the Business as Usual scenario. The Asian
region has a massive contribution to the world energy
demand. There are high differences in the distribution of
the fuel used. Europe and South America already use close to
50% of fibrous resources (waste wood and black liquor) in
covering their heat demand, while Asia is lagging behind in
waste wood use. See Fig. 3 for more details. The two leading
countries in waste wood utilisation are Finland and Sweden
with close to two third shares in energy use, while this
potential is limited in other countries like Germany and Italy,
as their production is more focused on the end-products with
less access to waste wood resources.
Carbon emissions from the sector also rise with a yearly
average rate of 2%, where the most significant increase comes
from Asia, increasing its present 25% proportion close to 40%
by 2030.
4.2. A climate commitment scenario
In addition to the BaU run, a policy scenario was also run with
the model. This is a transition scenario representing a carbon
reduction committed future, in which the effects of the
changing forestry management practices are also included. In
this setup the sector is expected to contribute to the carbon
emission reductions required to achieve a GHG stabilisation
scenario mainly intwo channels. Firstly, as the sector is the big
consumer of forestry products – the expected changing
practices in forest management that are foreseen to take
place globally – it has to cope with some disturbances on its
main raw material supply chain. The impacts of introducing
sustainable forest management (SFM) practices globally could
arrive to the sector through two main channels. First, supply
could be reduced in a transitional period, and additionally
there could be certain price increases due to the new forest
management practices. Due to the lack of quality data and the
long time scale involved it is difficult project these changes,
however the global forestry model of FAO (Global Fibre Supply
Model 1998) gives indication of the extent of these impacts.
Secondly, there is a direct impact on the sector, through its
high fuel use, brought by carbon constraint policies including
trading schemes (such as the European Trading Scheme) or
through carbon taxation.
9
As the model is a stand-alone
version sector model,
10
the carbon reduction target cannot be
determined within the model. To overcome this difficulty, the
carbon constraint commitment is represented by an exogen-
ous carbon tax, derived from the latest European Commission
World energy, technology and climate policy outlook (WETO,
European Commission, 2003), representing a delayed action
500 ppm concentration scenario. The delayed action means,
that in the early stages – up till 2020–2025, depending on their
future development – developing world countries face rather
‘soft’ commitments (or targets), and participate in the
reduction scheme through e.g. the clean development
mechanisms.
The scenario set-up can be summarised as follows. SFM
impacts are modelled through two impacts, first by introdu-
cing exogenously supply constraints of fibrous resources for a
Fig. 3 – Heat use in the paper sector (for years 2000, 2015,
2030).
8
In the sector heat accounts for more than 90% of the energy
used, so referring to energy use in the paper sector mainly means
heat consumption.
9
The pulp and paper sector is already included in the ETS in the
first trading period of 2005–2007, with paper and pulp capacities
higher than 20 tonnes per day (EC Directive 2003/87).
10
It is planned to connect the model to the POLES world energy
simulation model in the near future, however for the policy exer-
cise presented in this paper, the connection is limited to certain
exogenous variables: GDP, population projections and energy
prices of POLES.
e nv i r onme nt a l s c i e nc e & p ol i c y 1 2 ( 2 0 0 9 ) 2 5 7 – 2 6 9 264
certain transitional period, and additionally set the minimum
price increase to a range indicated by the FAO (1998) study.
Setting these limits exogenously are necessary inour model, as
the fibre resourcemarket is onlymodelledinour model through
exogenously given available potentials, so not in the details as
GFSM does. These potentials are harmonised to the ones of
GFSM, while the constraints themselves are put in the logging
capacities (see Table 3 for values), that are already organic part
of our PULPSIM model. Introducing the GFSM estimates in the
scenario makes the model behaviour more realistic on the
resource market as well. The direct financial impacts of the
carbonconstraint commitment isrepresentedbyacarbonvalue
(CV) introduced in two stages. Europe faces the CV already by
2006, while the other regions start to face it only after the first
Kyoto period. It is linearly increasing froms0 to s140 per tonne
of Carbon by 2030, a value which represents a median value of
the different estimates for the500 ppmconcentrationpathway,
according to the delayed actions set-up.
The following table summarises the assumptions made to
arrive at the carbon constraint scenario.
Inorder to analyse separately the effect of the carbonvalue,
an analytical scenario was also run, which only differs from
the reference run by the CV. In the graphs and in the
subsequent text this scenario is named as the ‘Only CV’
scenario, whereas the mixed instruments policy case is called
‘Carbon Constraint’ scenario (abbreviated to Carbon const.).
The modelled carbon policy case triggers important effects
in the sector. Total paper production and heat consumption
runs parallel in the BaUand the Carbon Constraint scenario in
all of the five regions. In general, the carbon value alone
reduces paper production only to a minor extent in the range
of 2–3%. If it is applied together with the SFM practices, CO
2
emissions further reduce (as is shown by the following
Tables 4 and 5), but paper demand is reduced by more than
6% on world level, of which around half could be attributed to
the supply-side effects, and the generated demand responses.
Furthermore, the different paper grades seem to be reduced
proportionally.
More remarkable are the changes amongst the energy
fuels. Fossil-based energy consumption is reduced, while the
black liquor andwaste woodbasedenergies gainhigher shares
in both the pure carbon taxation and mixed policy cases. This
is more apparent in the case of America and Asia, but holds
true for all the regions. South America and the ROW regions
(including Russia) even overtake Europe in the waste wood
and black liquor use, but it is not a surprise: they have
abundant source of the necessary raw material.
As the study focuses on the future energy consumption of
the sector, and incorporates measures both from the demand
and supply side of the sector, the following tables gives insight
to the most important effects, that take place in the model in
the three most important regions (Europe, Asia and North
America). These regions are not only the most important ones,
with more than 80% of the total world production, but also
represent regions with different characteristics for both their
economic development and their paper sector structure.
The analytical overview presented in the next part shows
the core mechanism of the model, based on an identity
Table 3 – Scenario assumptions.
Constraints Reference scenario Climate Commitment Scenario
Carbon value—Europe 0–30 s/tC (2006–2030) 0–140 s/tC (2006–2030)
Carbon value—rest of the World None 0–140 s/tC (2013–2030)
Wood and other
fibrous resources restriction
Reference level of raw material
availability
Transitional resource supply
constraints introduced
a
Asia: 20–40% (2020)
Europe: 6% (2012)
North America: 12% (2012)
South America: 20–40% (2020)
Wood and other fibrous
material price
According to BAU, on average yearly
1% growth in constant term
Minimum price increase introduced to
the transitional period
a
Year of introduction in brackets.
Table 4 – The demand side effects of the BaU and carbon constraint scenarios.
Population (Million) GDP/population (kE/cap) Paper demand/GDP (kg/KE) Demand (Mt)
EU
2030 Ref./2000 Ref. 103.5% 181.3% 75.3% 141.2%
2030 only CV/2030 Ref. 100.0% 100.0% 98.6% 98.6%
2030 Carb. C/2030 Ref. 100.0% 100.0% 98.1% 98.1%
Asia
2030 Ref./2000 Ref. 132.0% 305.7% 84.5% 341.1%
2030 only CV/2030 Ref. 100.0% 100.0% 96.6% 96.6%
2030 Carb. C/2030 Ref. 100.0% 100.0% 95.7% 95.7%
N. America
2030 Ref./2000 Ref. 129.0% 154.4% 70.9% 141.3%
2030 only CV/2030 Ref. 100.0% 100.0% 97.5% 97.5%
2030 Carb. C/2030 Ref. 100.0% 100.0% 95.7% 95.7%
e nv i r onme nt a l s c i e nc e & p o l i c y 1 2 ( 2 0 0 9 ) 2 5 7 – 2 6 9 265
decomposition approach. The carbon emission of a region is
decomposed in the following way:
CO
2
Emissions
r
¼ Paper production
r
Â
Energy use
r
Paper production
r
Â
Fossil fuel use
r
Energy use
r
Â
CO
2
emissions
r
Fossil fuel use
r
Thisidentityallowsforcapturingthedrivingforcesthat drive
the future CO
2
emissions in the sector. To capture the effects of
the demand side measures a further identity is introduced:
Paper demand
r
¼ Population
r
Â
GDP
r
Population
r
Â
Paper demand
r
GDP
r
International trade gives the connection points between
the two equations. Following this route, all the demand and
supply side effects could be captured in the future develop-
ment of the sector. Tables 4 and 5 shows the result of the
decomposition, where the first five columns deal with the
demand side changes and the last five with the supply side
effects taking place between 2000 and 2030. In the table the
percentage change values are presented, which compare the
changes in the reference scenario in time (between 2000 and
2030) and between the scenarios for 2030.
The first two columns summarise the exogenous driving
forces for the model, the population and GDP per capita
projections, and as the table shows these are extremely
influential driving forces.
11
GDP per capita triples in Asia, but
also in Europe and North America more than 50% growth is
projected over the period of 2000–2030. This is coupled with a
30% population growth in Asia and North America (while
stagnating in Europe), and puts high pressure on the paper
demand on the global level. This pressure is only partly
relieved by dematerialisation – represented in the third
column – but these values are in the range of 20–30%reduction
only in the BaU. Therefore the overall effect is a rapidly
increasing paper demand for Asia, which more than triples its
demand for paper, while 30–40% increase also observable for
the developed world.
In the policy case the impacts are minor on the demand
side if we consider that the values in the table represent the
effects for the CV over 15 years (starting in 2013 – in the post
Kyoto period – for regions outside Europe), and the introduc-
tion of the SFM practices covering 15–20 years of a transition
period. In the carbon constraint policy case, a minor 3–5%
reduction in demand is envisaged, so the assumed policy has
minor effects on the demand side.
Table 5 is related to the product supply and to the energy
consumption—emissionpart of the model, the core of analysis
of this study. Asia strongly accelerates capacity expansion, so
its production keeps pace with the steeply increasing demand
as the first columnshows inthe table.
12
The developed regions
also significantly increase their production till 2030, but with a
much lower pace. As North America has the capacity and the
proximity of fibrous resources it follows a more dynamic
increase in production relative to Europe.
The energy consumption per unit of paper produced does
not change dramatically in the modelled period, the assumed
climate commitment policy has a rather minor impact. More
importantly, the effects of carbon taxation are also diluted, as
significant part of the energy consumption is based on heat
derived from waste wood and black liquor (30–50%), assumed
to be carbon neutral. However the directions of the changes
are remarkable. Inthe reference case all the regions reduce the
specific energy consumption of its paper production, but only
to a minor extent (3–6%). As the third column shows, all
regions follow a carbonisation trend in the reference case,
meaning increasing fossil fuel (mainly coal and oil) use. This is
a presently observed trend mainly in China—an action aiming
to reduce its rapidly growing energy dependency on oil. Given
the cost advantages of coal, the domestic availability and the
lack of a carbon constraint in the BaU scenario, it is not a
striking result for this region. This trend is true for Europe and
North America as well, as the numbers indicate, however to a
Table 5 – The supply side effects of the BaU and carbon constraint scenarios.
Paper
production (Mt)
Energy use
*
/paper
(toe/t)
Fossil fuel
use/energy (toe/toe)
Emisson/fossil
fuel (t/toe)
CO
2
emissions (Mt)
EU
2030 Ref./2000 Ref. 146.7% 94.1% 88.0% 103.4% 125.8%
2030 only CV/2030 Ref. 98.1% 100.8% 97.0% 95.1% 91.1%
2030 Carb. C/2030 Ref. 99.7% 99.6% 99.4% 95.0% 93.8%
Asia
2030 Ref./2000 Ref. 337.3% 96.7% 96.4% 109.4% 343.8%
2030 only CV/2030 Ref. 97.4% 100.9% 86.7% 91.0% 77.5%
2030 Carb. C/2030 Ref. 95.8% 101.3% 86.1% 91.0% 76.0%
N. America
2030 Ref./2000 Ref. 180.2% 94.1% 94.1% 109.5% 174.8%
2030 only CV/2030 Ref. 98.6% 100.8% 68.0% 90.7% 61.3%
2030 Carb. C/2030 Ref. 87.3% 101.2% 71.2% 90.7% 57.1%
*
Includes heat and electricity consumption.
11
Projections of GDP and populations are POLES data, where GDP
is based on CEPII forecasts, population data is based on the UN
World Population Prospects medium variant (see European Com-
mission, 2003 for more detailed description).
12
It is uncertain whether China wishes to pursue the same policy
for paper as for cement and steel and to cover its whole demand by
domestic production. No special treatment is provided in the
model to reflect this policy, so the results presented are based
on the ‘model rationality’. However if China goes along on this
path, it would significantly change the trade and most probably
the production patterns in the sector.
e nv i r onme nt a l s c i e nc e & p ol i c y 1 2 ( 2 0 0 9 ) 2 5 7 – 2 6 9 266
lesser extend for Europe (3.4%). What is more surprising is that
the pure effect of the CV case is a further increase the specific
energy consumption. The changes in fossil fuel shares explain
this rather unexpected effect. As the fossil fuel use is reduced
by the application of the carbon value, the sector uses more
waste wood fuels and black liquor to produce heat and
electricity, where the efficiencies are lower than for the fossil
fuel-based heat generation in the sector.
13
Application of the full policy set-up assumed in the sector,
however, would more significantly reduce the fossil fuel share
(up to 28% in North America), than the overall energy use. It
would also add to the effect of the de-carbonisation triggered
by the CV. The table shows the potential of the assumed policy
to generate fuel changes in the sector, which is a mixed effect
of changing the distribution amongst the fossil fuels (mainly
from coal to natural gas), and from fossils to wood and black
liquor-based heat and electricity generation. The effect is 10–
11% reduction in emission per unit of fossil fuel used for Asia
and North America, while around 5%in Europe indicating that
in the baseline this region already has the ‘cleanest’ energy
mix fromthe CO
2
reduction potential point of view. The use of
recycling paper is also the highest here, meaning less roomfor
further manoeuvres.
The last column shows the resulting CO
2
emissions (the
other GHG emissions are not yet modelled by PULPSIM). The
picture is alerting: CO
2
emissions from the sector triple in the
forthcoming 30 years in Asia, if the Business as Usual trends
continue, North America emits more by 75%, but even the
European paper sector would produce 25% more CO
2
gases in
2030 as now. However the model shows a high potential to
save in emissions in the modelled policy scenario. The carbon
taxation alone could reduce the emissions in the regions by 9–
38%, and the full policy setup arrives to a slightly higher
reduction potential in some regions. The numbers in the last
column show that the measures other than CV could play a
role in achieving more stringent GHG reduction targets within
the sector. For example in Europe – where the CV has less
significant impacts due to the already cleaner energy mix –
further reduction could only be attained if other, mainly
technology based measures are also introduced.
4.3. Model sensitivity and verification analysis
As many of the driving parameters in the PULPSIM model are
exogenously set, based by literature review and expert
judgements, a detailed sensitivity analysis should reveal the
uncertainty range around its output. Additionally, as the
model has a long term outlook to the sector and as it is a new
application, it calls for an extensive check on these para-
meters. This sensitivity analysis also fulfils other purposes.
First, it gives an uncertainty range about the model results,
providing for relative ranges for the rather precise values
reported in the earlier chapters. Second, it helps to identify
those features of the model where further elaboration would
result in the highest gain in precision.
Carrying out a reasonable sensitivity analysis was a
challenging task, as it must accommodate with the recursive
simulation approach followed in the PULPSIM model. It means
inpractice, that weperturbthe systemintwodifferent ways: on
static, initial-value parameters as well as on dynamic assump-
tions (see Appendix C in Supplementary Data for details). The
analysis followed a two step approach: first individual para-
meters are ‘shocked’, than a multivariate analysis was carried
out to check the composite effects, if all the chosen parameters
are allowed to change simultaneously.
According to the sensitivity results the price elasticity, the
consumption level parameters and the life time of the
equipments are the most influential parameters, showing
the expected signs (directions) of changes. Concerning the
multivariate analysis, the model shows high variance for the
extreme values, but the standard deviation is within a Æ15%
for the analysed variables. This is a reassuring range, if we
consider the long time scale involved in the model runs and
the ranges in which the parameters allowed to change.
A model verification experiment was also carried out in
order to verify the model functioning, when the last eight
years data covering the period of 1998–2005 were removed
from the input data file of the model. In general the model
arrived to a difference of Æ5-10% during the eight year period
of 1998–2005 for paper production, demand and export, which
equals to a yearly average 1–1.5%difference interms of growth
rates. The difference pattern seems random, which means
that there is no systematic under- or overestimation by the
model, and the variations are not amplified radically in the
later periods. Only the international trade values show higher
fluctuations, which is a common feature of most economic
models, also reflecting the higher past fluctuations inthe trade
data. The deviation is still under 20%, which means only
slightly above 0.5% a year (see Appendix C in Supplementary
Data for more details).
5. Conclusions
The article introduces a global bottom-up model of the pulp
and paper sector incorporating fundamental economic dri-
vers, in particular, product demand and international trade.
The PULPSIM model scrutinises the sector at the technology
level going down to the various process modules and, at the
same time, also describes the whole paper market with its
segmented and highly interlinked sub-markets. This techno-
logically rich representation of the sector can provide for
consistent long-term future ‘narratives’ or ‘storylines’, bene-
fiting not only from the technological part of the sector, but
also from the considered market mechanisms.
The development of the sector is analysed under three
scenarios. The business as usual (BaU) scenario is comple-
mented with a carbon constraint one, where the sector faces
not only an increasing carbon tax in time, but reduced
resource availability caused by the introduced sustainable
forest management practices. These measures represent a
climate committed future for the sector compared to the
described reference path. In order to isolate the effect of the
carbon taxation, a third scenario considers only the increased
carbon value.
13
More widespread use of the black liquor gasification technol-
ogy would reverse this effect, as the study of Farahani et al. (2004)
suggests.
e nv i r onme nt a l s c i e nc e & p o l i c y 1 2 ( 2 0 0 9 ) 2 5 7 – 2 6 9 267
The simulation results show that the sector has a
distinctive responsiveness to the climate change policy in
comparison to other energy intensive sectors. In particular, as
wood and other fibrous resources serve as energy resources,
the sector could use this option to reduce its exposure to
carbon-constrained future developments. Yet implementing
this strategy involves risk as well: the resource must be
attained from sustainable forestry, which could be endan-
gered by the dynamic growth of the paper demand. Addition-
ally, biomass use faces increasing competition from other
sectors, such as power generation or transport.
The second insight from the article comes from the
analysis of the future trends in the CO
2
emissions of the sector,
and the measures aiming at limiting its growth. In the BaU
scenario the sector is projected to increase its emission from
220 Mt of CO
2
to over 400 Mt at world level between 2000 and
2030. The Carbon Constrained Future scenario shows a high
potential in carbon savings in the sector, up to 30–40%
compared to the BaU.
The results also show that carbon taxation (or an emission
permit system) is a sharply targeted instrument reducing
carbon emissions while other aspects of the market function-
ing are less affected (e.g. minor reduction in demand for final
products). Other measures, such as efficiency measures or the
promotion of Black Liquor Combined Cycle technology, have
significant impact on the carbon performance of the sector.
The process of model development also revealed some
vulnerable points in the approach used: e.g. the pressing need
for more reliable data on certain fields (data on technology
levels and on the forest resource markets) and the need to
incorporate in the interaction amongst the forest resource
using sectors (e.g. power generation, pulp and paper,
construction). To by-pass this later difficulty exogenous
information sources are used in the model. The sensitivity
analysis carried out on these parameters of the model shows
that these technologically richmodels have their utility inlong
term modelling, however as many of the driving parameters
possess high uncertainty range, the model should be
constrained to comparative scenario analysis, and the results
should not be treated for predictive purposes.
Future developments of the PULPSIM model could be along
the following directions. First of all, the model is planned to be
linked to the POLES energy model in order to take into account
the market interactions with the global energy markets.
Additionally, the improvement of the specification of the
international trade of forest and paper products would be
further explored.
The contribution of this paper to the existing model and
literature is twofold. First, it seeks to arrive to a modelling
scheme, wherethe global paper industrycouldbecharacterised
in sufficient details for alternative scenario analysis. The
modelling approach applied in this model (e.g. technology
characterisation, setting up the pulp and paper categories) is
boundedfromtwosides: dataavailabilityandthe pressing need
for more technological details. Second, the proposed modelling
solution seeks to answer questions concerning the sector’s
contribution to the climate change issues. As the problem can
only be analysed with long termmodels, they must be ready in
the forthcoming years to sensibly contribute to the climate
change debate. Long term modelling requires, that the higher
uncertainty involved in this modelling approach be treated
explicitly, and it is attempted to be achieved in our paper by a
detailed sensitivity and verification analysis.
Appendix A. Supplementary data
Supplementary data associated with this article can be
found, inthe online version, at doi:10.1016/j.envsci.2009.01.011.
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La´ szlo´ Szabo´ is a scientist at the Institute for Prospective Tech-
nological Studies, DG JRC, where he deals with energy and climate
related research issues. He is an economist, holding a PhD in
environmental management. His work focuses on the modelling
of the energy intensive sectors and assessing their long term
climate change impacts.
Antonio Soria is a scientist at the Institute for Prospective Tech-
nological Studies, DG JRC, where he coordinates the work of the
energy and climate research group. He holds a PhD in industrial
engineering, with main interest in long term modelling of energy
and climate change issues and techno-economic characterisation
of emerging technologies.
Juha Forsstro¨ m holds a masters degree in engineering from Hel-
sinki University of Technology. He has been working at VTT since
1984. His main research interests are in energy system modelling
and energy economics.
Janne T. Kera¨ nen is a physicist from Jyva¨ skyla¨ University and
holds an MSc in applied physics in papermaking technologies. He
has worked from 1999 at VTT as research scientist focusing in
drying and quality of paper.
Eemeli Hyto¨ nen is a research scientist at Technical Research
Centre of Finland, VTT. He holds a MSc in applied physics. His
research interests are in modelling based process design and
integration.
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