Pulp and paper: why profits are evaporating while the planet burns

Some of the world’s largest energy users, in the pulp and paper and biofuels sectors, are throwing money on the bonfire of our burning planet, by unnecessarily evaporating billions of gallons of water.

Now that I’ve got your attention, I want to explain why, and also dig a bit into the slightly complicated area of the cap-and-trade compliance markets that are meant to punish the bad actors.

There are, of course, companies with strong sustainability policies, that show a good example, but all too many mills in these important industrial sectors are guilty of poor water management in their energy-intensive evaporation processes.

Among the “good guys”, including, I am glad to say, a number of AESSEAL customers, there are some striking examples of how to get it right. I have just been looking at a case study of Canadian pulp mill which engaged AESSEAL to modernize and seal its evaporation processes. We hope to get permission to name them and give all the technical details, but here are some of the most striking results.

In 2014, AESSEAL specified 26 high performance seals and support systems and seven new pumps for a one-off cost of $420,000 (CAD). This modernization, combined with our reliability services, cut leaks, dramatically reduced water use, controlled evaporation, and saved masses of energy.

However, this is far from the whole story. The internal company estimates do not put a price on the 45,000 tonnes of CO2e saved. Back in 2014 that was not such a big issue and to the company’s credit they decided to go ahead anyway.

Fast forward to 2021-22 and the UN Climate Change Conference and beyond, when the cost of carbon, both to companies and to the planet, has become an increasingly pressing issue.

In addition to voluntary carbon credits, which many companies, including AESSEAL, buy in order to increase their sustainability credentials and push towards Net Zero, there is a significant growth worldwide in compulsory carbon compliance markets.

These compliance markets target major energy users, including many companies in the pulp and paper sector, which is seen as a major contributor to the climate change crisis. So far, about 64 carbon compliance markets are in operation around the world, with the largest ones in the European Union, China, Australia and Canada.

In the US, California is leading the way with a State scheme, which has the goal of reducing greenhouse gas emissions by 15 percent by 2030. These cap-and-trade schemes effectively “fine” companies that exceed an allowance for CO2e set at a level meant to encourage energy saving, by making them buy credits in a trading market. 

The credits in this market come from companies that are better at energy saving and use less than their carbon cap.  Within the EU Emissions Trading Scheme (EU ETS) - currently the largest cap-and-trade scheme - the cost of a tonne of carbon has almost tripled from €33 per tonne to €95 per tonne in little over than a year. 

Take our earlier example of the Canadian pulp mill which engaged AESSEAL to help cut water and energy use. In addition to millions of dollars saved in direct energy and water costs, the company reduced its carbon footprint, saving 45,000 tonnes of CO2e over an eight year period. The company did not take into account the monetary value of this saving, but it will be of enormous future significance.

Under the Canadian cap-and-trade scheme a tonne of CO2e costs $65 (CAD) and this is expected to rise to $170/tonne by 2030. The present value of 4,500 tonnes of CO2e, under the EU scheme, is just over €4.3 million. 

These are significant business costs, eroding the bottom line, or potentially providing valuable earnings for companies that get it right. All in all, quite apart from the unnecessary waste of water, which is a matter of huge significance in many communities, the global trend towards the rising cost of carbon and lower caps means that the writing is on the wall for profligate energy users.

Plant managers, engineers and other company experts should note that when their boards of directors eventually get their heads around this issue, they are going to ask, “Why did nobody warn us?”

In that case, you heard it here first.