CPI Director Warns Excessive Regulatory Measures Hurting UK Paper Industry

"Given the trade imbalance that now exists in the Paper Industry, the UK should be seeking to encourage inward investment in papermaking. The current regulatory climate does not offer the sort of incentives that will attract investors." – David Workman, Director General, CPI.

Jan. 14, 2014 (Press Release) - In his New Year Briefing to Members of Parliament, Confederation of Paper Industries’ Director General, David Workman, highlights the impact of increasing direct and indirect costs and the ever-growing regulatory burden placed on UK Industry, by both UK and European Government.

CPI remains concerned that the future direction of both EU and UK policy on climate change, together with tighter environmental compliance measures, could well result in another period of significant decline. The last decline in the early 2000s saw half the UK’s paper mills close, with the loss of thousands of jobs and production fall by over one third.

According to CPI, the UK’s unique Carbon Price Floor (CPF) is the most worrying aspect of current government policy, being implemented at a time when the EU price of carbon remains very low. Coupled with the danger of losing its “at risk of carbon leakage” status, the UK Paper Industry faces a possible “double whammy” from which it may not recover.

The Briefing shows that many CPI Members are also being hit by the Carbon Reduction Commitment (CRC) which, according to Mr Workman, now appears to simply be a revenue-raising exercise on behalf of the Treasury. Despite the government introduction of measures to partially exempt or compensate the industry from the most damaging aspects of climate change policy, UK industry remains exposed.

Mr. Workman states that governments of all political persuasions have failed to recognise several important factors, including:

  • The cumulative cost impact of environmental, energy and climate change measures has been far greater than was ever envisaged which, in turn, has significantly dented our international competitiveness.
  • The Paper Industry, along with most Energy Intensive Industries (EIIs), is now truly global and has to compete with parts of the world with much lower, or even non-existent, environmental compliance costs.
  • For EIIs the efficient use of energy has been an overriding commercial imperative since the oil crisis of the 1970s.
  • EIIs are essential players in the manufacturing supply chain. Without them other sectors would need to rely on imports, or move abroad themselves in order to secure supplies.

Mr. Workman was keen to highlight recent claims from Commissioner Tajani that “we face a systemic industrial massacre” as a result of the EU’s pursuit of unrealistic climate change goals, and emphasised the tremendous strides made by the Paper Industry in improving its environmental credentials:

  • Collectively, the European Paper Industry is the largest forestry owner on the continent and has introduced systems to ensure that woodlands are sustainably managed. Twice as many trees are planted every year than is harvested. Resource is being invested in research to develop new and exciting markets for forest fibres.
  • Over half of the paper made in Europe is produced using renewable energy sources.
  • Recycling rates in the UK are now approaching 80%. Many UK mills only use recycled materials in the production process.
  • Over the last 20 years the amount of energy required to make a tonne of paper has fallen by one third and carbon emissions by over 40%.
  • Two thirds of paper produced in the UK comes from mills that have installed Combined Heat and Power (CHP) plants.

The Briefing outlines that the Paper Industry was the first major sector to produce a 2050 Roadmap, titled “Unfold the Future”, and has brought together leading figures from academia, the scientific community, and industry experts to develop blue-sky breakthrough technologies aimed at overcoming the barriers to achieving 2050 carbon targets.

“It is a measure of how seriously the industry takes its environmental responsibilities that competitive hostilities were put aside as expertise from across the industry was pooled for the common good” stated Mr Workman.

The Briefing calls for action on a number of points, namely:

  • More carrot and less stick in legislation and regulation. Fewer taxes and levies and more incentives.
  • Full compensation or exemption from pass through costs from the energy sector.
  • Recognition that industries such as paper need assistance in transitioning to a low carbon economy.
  • Simplification of the plethora of highly complex initiatives currently before us.
  • More emphasis on energy efficiency, because without it (especially in the domestic sector) we could find ourselves facing genuine energy shortages over the coming years.
  • A rethink about the implications of attempting to meet our climate change targets if there is no global agreement in Paris in 2015.
  • An assessment of the real efficiency performance of renewable energy sources. The Paper Industry is particularly concerned about the subsidised use of wood as a biomass fuel in large-scale energy-only power production.
  • Reintroduction of incentives for small scale on-site industrial CHP. Increased capital allowances and complete exemption from all taxes and levies on input fuels and heat and power output.
  • The immediate withdrawal of the CPF, or at the very least the scrapping of the escalator.
  • The immediate withdrawal of the CRC.
  • A drive towards a resource efficient economy.

In summary, Mr. Workman said “Given the trade imbalance that now exists in the Paper Industry, the UK should be seeking to encourage inward investment in papermaking. The current regulatory climate does not offer the sort of incentives that will attract investors. A new legislative and regulatory approach is needed — based less on complexity, taxes and levies, and more on incentives that encourage industries such as our own, to flourish and grow.”

CPI is the voice and face of the UK's Paper and Paper-Based Industries, representing recovered paper merchants, paper and board manufacturers and converters, corrugated packaging producers and tissue makers. CPI represents 70 Member Companies, with a combined annual turnover of £5 billion and 25,000 direct and more than 100,000 indirect employees. To learn more about CPI, please visit: www.paper.org.uk.

SOURCE: Confederation of Paper Industries (CPI)