Cepi represents the European pulp and paper industry and gathers, through its 19 member countries, almost 860 pulp, paper and board mills of which some 140 biorefineries across Europe, directly employing more than 175,000 people to reach €100 billion turnover.
The European pulp and paper industry fully supports the EU objective to reach climate neutrality by 2050. We provide an ever-increasing range of solutions for our customers, other industries, and society at large, in order to meet their needs both today and tomorrow. Our renewable and recyclable wood-based fibre solutions are made in Europe – from sustainably grown forests predominantly European – and recycled in Europe. Building on our position as global leaders in recycling, and tapping into the full potential in extending the life-span of our fresh fibre, we are set to increase recycling even further to boost the circular economy.
Cepi welcomes the report “The future of European competitiveness – A competitiveness strategy for Europe” by Mario Draghi, which rightly acknowledges that energy-intensive industries, including the pulp and paper sector, are “a vital part of the European economy and play a critical role in reducing the EU’s strategic dependencies.” However, we regret that the essential role of the European bioeconomy has not been fully integrated into the report’s analysis and recommendations. Unlocking the full potential of the bioeconomy is key not only to improving material and energy self-sufficiency but, even more importantly, to effectively replacing fossil-based materials.
A Clean Industrial Deal should contribute to overcoming the challenges we face in making the green transition happen. The returning Commission President instructs the incoming college of Commissioners to draw inspiration from the report’s policy recommendations aimed at enhancing the competitiveness of energy-intensive industries and improving energy markets. This paper outlines Cepi’s perspective on these key issues:
1) Free allocation and indirect carbon cost compensation have a role to play in the industrial transition.
While the report argues that “free allowances for the EIIs have so far limited the ETS’ impact”, these allowances have been crucial in providing carbon leakage protection, enabling industries such as the pulp and paper sector to reduce emissions, remain competitive in global markets, and maintain production within Europe. Furthermore, the claim that “carbon pricing has been of limited importance as a cost factor for heavy industry” is questionable, especially considering the report also acknowledges that “the EU is the only region globally with a significant CO2 price,” and that “carbon pricing increases relative production costs in EIIs.” Further erosion of carbon leakage protection
measures must be prevented. In this context, we regret that decarbonisation pathways relying on biomass are penalised under the EU ETS, while support for alternative options has been introduced.
2) “Success of CBAM is uncertain” as key challenges remain unaddressed.
Cepi agrees that in the transition phase, the European Commission should “closely monitor and improve the design of CBAM”. The risks highlighted in the report—such as challenges in ensuring consistent and uniform implementation, the potential for circumvention, downstream carbon leakage, and the lack of a level playing field for exporters—align with Cepi’s concerns about the new instrument. Therefore, it is indeed advisable to “evaluate whether to postpone the reduction of free ETS allowances if CBAM’s implementation is ineffective”. The inclusion of other basic materials in CBAM scope should be considered only once the effectiveness of CBAM is secured and should result from an in-depth impact assessment and a consultation of industry representatives.
3) Ensuring “access to a competitive supply of natural gas during the transition, and sufficient and competitive decarbonised electricity and clean hydrogen resources” is essential.
As the report highlights, the pulp and paper industry is the fourth-largest industrial energy consumer in Europe, with the majority of our processes being heat-driven. Approximately 70% of our energy consumption is dedicated to generating low to medium temperature heat (100-400°C). Our sector is a leader in the use of renewables for industrial heating, with biomass—sourced from the by-products of our operations—accounting for over 60% of our primary energy. Since virtually all our fossil emissions stem from fuel combustion, access to affordable fossil-free energy is essential for further decarbonising the sector. In cases where renewable alternatives can gradually be phased in, for example, the natural gas supply – over 30% of our primary energy consumption – can be replaced by biogas or biomethane.
4) “Keeping the marginal pricing system to ensure the efficient balance of the energy system” whilst enabling existing market solutions such as PPAs and 2-way CfDs.
Cepi recognises the achievements of the liberalisation of the European electricity market, in general terms. We believe that worldwide, the European electricity market is one of the most liquid and transparent markets for purchasing electricity. In the past year, forward market liquidity has decreased due to increased political, regulatory and price uncertainty. Cepi has welcomed measures that complement existing market solutions such as hedging and long-term contracts (including Power Purchase Agreements (PPAs) and 2-way contracts for difference (CfDs)) to ensure certainty and predictability for electricity prices. This does not change the fact that electricity costs in Europe are less competitive than in the US or China. “As marginal price-setters are often a carbon-intensive technology, they embed carbon intensity in the price (amounting to EUR 20-25/MWh for gas-fired generation in EU).
5) “The cost of energy must be lowered for the final user” and companies must retain freedom to develop their hedging strategies and to enter the energy contracts of their choice.
The report proposes to “facilitate industries exposed to international competition to get access to competitive energy sourcing”, which, in our view, should have a predictable cost over time. However, each market participant, consumer, or producer, must be able to freely handle their price risks. The proposed policies should not force market participants to enter any kind of contracts. The diversity of interests and hedge horizons is one of the core strengths of the current market. Contracts should be signed based on individual needs of a market participant and their willingness to take risks. Nevertheless, as recommended by Draghi, greater transparency and retail market competition could be ensured.
6) “Self-generation” as well as “system integration, storage and demand flexibility” ensure systemic emission reductions with “a competitive uptake of renewables”.
As highlighted in Cepi’s “Checklist for EU Climate and Energy Policies” on-site renewable energy production can be further facilitated. An enabling framework, including CfDs, could accelerate on-site electricity generation or electrification. It could also prioritise decentralised renewable energy generation (power and/or heat). To incentivise voluntary integration of industrial energy prosumers, such a framework needs to ensure easy access to the electricity grid and heat networks, as well as appropriate infrastructure. As suggested by Draghi, industrial players need to be “appropriately compensated for the constraints associated with flexible connections by offering lower network charges and shortening connection delays, reducing their overall energy costs”.
Download the Cepi Position paper Cepi perspective on the Draghi report: insights on climate and energy policies.