Cepi warns that the European Commission's proposed overhaul of the EU Emissions Trading System (ETS) could undermine decarbonisation in the pulp and paper industry by reducing investment capacity and increasing carbon costs.
The industry association argues that the proposals, covering the 2031–2040 ETS period, come on top of previously announced changes to free allocation benchmarks that are already expected to reduce planned decarbonisation investments by an estimated €1 billion annually between 2026 and 2030.
Concerns over free allocation
According to Cepi, the revised framework would further reduce free emission allowances while introducing additional conditions that companies must meet to retain them.
The association says these requirements would increase administrative complexity and create uncertainty around long-term investment decisions at a time when many decarbonisation technologies remain commercially or technically unviable at scale. It also argues that companies could lose part of their free allocation if planned investments cannot be completed as expected.
Cepi is calling for the proposed conditionality to be removed, along with the recently introduced rule excluding installations using more than 95% biomass from receiving free allowances.
Biomass and smaller mills affected
The association says the biomass threshold penalizes early adopters that have already invested heavily in renewable energy by removing financial support intended to offset those investments.
Cepi also highlights the challenges facing the sector's many small and mid-sized producers, which often have fewer financial resources to support the energy transition. It recommends raising the ETS exemption threshold for smaller emitters to reduce compliance costs that deliver limited environmental benefits.
Competitiveness at stake
Cepi also raises concerns about the ETS Market Stability Reserve (MSR), warning that it may continue to drive carbon prices higher by cancelling allowances beyond what is required for emission reductions.
According to the association, the combined effect of these measures risks weakening the competitiveness of Europe's pulp and paper industry and slowing investment in the bioeconomy.
Cepi notes that the sector has reduced its greenhouse gas emissions by more than 55% since 2005, making it one of the strongest performers among Europe's energy-intensive industries. It also points to growing opportunities in biorefining and bio-based materials, a global market expected to reach €6.7 trillion by 2030.
Director General Jori Ringman said the ETS should support the development of the circular bioeconomy and the emerging bio-based carbon economy rather than discourage investment in one of Europe's few industrial growth sectors.
Cepi (the Confederation of European Paper Industries) represents the European pulp and paper industry. Its members include national associations across Europe, representing companies that manufacture pulp, paper and paperboard and play a key role in the continent's circular bioeconomy.
