Carbon Storage Technologies Could Boost Revenues for Pulp and Paper Producers: Fastmarkets Research

Why It Matters

The shift forces pulp producers to monetize biogenic CO₂, turning a regulatory burden into a potential profit center and reshaping the industry's decarbonisation strategy.

Key Takeaways

• EU ETS free allowances ending for 40% of mills.
• Pulp mills could earn revenue selling carbon credits.
• CCS viable when transport distances short.
• Integrated mills face higher CCS retrofit costs.
• Rising compliance costs boost CCS economic case.

Pulse Analysis

The European Union’s Emissions Trading System has long subsidised pulp and paper producers through generous free‑allowance allocations, delivering an estimated €4.5 billion surplus for the sector between 2008 and 2024. However, a new directive taking effect on 1 January 2026 will strip free credits from mills whose emissions are more than 95 % biogenic, affecting roughly 40 % of facilities. Coupled with a projected decline in overall allocations and higher carbon prices, the regulatory shift threatens to erode already thin profit margins and forces operators to reassess their cost structures.

From a technical standpoint, market pulp mills are uniquely positioned to adopt carbon capture and storage. Their processes generate large volumes of untaxed biogenic CO₂ from biomass combustion, and many plants operate with self‑sufficient steam, simplifying integration of capture equipment. In contrast, integrated mills divert most on‑site steam to paper drying, requiring additional infrastructure and raising retrofit complexity. The economics of CCS, however, are highly location‑dependent; facilities near saline aquifers, depleted reservoirs, or industrial CO₂ users can keep transport expenses low, making projects financially attractive.

Commercially, turning captured CO₂ into saleable removal credits or supplying it to nearby industries creates a new revenue stream that can partially offset EU ETS liabilities. For mills with favorable logistics, CCS retrofits may even lower overall production costs as compliance expenses rise. Investors are likely to prioritize projects with short haul distances and clear market demand for CO₂, prompting a strategic reallocation of capital toward decarbonisation assets. Ultimately, the ability to monetize carbon could reshape competitive dynamics in the European pulp sector, rewarding early adopters and accelerating the transition to a low‑carbon business model.