A federal program intended to promote the use of renewable fuels is instead encouraging U.S. paper companies to pursue some rather "un-green" practices, such as substituting virgin pulp for recycled pulp.
If the "black liquor" tax loophole persists, it could turn the market for publication papers topsy-turvy and lead to public backlash against paper companies -- and perhaps their customers.
At least two U.S. containerboard mills recently switched from recycled corrugated to wood chips as their fiber source because of the loophole, and others are probably doing the same, Pulp & Paper Week reports in its April 10 edition. (As I wrote in "Hey, Big Boy, Can I Recycle Your Cardboard?" four months ago, the market for recycled corrugated was already so weak that perhaps it's a good thing that the "Corrugated Recycles" phone number was taken over by a phone-sex outfit.)
Most, perhaps all, U.S. kraft-pulp mills are receiving or have applied for alternative-fuel credits for using a mixture of black liquor and a bit of diesel to power the mills, according to Kevin Mason of Equity Research Associates. The credit is worth roughly $200 per ton of pulp, he estimates, which means the federal government could theoretically end up paying out $10 billion for these credits. The current market price for kraft pulp is about $600 per ton.
The credits come from 2005 transportation legislation intended to encourage the use of non-fossil fuels, but the effect for paper companies is just the opposite: For decades, kraft-pulp mills have been using black liquor, a pulp byproduct, for power, but they can only receive the fuel credits if they mix some fossil fuel into the black liquor.
The credits also give paper companies a perverse incentive to use kraft pulp instead of mechanical (groundwood) pulp. Mechanical pulp is usually considered environmentally preferable to kraft because it uses fewer trees and causes less pollution.
Kraft pulp is generally more expensive to make than mechanical pulp, which is one reason that freesheet papers command a price premium over papers containing mechanical pulp. But the fuel credits might actually make kraft pulp cheaper for many mills.
So why should such mills make 50# #4 coated groundwood when it would be more profitable to sell 50# #3 freesheet at #4 prices? And why should a company sell a groundwood-substitute at a discount to uncoated freesheet when it would be cheaper just to make the uncoated freesheet?
I don't blame U.S. paper companies, many of which have undergone massive downsizing, for taking advantage of a perfectly legal loophole that could bolster their anemic bottom lines.
But others will. And in an era when the general public mistakenly views digital content as being greener than paper-based content, that could end up being a huge public-relations nightmare for those of us who toil in the dead-tree world.