Download Smurfit-Stone Container Enterprises, Inc

6 CityPlace Drive
Creve Coeur, MO 63141
(314) 656-5300
(314) 787-6163 fax
Smurfit-Stone Position on Climate Change
Introduction: Climate change is a global scale environmental issue. Many in the scientific and political communities
support the theory that greenhouse gasses (“GHG”) released contribute to global climate change. Although natural
processes release GHG, it is the increase in human generated sources of GHG, primarily carbon dioxide (“CO2”) resulting
from the burning of fossil fuels such as gasoline, diesel fuel and coal, since the start of the industrial revolution that many
have predicted will cause catastrophic global human and economic impacts.
Multiple federal, state, provincial and local initiatives have been developed to reduce the emissions of GHG. Since fossil
fuels are the main human contributor to GHG emissions, any initiative that deals with fossil fuels or other energy sources is
linked to climate change. State or regional Renewable Portfolio Standards (“RPS”) attempt to encourage the use of
alternatives to fossil fuels. Wood is a fuel which is both renewable and not a contributor to GHG emissions. As a result,
wood is generally promoted in RPS proposals. Frequently, RPS proposals offer incentives such as subsidies and tax credits
to encourage large fossil fuel consumers to switch to renewable, non-CO2 emitting fuels such as wood.
Other initiatives such as tax bills and energy efficiency legislation are often structured to encourage the reduction of the use
of fossil fuels or replacing coal with natural gas which emits less CO2. Unfortunately, these initiatives are being considered
without an overall energy policy that stresses the development of natural gas, nuclear and other sources of low/non-CO2
emitting energy.
Potential Impacts: The economic and other impacts of mandating GHG reductions or encouraging the use of wood or
other biomass fuels are likely to be far reaching. Because various legislative proposals aimed at reducing GHG emissions
are still largely under development, the specific impacts to Smurfit-Stone and the pulp and paper industry are difficult to
predict as any single variable can vastly alter the scope of such impacts considerably. For example, a study done by
National Economic Research Associates (“NERA”) suggests that under a moderate approach to GHG regulation, the
overall net present value costs to the industry could be $3.3 billion for higher wood prices and $2.5 billion for higher
electricity prices. Additionally, the use of an auction versus and allocation approach to a GHG emission cap and trade
system could add another $6 billion in costs for the pulp and paper industry.
Smurfit-Stone GHG Reduction Efforts: In addition to reducing greenhouse emissions to 1990 emission rates as reported
by EPA on February 22, 2008, U.S. industry and the U.S. pulp and paper industry in particular has made great strides in
reducing GHG emissions. Consistent with our core value of environmental responsibility, Smurfit-Stone has taken early,
voluntary steps to use less fossil fuel and further reduce emissions of CO2 from its operations. Smurfit-Stone has reduced
the burning of fossil fuels by over 20% since 1998. Smurfit-Stone has already met its 2010 Phase I and 2 reduction
obligations for Chicago Climate Exchange (“CCX”) members (6% since the baseline from 1998-2001). AF&PA member
companies expect to meet their voluntary DOE Climate Vision Program goal of reducing GHG intensity by 12% over 2000
levels by 2012. Through its collection of waste paper, Smurfit-Stone prevented the release of an estimated 6.6 million tons
of CO2 equivalents from landfills.
Position on Climate Change, RPS or Other Energy Related Legislation: Any legislation requiring GHG reductions or
encouraging the use of alternative fuels must be considered in the context of a broader U.S. energy policy and must address
the availability and cost of natural gas and other sources of energy. It should also provide incentives and support for the
development and use of technologies that reduce GHG emissions and increase energy efficiency. We believe that a
voluntary approach to reducing GHG emissions in the U.S. would be efficient and effective; however, we recognize there is
a push at both the federal and state levels for a mandatory approach to GHG emissions reductions. In our view, any
mandatory GHG reduction approach must have at least the following key attributes.
o
Multiple Economic Sectors. According to EPA, the U.S. industrial sector has presently reduced its GHG emissions to
roughly 1990 levels, the target year for the Kyoto treaty. During the same time period other sectors of the U.S.
economy grew their GHG emissions by as much as 34%. Any mandatory GHG reduction legislation must incorporate
emission reduction strategies for multiple sectors of the economy applying the most efficient regulatory tool suitable
for each sector.
o
International Competition. U.S. climate change legislation must not place U.S. Industry at a disadvantage with
competing industries in (Kyoto treaty) countries which have failed to reduce their GHG emissions below the 1990
levels that U.S Industry has already achieved. It must not have an anti-competitive effect on U.S. manufacturers, and
must not be used as revenue generation mechanism by governmental authorities. Legislation must incorporate process
for periodic review and correction for competition from countries that are not requiring similar GHG emission
reductions. Trade sanctions or other free trade penalties should not be incorporated in an effort to counter the inherent
anti-competitive impact of the legislation.
o
Cap and Trade. If a cap and trade is used, it must give allowances to the industrial sector rather that auctioning credits
and allow for a phase-in of caps to permit capital investments and technology advancement. The cap should be
structured to be inversely proportional to the increase in CO2 emissions from the U.S. economic sectors so as not to
penalize the industrial sector for the growth in the emissions of the other sectors. It must also include mechanisms to
prevent economic hardship for program participants. Further, it must allow for use of national and international
credits, and give credit for activities that prevent GHG emissions, including carbon sequestration in paper products.
o
Biomass. It must retain the internationally-recognized principle of carbon neutrality for biomass fuels. However,
biomass must be used efficiently with consideration to conservation and sustainability of the resource and the carbon
sequestration impacts of each use. Furthermore, we are opposed to any incentives or subsidies that would divert
biomass from its most economically productive or environmentally conservative use simply to meet a mandate where
other fuels could be used.
o
Energy Efficiency. It must provide for recognition of operations that already use energy efficient technology such as
combined heat and power (“CHP”) in addition to those that install similar technology once the legislation is passed to
avoid inadvertently penalizing those companies with the foresight to install the technology without the benefit of
subsidies or other incentives.
o
Primacy. It must be a national program that establishes minimum, uniform national standards so that business can
make capital and other planning decisions, but it also must recognize the ability of states to carry out requirements
established in harmony with the federal program. States are in the best position to inventory their biomass resources
and establish programs to manage those resources in a manner that is sustainable and most beneficial to the locality in
which the resource resides.
o
Early Reduction Credits. It must recognize and give credit for early GHG reductions, including those made under
voluntary programs such as Climate Vision and CCX.
o
Simplified Protocols. It must encompass simple, streamlined GHG accounting and reporting protocols based on
internationally recognized principles that are currently in use. Industrial sector-based regulatory strategies must be
avoided as overly complex and unnecessarily restrictive to emissions trading.