Thu. Jun 30th, 2022

Natural Resource Updates

Europe’s largest non-state forest owner is facing a challenge to its core business of harvesting and planting trees worth $ 9 billion, as the EU’s climate change strategy focuses on bushveld conservation.

The listed Svenska Cellulosa AB (SCA) owns 2.6 million hectares of Swedish forest, almost equivalent to the area in Belgium, which uses it to produce wood products, pulp and packaging paper.

Ulf Larsson, CEO of SCA, argues that policymakers would not be able to protect bushveld by considering forests primarily as carbon storage, and that they should be actively managed.

“We really can not just look at the forest as a carbon footprint, because that would be a very big mistake,” he told the Financial Times.

‘If we harvest the tree, we replant with two or three new ones. . . We gain access to raw materials and can replace plastic with paper, fossil fuel with biofuel and concrete and steel with wood. ”

SCA has revalued its forests to 76.6 billion ($ 9 billion) as of June 2021, compared to approximately 75 billion. Shares in the group rise to a recent new high on strong quarterly revenue from pulp and packaging demand due to the pandemic.

Industry analysts are now also focusing on what effect the emerging EU policy will have on the company’s revenue and growth.

Forest management, as a qualifying activity under EU categorization, could potentially lead to SCA being paid to plant more trees, or to be paid for carbon dioxide captured by its forests.

In 2020, the company harvested 4.8 cubic meters of timber, while the remaining forests absorbed about 4.4 million tons of CO2 or about 9 percent of Sweden’s total annual carbon emissions. SCA also operates wind turbines on its land.

Larsson told analysts at the latest results briefing that while he was generally positive about the EU’s efforts, the outcome would be “negative if we had major restrictions on how to manage the forest and how to market” provided with renewable materials from Scandinavian forestry, then it is not good for the climate ”.

Ulf Larsson
Ulf Larsson, head of SCA: ‘We can not really look at the forest as a carbon bowl, because it would be a very big mistake’ © Per-Anders Sjöquist / SCA

However, environmental groups say that actively managed forests, where trees are cut down and new ones planted, will absorb less carbon than they would if they were not harvested at all.

The EU Commission this month unveiled its forestry strategy, which aims to increase the volume of carbon taken up by forests as part of major measures to reduce blockchain emissions by 55 percent by 2030.

The volume of greenhouse gas absorbed by a tree depends on a complex range of factors, including its age and species.

The commission said that wood with a “high ecological value” should not be harvested and that the use of the material should be optimized based on its environmental value.

It gives priority to the use of wood in products with a long life, such as furniture, or instead of carbon-intensive alternatives, such as changing plastics for wood.

Member States should be careful that the benefits of using wood for such purposes do not outweigh a reduction in the carbon stored as a result of a larger harvest, the statement said. The commission also plans to include the planting of 3 billion extra trees in its policy by 2030.

Wood industries, such as papermakers and biomass companies that burn energy grains, support 3.6 million jobs across the EU and insist on ‘sustainable’ forestry.

Tensions between EU policymakers, the timber industry, scientists and green groups have been mounting for months in the run-up to the EU climate package.

Forests and other woodland cover about 44 percent of EU land, but the commission’s strategy is politically sensitive because member states, which are required to report data to Brussels, say forestry policy is a matter of national competence.

Following objections from 11 EU countries, the commission’s new strategy made concessions through greater recognition of Member States’ authority over their forests.

Larsson told analysts SCA is going to “put a lot of effort” into the debate to shape the rules in the coming quarters, as the details of the policy are critical. The group reported the strongest earnings in the second quarter this month since falling from fabric and cloth maker Essity in 2017.

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