Mondi - Energy and climate change

We recognise the need to consider and plan for the consequences of climate change, both in respect of the physical and non-physical impacts on our business, and the impacts on our markets. Importantly, as a company with operations largely in developing economies, we note the impacts of climate change on our communities, and the need for adaptation. We recognise that we have a role to play in reducing our GHG emissions, and note the positive impact that well-managed, sustainable plantations and forests have on CO₂ sequestration. See the section: Critical issues: responsible forestry and climate change.

In 2005, the Mondi Group first considered the risks and opportunities posed by climate change, when we set ourselves a target of reducing both our specific energy consumption and our specific CO₂e emissions by 15% by 2014, against a 2004 base year.

Mondi reports its GHG emissions in accordance with the WRI/WBCSD GHG Protocol. GHG gas emissions are reported in metric tonnes (t) of CO₂ equivalent (CO₂e).*

*GHGs are often compared on the basis of their estimated potential to cause global warming. Factors can be used to convert a quantity of non-CO₂ GHG (such as CH₄ or N₂O) into an amount of CO₂ with an equivalent warming potential. Of importance in the pulp and paper industry, CH₄ and N₂O emissions are considered. Every gram of CH₄ is equivalent to 21 grams of CO₂ and each N₂O gram is equivalent to 310 grams of CO₂. The total GHG emissions can be calculated as the sum of several GHGs expressed as the equivalent amount of CO₂, abbreviated as CO₂e.

Performance in 2010

In 2010, our energy consumption in primary activities (the production of pulp and paper) was 86.1 million GJ (2009: 79.2 million GJ). The increase in energy consumption was mainly caused by increased production volumes in 2010. Total electricity requirements amounted to 5.6 million MWh (2009: 5.0 million MWh), with 79%* of this electricity generated by Mondi’s own power plants, using 66.7 million GJ of fossil fuels and 80.2 million GJ of biomass. A total of 7.3 million GJ of energy was sold to third parties, mainly from our operations in Syktyvkar, Štĕtí and Ružomberok. Between 2004 and 2010, we reduced our specific energy consumption for pulp and paper making by 11%, against a 2004 base year.

*In 2010, we included Mondi Shanduka Newsprint for the first time in the scope of our energy reporting (our shareholding stands at 50%) and, since Shanduka Newsprint does not produce any of its own electricity, our electricity self-sufficiency has gone down from 83% in 2009 to 79% in 2010. The electricity self-sufficiency of the Group has nevertheless improved by 16% against a 2004 base year.

In 2010, our direct (scope 1) Group-wide GHG emissions amounted to 4.45 million tonnes CO₂e (2009: 4.54 million tonnes CO₂e), while our indirect (scope 2) emissions from purchased energy were 1.41 million tonnes CO₂e (2009: 1.37 million tonnes CO₂e). Our indirect emissions (scope 3) from transportating our products, employee commuting and business travel (reported for the first time) amounted to 0.34 million tonnes.

Risks relating to climate change

We understand that climate change presents both risks and opportunities for the Group. We have reviewed these and are committed to mitigating the risks and taking advantage of the opportunities presented.

Regulatory risks:

Mondi’s operations in the European Union have an imposed cap on CO₂e emissions, beyond which Mondi might be required to purchase EUAs^* from the market.
As an Annex 2 country (in terms of the Kyoto Protocol), South Africa does not have any carbon regulatory constraints at present. Restraints and targets are likely to be introduced for the post Kyoto period. South Africa is currently considering a national reduction target of 34% by 2020 and this will have an impact on existing and new permissions as well as on energy costs.
Water regulations will become more stringent as a result of climate change-related changes in rainfall patterns and related regulatory changes.
A general risk to paper and pulp producers is the number of pulp and paper mills emerging in the developing world, given the cost differential in operating in regulated versus unregulated countries. Environmental legislation connected to climate change drives energy, wood and transport costs.
Inappropriate policy instruments may increase input costs and distort the market for raw materials and may result in unfair global trade and threaten company competitiveness within the global pulp and paper industry.

Physical risks:

South Africa is a water-scarce country and the impact of climate change could increase the water shortage, thus increasing the water supply risk to the business.
The expansion of plantation forestry has already been severely restricted in South Africa because of water and biodiversity concerns. Food security is a key issue for a developing country like South Africa and with less agricultural land available as a result of the impacts of climate change, there will be increasing pressure on forestry to minimise impacts on water and biodiversity and to maximise production-resource efficiency. The Mondi tree improvement programme is expected to provide trees more tolerant to any increase in temperatures, droughts, floods, disease and insect infestations. Mondi SA has recently increased and refurbished its fire protection capability.
We hold extensive logging rights to mainly softwood forests in Russia. Due to a warming climate, logging and transportation could be made more difficult by a reduction in the length and frequency of periods when soil and water bodies are frozen enough to provide easy and low-impact access to the boreal forest. With the predicted shift of the boreal forest northwards, the rising temperatures are likely to increase the incidence of fires, pests and disease in the current boreal areas. After the severe fires in Russia in 2010, the state has focused on better protection for the forests.

Other risks:

Climate change can negatively affect supply chains for energy, wood and transport. Higher prices for electricity, gas and fuel will result in higher production costs.
End customers are increasingly interested in carbon neutrality and demand climate-friendly products with a reduced carbon footprint. A product carbon footprint based solely on the GHG emissions associated with the production of a given product poses risks.
South Africa is a coal-based economy and as a result, the energy source for pulp and paper manufacturing operations is largely dependent on fossil fuels. The ability to market products in developed countries could be impacted if purchasing decisions are driven by the carbon footprint of products.

^*EUA stands for EU Allowance Unit of one tonne of CO₂ allowing a regulated operator to use carbon credits to comply with its climate change obligations. They are produced by a carbon project that has been certified by the Clean Development Mechanism or the Joint Implementation Projects.

Opportunities related to climate change

We understand that climate change presents both risks and opportunities for the Group. We have reviewed these and are committed to mitigate the risks and take advantage of the opportunities presented.

Regulatory opportunities

All of our EU operations are performing substantially below GHG emissions limits and are able to trade excess emissions allowances. In some of our EU-ETS operations excess power generation can be sold as green energy.
Current or anticipated regulatory requirements (e.g. landfill directive, introducing national recycling targets) will lead to higher pulp and paper recycling rates. Almost all of Mondi’s products are made from wood fibre, allowing recycling after the products´ life time. Corrugated board can be re-used up to seven times; de-inked newsprint up to four times. Even materials that are too degraded for use in paper or board products can provide carbon-neutral energy.
Our energy improvement programme increase the cost effectiveness of our products. Our energy projects aim to improve energy efficiency during production by maximising the use of CHP generation and carbon-neutral, biomass fuels.
If the South African government implements policies to promote “green energy” there could be an opportunity to further expand Mondi’s biomass-based heat and power generation. In the EU and a number of other countries, renewable energy or bio fuels targets have been set or are in the process of being set.
Legislation is being used to drive an increase in percentage renewable energy available in South Africa. Mondi, being the owner of renewable resources in the form of forests, has the opportunity to explore bio-energy. Currently research and development is focusing on these options. Biomass is also already part of our energy generation plan and we are currently investigating the increase of this energy production capacity.
As an Annexure 2, South African operations have the potential to be eligible for Clean Development Mechanism (CDM) funding for fossil fuel replacement projects. State regulations for such projects have already been put in place. Mondi regularly reviews CDM opportunities.

Physical opportunities

Mondi works with NGOs and the scientific community in Europe, Russia and South Africa to develop and implement best practice for sustainable forest management.
Carbon sequestration in forests generates the main raw material for our pulp and paper mills. Our trees are a renewable raw material for our fibre production as well as for the generation of green energy. A higher temperature during the trees' growth period could lead to an increased volume of standing timber and thereby an increased net absorption of carbon dioxide in Mondi’s sustainably managed Russian forests.

Other opportunities

The renewable nature of wood positions our business well for low carbon footprint materials and products that are sustainable. Mondi’s Green Range meets market demand for this, as well as a number of other new sustainable products such as the worldwide first FSC™-certified paper for coloured laser copies, a carbon-neutral office paper, lightweight papers and board-saving natural resources, and sustainable plastics based on biodegradable polymers.
Mondi actively uses the energy produced as a by-product of its industrial processes. Sustainably produced energy is sold via renewable energy support schemes in the Czech Republic and Poland. Mondi supplies communities with excess heat and electrical energy from its Syktyvkar (Russia) and Ružomberok (Slovakia) mills. In Austria, a hospital is successfully using its excess low-temperature heat following an investment by the local authority.
We have invested in anaerobic waste water treatment plants such as Świecie (Poland) and use the biogas generated for energy production.
We actively engage with NGOs and research bodies to manage land, fresh-water systems and biodiversity. See section: Critical issues: ecosystems and biodiversity conservation.

Between 2004 and 2010, we reduced our specific GHG emissions by 23%, against a 2004 base year.

Mondi’s CO₂ emissions by country (tonnes)
Country	Scope 1 2010	Scope 2 2010	Total emissions 2010	Total emissions 2009
Europe & International Division
Austria	202,152	29,437	231,589	273,144
Czech Republic	452,973	14,249	467,222	425,363
Germany	120,165	1,848	122,013	113,790
Israel	0	72,053	72,053	74,240
Hungary	0	0	0	1,030
Poland	402,781	209,851	612,632	548,767
Russia	1,929,871	0	1,929,871	1,958,577
Italy	0	0	0	18,580
Bulgaria	30,205	28,542	58,747	46,256
Sweden	22,488	7,905	30,393	28,004
Turkey	64,495	20,264	84,759	79,700
Finland	162	61,918	62,080	61,505
Slovakia	177,019	36,890	213,909	257,992
Europe and International Division total	3,402,221	482,957	3,885,268	3,886,948
South Africa
South African operations	1,047,983	929,758	1,977,741	2,025,291
South Africa total	1,047,983	929,758	1,977,741	2,025,291
Group total	4,450,204	1,400,248	5,863,009	5,912,239

The combustion of biologically sequestered carbon such as biomass and biofuels amounted to 10.3 million tonnes in 2010. According to the GHG Protocol the CO₂ emissions from biomass are to be taken as climate neutral. Only the emission of CH₄ and N₂O arising during the combustion in boilers has to be considered.

Optimising energy consumption, reducing CO₂ emissions

CO₂e emissions from fossil fuel combustion are widely accepted to be one of the most significant drivers of climate change. Our climate change programme is aimed largely at the more efficient use of energy, and increasing our use of renewable energy and switching to fossil fuels that are less carbon intensive.

Our energy projects are designed to improve the way we generate and consume energy at all our operations. The network group of energy experts works to increase profitability and competitiveness by optimising costs and efficiency improvements and to achieve productivity improvements by:

One of the ways in which we optimise energy consumption, and hence reduce CO₂e emissions, is by maximising the use of combined heat and power (CHP) technology. More than 90% of the electricity consumed by Mondi operations was generated by CHP with commensurate energy savings of between 30% and 35% when compared with conventional generation methods. CHP refers to the use of a heat engine or a power station to simultaneously generate both electricity and useful heat. Power plants must emit a certain amount of heat during electricity generation. CHP captures some or all of the by-product heat for heating purposes, either very close to the plant, or as hot water for district heating with temperatures ranging from approximately 80°C to 130°C.

To reduce our CO₂e emissions still further, we use less carbon-rich fossil fuels (natural gas to replace coal) wherever possible. We are also increasing our use of carbon-neutral biomass fuels. We use biomass (for example, black liquor, an aqueous solution of residues from the Kraft process used to produce paper and pulp) as an alternative to fossil fuels at all of our mills, making them energy self-sufficient and net energy providers. Surplus energy is used in paper production or by local communities and third parties. An added benefit of using biomass is that this material would have been sent to landfill if not used as fuel.

Since 2004, Mondi has invested more than €300 million in, among other projects, modernising our mills at Syktyvkar, Russia; Richards Bay, South Africa and Ružomberok, Slovakia; constructing new biomass installations (multifuel boilers in Merebank, South Africa, and Stamboliskij, Bulgaria); and transforming some of our fossil-based boilers to biomass incinerators (Świecie, Poland).See the case study: Reducing heat and electricity consumption at Świecie for environmental and efficiency benefits.

In total, the Group has avoided emissions of some 4.9 million tonnes of CO₂e by:

Optimised logistics initiatives to reduce fuel consumption for transport are currently under consideration.

Product carbon footprints

A Group-wide methodology for calculating our products’ carbon footprints which meets the Life Cycle Analysis (ISO 14040/44) and PAS 2050:2008 requirements, is in place. We have established the carbon footprint of our top 25 products.

We have incorporated the recommendations of the Confederation of European Paper Industry (CEPI) into our product-development processes and launched our first carbon-neutral paper, Nautilus, which uses 100% recycled materials, in 2009. See the section: Product responsibility for further information.

In 2010, Mondi introduced a group-wide methodology for calculating the carbon footprint of our products during their complete life cycles. See the section: Product responsibility. Additionally we continued to improve the monitoring and accounting of Scope 3 emissions associated with the transport and distribution of our products, by implementing a new standard published by GHG Protocol.

Carbon Disclosure Project

In 2010, we once again participated in the Carbon Disclosure Project (CDP), and were gratified to be recognised by CDP as a leading reporter and operator by admission to the Carbon Disclosure Leadership Index and the Carbon Performance Leadership Index. See the section: Governance of sustainability for further details.

* Selected data on this page has been subject to external assurance by ERM. See the assurance report.

Energy and climate change