Are we about to see a gold rush for paper? Waste paper has traditionally been seen as low value - there have been times in the past when its value has dropped so far that the financial viability of recycling it has been questioned.
This has been related to the cheap price of wood as a raw material. But this is all about to change as supply and demand drives up the price of wood. It is not that there is a massive new demand for paper and, although there has been growth in the use of wood as a building product, that is not what’s driving the rise either. Far more importantly in terms of price, wood is increasingly being diverted to fuel biomass plants to generate electricity. The value of this wood is, therefore, being linked to the price of electricity which is resulting in a higher price being paid than has traditionally been possible for wood used as raw material for paper.
What is driving this major market for wood? The answer is the move towards an electricity market based more on renewable resources than fossil fuels. A number of biomass stations have been commissioned and the Coalition Government has made a commitment to increasing the amount of energy generated from waste.
The value waste wood is being linked to the price of electricity
The precise phrase used was a ‘huge increase in energy from waste through anaerobic digestion,’ however DECC is looking to meet some fairly challenging targets through the introduction of biomass.
There have been concerns that very large biomass plants would be based at ports and rely on importation of wood from overseas. In order to clarify the situation DECC has initiated a consultation paper on the sustainability of feedstocks to biomass plants. It would be ridiculous if, in order to reduce our carbon footprint in this country, we were using wood sourced from forest clearance in other countries.
In the next year or two there are going to be some serious complaints from more traditional market places, especially as the underlying price for building timber or paper resources rises considerably due to the new pressure created by the demands of biomass for energy. This situation might be exacerbated as waste paper gets redirected to power stations for co-firing.
There should, therefore, be warning bells sounding among all those waste companies who are looking at major investment in biomass. The European Directive on waste institutes a waste hierarchy, under which recycling is seen as a far higher priority than combustion. Also the carbon calculations for recycling, including the value of recycled natural resources preserved in the anaerobic digestion process, compared to those for energy from waste through combustion, will need to be taken into consideration by the Government. This may well affect the subsidy regime that biomass currently enjoys.
The reality is that biomass, as a form of power generation, is here to stay. Wood from forestry is evermore likely to be diverted to woodchip or wood pellet and this will affect the cost of this raw material; this is a process that is taking place worldwide. Recycling paper may well become far more profitable in the future as the value of the raw material is increased due to the lack of availability of cheap imported or home grown wood.
The value of the waste and recycling industry has always been based on understanding the real value of discarded raw material. During the next 5 to 10 years the value of waste paper as a resource is almost certain to rise. It might not be a gold rush but it will certainly be a paper chase.