World Rainforest Movement

Uruguay: The Botnia pulp mill project intends to profit from climate change

The Finnish company Oy Metsä-Botnia Ab (Botnia’s trade name) established in 1973, is the second largest pulp producer in Europe. It has four subsidiary companies, two of which are located in Uruguay: Compañia Forestal Oriental S.A. (FOSA), that has eucalyptus plantations; and Botnia S.A. established in 2003 to implement the project to install a pulp mill producing one million tons per year.

The installation of the mega-mill – involving all the facilities and related chemical factories, plus the plantations supplying eucalyptus – are, not only for Botnia but for Finland as a country, the largest private industrial undertaking abroad in its history. For the company, this guarantees the availability of large amounts of cheap, short fibre pulp, obtained from timber from its vast eucalyptus plantations. The generous Uruguayan soil ensures rapid growth and enables the trees to be cut 7 or 8 years after plantation.

The company found very advantageous conditions in Uruguay: cheap land and labour, plentiful direct and indirect subsidies for the establishment of eucalyptus plantations, enormous benefits ensured with the concession of a free trade zone – exempting it from taxation – and the unlimited and totally free use of much fresh water required to grow eucalyptus trees and process pulp. To this is added the fact that the Uruguayan state ensures upkeep of the necessary highway facilities to transport timber to the mill at no expense to the company.

The prospects for Botnia making a profit in Uruguay are therefore most auspicious, although its presence in the region is very controversial as reported in WRM bulletins 75, 83, 91, 94, 95, 100, 102 and 103, which show that actions against its installation go back to 2003.

However, the company’s imagination to increase its profitability would seem to be unlimited. The most recent news is the submission of a project to take advantage of the mechanism set up in the framework of the Kyoto Protocol of the United Nations Convention on Climate Change for the reduction of greenhouse effect gases, known as the “clean development mechanism” (CDM). As we have already discussed in 2000 (see WRM Bulletin 37), this instrument authorises those who pollute to “compensate” their releases by investing in countries of the South, in projects supposedly reducing the release of greenhouse effect gases.
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The fact is that Botnia presented its CDM project this month at the Faculty of Engineering of the University of the Republic of Uruguay through two consultant firms: the Uruguayan Carbosur and the Finnish Poyry. It is important to note the presence of Poyry (previously known as Jaakko Poyry), as this consulting firm has played an essential role in the promotion of fast growing monoculture tree plantations and of pulp mills all over the world. Of course, in every case they have recommended the use of Finnish technology and advisory services.

Botnia’s CDM project is based on a rationale that is more complicated than usual in projects of this type. The company will generate electricity by burning black liquor from the timber pulping process. This electricity will be used in its production process and will generate an excess of 32 MW of electricity that Botnia will sell to the public electric network (the State owned UTE). According to Botnia, emissions from burning black liquor will be nil as they involve “renewable biomass material” (eucalyptus plantations). They affirm that “combustion of black liquor does not produce the release of greenhouse effect gases because it is part of a cycle implying its restitution due to new biomass growth” (of the eucalyptus trees). So how does the CDM fit into this? Again according to Botnia, “with this process the release of greenhouse effect gases through substitution of electricity generation from fossil fuel [by UTE] will be reduced by generation from renewable biomass” [by Botnia].

If this project is accepted by the CDM, Botnia will obtain additional profits from the sale of “carbon credits” on the “carbon market” where many polluting states and companies are eager to “compensate” their polluting activities with these bonds that enable them to continue business as usual. For Botnia it is a thoroughly good business: it sells its excess electricity while at the same time selling carbon credits.

However, even within the CDM rationale, many questions still remain, in particular those referring to the so-called “additionality factor.” In fact, to avoid carbon credits being granted to projects that would have been carried out anyway, the Convention on Climate Change establishes rules to ensure project “additionality.”

To take advantage of the system it is essential for the project to demonstrate that the mitigation of greenhouse effect gases achieved is due to the implementation of the project and that such mitigation would not take place without it. However, if the project is considered as a whole (from logging the trees to pulp exportation), what is most probable is that – as will be seen further on – total releases of greenhouse effect gases by Botnia will be higher than those that would have occurred in the country without its presence.

Another aspect taken into account to assess the “additionality factor” is whether the project requires, in order to be commercially viable, the allocation of carbon credits. In the case of Botnia, this is clearly not the case as the project submitted for approval of the pulp mill already included burning black liquor for power generation and not only was it economically viable but, in the words of Metsä-Botnia’s CEO Erkki Varis, “I expect the factory to be very competitive, with estimated production costs of about half of those of modern Finnish pulp factories.” (Helsingin Sanomat, 8 March 2005)

Furthermore, Botnia affirms that the decrease in emissions will not be made at the mill but by the State electricity company, stating that “future demand for electricity in Uruguay will have to be satisfied by increasing generation from fossil fuels (oil and natural gas), which release greenhouse effect gases.”

Why is it so sure that the 32 MW of electricity that UTE is to purchase from Botnia would have necessarily been generated from fossil fuels, when UTE has three hydroelectric dams of its own in operation and another one shared with Argentina? It also has the possibility of developing other energy sources such as wind energy, bio-fuels or solar energy.

Furthermore, the calculation made by Botnia regarding emissions is totally simplistic. In fact, Botnia maintains that releases from burning black liquor will be nil because it “compensates” for them by growing eucalyptus plantations. However, even assuming this was true, it “forgets” to mention the releases generated by the project as a whole. On the one hand, it omits to mention the considerable emissions arising from the construction of the factory. On the other hand, it also forgets to mention releases resulting from project operation as a whole. That is to say, the emissions from the factories producing chemicals associated to pulp production; the consumption of fuel by forestry machinery; timber transportation by trucks to the factory – a major operation (calculations involve one truck every 2.5 minutes, 24 hours per day every day of the year); port movements; and fuel consumption by ships taking pulp to paper factories in Finland and China, etc.

Summing up, what is needed, in first place, is to establish the greenhouse effect gas releases base line before starting the mill’s construction. This would allow a serious examination of the net balance of greenhouse effect gas releases resulting from the installation and operation of the Botnia factory. If this were to be done, the result would surely be – on the level of Uruguay – that the release of such gases has substantially increased, which is precisely what the Convention on Climate Change is trying to avoid.

However, in this fictitious scenario, where pollution is transformed into a merchandise and carbon release into current accounts, the fact that the web of life does not operate in this way is totally left out. In theory, releases could be considered as “nil” and “compensated” by growing eucalyptus trees, but in practice they will be released every day by the chimneys. The effects of pollution will be suffered by ecosystems and people – Uruguayans and Argentines – who live close to the gigantic Botnia factory, which will not only release carbon dioxide but also many other chemicals such as sulphurs and even dioxins, potentially affecting the health of the neighbouring inhabitants.

In spite of this, this perverse mechanism “greenwashes” these projects, activities and undertakings in Third World countries, condemning them to continue dependant on an unjust world order where inequality is rising, natural goods are exploited unlimitedly and where poverty and social exclusion are of less importance than market needs. In this context, even climate change itself, one of the planet’s most serious environmental problems, ends up by giving rise to yet another business – carbon trade – from which Botnia now intends to profit.

In Uruguay, Botnia’s CDM project is another step forwards in strengthening the interests that want to place the country – in the words of the well-known Uruguayan writer, Eduardo Galeano – “in the purest Colonial tradition: vast artificial plantations that they call forests, converted into pulp in an industrial process that dumps chemical waste into rivers and makes the air impossible to breathe.”

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