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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.”
