An assessment of the cumulative cost impacts of specified EU legislation and policies on the EU forest-based industries : final report.
Date: 2016-01-24
Institutions: Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs
Subjects: EU law, competitiveness, cost analysis, forest, forestry economics, forestry policy, wood industry, wood product

Ref. Ares(2016)6600116 - 24/11/2016

November 2016 

An  assessment  of  the  cumulative  cost 
impact  of  specified  EU  legislation  and 
forest-based 
the  EU 
policies  on 
industries 

Final Report 

www.technopolis-group.com 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LEGAL NOTICE 

This  document  has  been  prepared  for  the  Directorate-General  for  Internal  Market, 
Industry,  Entrepreneurship  and  SMEs  (DG  GROW)  by  the  consortium  led  by  the 
Technopolis  Group.  However,  it  reflects  the  views  only  of  the  authors,  and  the 
Commission  cannot  be  held  responsible  for  any  use  which  may  be  made  of  the 
information contained therein. 

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Luxembourg: Publications Office of the European Union, 2016 

ISBN number 978-92-79-62309-7 
doi:number  10.2873/842839 

© European Union, 2016 
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Unit C2 — Resource Efficiency and Raw Materials 

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An assessment of the cumulative cost impact of specified EU 
legislation and policies on the EU forest-based industries 

Final Report 

technopolis |group| November 2016 

Lorena Rivera León, Kastalie Bougas, Eleonora Zoboli, Julien Ravet, Elina Griniece and Judith 
Vermeer - Technopolis Group 

Filip Aggestam, Helga Pülzl, Frederike Ettwein and Tobias Stern- BOKU 

Jo Van Brusselen, Tim Green, Nataša Lovrić and Elias Hurmekoski - EFI 

www.technopolis-group.com 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table of Contents 

List of acronyms .............................................................................................................................................. i 

Executive Summary ....................................................................................................................................... 1 
Objectives and scope of the study ............................................................................................................................... 1 
Methodology ................................................................................................................................................................ 2 
Main findings of the CCA ............................................................................................................................................ 3 
Insights on international competitiveness ................................................................................................................. 7 

1 

Introduction ........................................................................................................................................... 11 
Objectives of the study ................................................................................................................................... 11 
Scope of the study .......................................................................................................................................... 11 
Structure of the report .................................................................................................................................. 12 
Organisation of work .................................................................................................................................... 13 

1.1 
1.2 
1.3 
1.4 

2  Framing the EU forest-based industries ............................................................................................. 14 
Use of value chains and product groups for defining the EU Forest-based Industries ............................. 14 
Final scope and coverage for the Cumulative Cost Assessment.................................................................. 21 
Drivers of costs in EU forest-based industries ............................................................................................ 22 
Geographical panorama of the woodworking and pulp, paper and paperboard industries ...................... 26 

2.1 
2.2 
2.3 
2.4 

3  Methodology of the cumulative cost assessment................................................................................ 28 
A cumulative approach to cost assessment ................................................................................................. 28 
Phase 1: Identification of legislation incurring costs for European forest-based industries .................... 30 
Phase 2: Identification of the actions required for compliance and creation of a cost typology ............... 33 
Phase 3: Identification of typical plants ....................................................................................................... 35 
Phase 4: Collection of data and estimation of cost ...................................................................................... 39 
Quantitative estimation of ETS indirect costs ............................................................................................. 45 

3.1 
3.2 
3.3 
3.4 
3.5 
3.6 

4  Overview of the relevant legislation .................................................................................................... 50 
Production steps affected by legislation .......................................................................................................50 
Package 1: Competition legislation .............................................................................................................. 51 
Package 2: Climate and Energy legislation .................................................................................................. 54 
Package 3: Environmental legislation .......................................................................................................... 61 
Package 4: Forest-related legislation .......................................................................................................... 68 
Package 5: Employment legislation ............................................................................................................. 71 
Package 6: Products legislation .................................................................................................................... 74 
Package 7: Transport legislation ................................................................................................................. 82 
Package 8: Trade legislation ........................................................................................................................ 84 

4.1 
4.2 
4.3 
4.4 
4.5 
4.6 
4.7 
4.8 
4.9 

5  Results of the cumulative cost assessment of the EU F-BI ............................................................... 88 
Cumulative cost assessment for the overall woodworking sector .............................................................. 88 

5.1 

i 

 
 
5.2 
5.3 
5.4 
5.5 
5.6 
5.7 
5.8 
5.9 

Cumulative cost assessment for sawmilling and planing of wood (16.1) .................................................... 95 
Cumulative cost assessment for manufacture of veneer sheets and wood-based panels (16.21) ............ 100 
Cumulative cost assessment of manufacture of other builders' carpentry and joinery (16.23) .............. 104 
Cumulative cost assessment of manufacture of wooden pallets and other wooden packaging (16.24) .. 108 
Cumulative cost assessment for the overall pulp, paper and paperboard sector ......................................112 
Cumulative cost assessment of manufacture of pulp (17.11) ..................................................................... 122 
Cumulative cost assessment of manufacture of paper and paperboard (17.12) ....................................... 128 
Expected future costs for the period 2014-2030 ....................................................................................... 134 

6 

International comparisons for USA, China and Brazil..................................................................... 143 
Approach to international comparisons .................................................................................................... 143 
Country overview: Brazil ............................................................................................................................ 152 
Country overview: China ............................................................................................................................ 169 
Country overview: USA ............................................................................................................................... 185 
International comparative analysis of regulatory cost impacts ................................................................ 210 

6.1 
6.2 
6.3 
6.4 
6.5 

7  Conclusions ......................................................................................................................................... 221 

Appendix A

 Estimation of direct costs ...................................................................................................... 226 

Appendix B
 Literature review relating to the indirect costs due to ETS and carbon pass-on of electricity 
to the pulp, paper and paperboard sector ............................................................................................... 230 

Appendix C

 Detailed explanation on RISI data for cost structures ........................................................ 239 

Appendix D

 International comparison: Key data sources ...................................................................... 240 

Appendix E

 Cross-correspondence between NACE Rev. 2 and ISIC 3.1 classifications ........................ 242 

Appendix  F
  Differences  between  North  American  Industry  Classification  System  (NAICS)  and  ISIC 
Rev. 3.1 ........................................................................................................................................................ 243 

Appendix G

 International comparison: List of contacts for questionnaire and interview invitations . 245 

Appendix  H
  International  comparison:  Online  survey  for  companies,  federations,  associations  and 
industry experts ......................................................................................................................................... 247 

Appendix I

 Company size-class distribution of the ORBIS query result. ............................................... 252 

Appendix  J
  Comparison  of  the  US  Lacey  Act  Amendment,  EU  Timber  Regulation,  Australian  Illegal 
Logging Prohibition Act ............................................................................................................................. 253 

Appendix K

 Summary table for Brazil ...................................................................................................... 254 

Appendix L

 Summary table for China ...................................................................................................... 256 

Appendix M

 Summary table for US .......................................................................................................... 257 

References .................................................................................................................................................. 259 

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Tables 

Table 1 Sub-sectors and product groups covered in the study .................................................................................... 22 
Table 2 Industry associations contributing to the prioritisation of legislation ........................................................... 31 
Table 3 The panel of typical plants ............................................................................................................................... 36 
Table 4 Value of production sold by product group ..................................................................................................... 37 
Table 5 Sources and uses of data .................................................................................................................................. 41 
Table 6 Number of responses to the online survey by product group ......................................................................... 43 
Table 7 Number of responses to the online survey by country .................................................................................... 44 
Table 8 Carbon intensity (CO2/Mwh and CO2/kwh per year).................................................................................... 47 
Table 9 CO2 price (euros per tonne) ............................................................................................................................ 48 
Table 10 State Aids compensation including the pulp, paper and paperboard sector ............................................... 49 
Table 11 Overview of Competition legislation .............................................................................................................. 53 
Table 12 Overview of Climate and Energy legislation .................................................................................................. 57 
Table 13 Overview of Environmental legislation .......................................................................................................... 64 
Table 14 Overview of Forest-related legislation ........................................................................................................... 70 
Table 15 Overview of Employment legislation ............................................................................................................. 73 
Table 16 Overview of Products legislation .................................................................................................................... 77 
Table 17 Overview of Transport legislation ..................................................................................................................83 
Table 18 Overview of Trade legislation ........................................................................................................................ 86 

Table 19 Costs for the overall woodworking sector by package and comparison with main financial indicators – 
annual average for 2005-2014 ..................................................................................................................................... 89 

Table 20 Costs for the overall woodworking sector by cost category and comparison with main financial indicators 
– annual average for 2005-2014 .................................................................................................................................. 89 
Table 21 Direct regulatory costs for the woodworking sector - First year, last year, ranges min-max ...................... 92 

Table 22 Costs for sawmilling and planing of wood by package and comparison with main financial indicators – 
annual average for 2005-2014 ...................................................................................................................................... 96 

Table 23 Costs for sawmilling and planing of wood by cost category and comparison with main financial indicators 
– annual average for 2005-2014 ................................................................................................................................... 96 

Table 24: Regulatory costs for manufacture of veneer sheets and wood-based panels by package and comparison 
with main financial indicators – annual average for 2005-2014 .............................................................................. 100 

Table 25 Regulatory costs for manufacture of veneer sheets and wood-based panels by cost category and 
comparison with main financial indicators – annual average 2005-2014................................................................ 101 

Table 26: Costs for manufacture of other builders' carpentry and joinery by package and comparison with main 
financial indicators – annual average for 2005-2014 ................................................................................................ 104 

Table 27 Costs for manufacture of other builders' carpentry and joinery by package and comparison with main 
financial indicators – annual average for 2005-2014 ................................................................................................ 105 

Table 28: Costs for manufacture of wooden pallets and other wooden packaging by package and comparison with 
main financial indicators – annual average for 2005-2014....................................................................................... 108 

Table 29 Costs for manufacture of wooden pallets and other wooden packaging by cost category and comparison 
with main financial indicators – annual average for 2005-2014 .............................................................................. 109 

Table 30 Direct Costs for the overall pulp, paper and paperboard sector by package and comparison with main 
financial indicators – annual average for 2005-2014 ................................................................................................ 114 

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Table 31 Direct Costs for the overall pulp, paper and paperboard sector by cost category and comparison with 
main financial indicators – annual average for 2005-2014....................................................................................... 114 

Table 32 Direct regulatory costs for the pulp, paper and paperboard sector - First year, last year, ranges min-max
 ...................................................................................................................................................................................... 118 

Table 33 Direct regulatory costs for the overall pulp, paper and paperboard sector by package and comparison 
with main financial indicators for an average integrated company – annual average for 2005-2014 .................... 118 
Table 34 Indirect costs of ETS (million EUR) for the overall pulp, paper and paperboard sector .......................... 119 

Table 35: Direct regulatory costs for manufacture of pulp by package and comparison with main financial 
indicators – annual average for 2005-2014 ............................................................................................................... 123 

Table 36 Direct regulatory costs for manufacture of pulp by package and comparison with main financial 
indicators – annual average for 2005-2014 ............................................................................................................... 123 

Table 37: Direct regulatory costs for manufacture of paper and paperboard by package and comparison with main 
financial indicators – annual average for 2005-2014 ................................................................................................ 129 

Table 38 Direct regulatory costs for manufacture of paper and paperboard by package and comparison with main 
financial indicators – annual average for 2005-2014 ................................................................................................ 129 

Table 39 Data sources as part of the data collection (first step) used for each section of the international 
comparison part ........................................................................................................................................................... 145 

Table 40 Main cost categories, of the EFORWOOD, RISI and Euromonitor datasets; their geographical and 
sectoral application in this study. ............................................................................................................................... 149 
Table 41  Summary of contacted associations, federations and industry experts, and companies. ......................... 150 

Table 42 Structure of cost items into cost sub-categories and categories, as applied in the presentation of country 
data and in the international comparison ................................................................................................................... 151 

Table 43 Number and size of Brazilian businesses in wood products and paper manufacturing sectors for the year 
2012 .............................................................................................................................................................................. 153 

Table 44 Number of Brazilian companies for ISIC20 – Wood and Wood Products - by Employment Size 2007–
2012 .............................................................................................................................................................................. 153 

Table 45 Employment in the wood products manufacturing and paper and paper products manufacturing sector 
in Brazil (2007-2013) .................................................................................................................................................. 154 
Table 46. Overview of Brazil’s FB-I production and trade in 2014. .......................................................................... 155 
Table 47 Cost structure for the woodworking sub-sector in Brazil, 2014 ................................................................. 158 
Table 48 - Summary table of forest-related and environmental policies for Brazil ................................................. 164 
Table 49 Summary table of trade policies for Brazil .................................................................................................. 166 
Table 50 Changes in ownership of wood forests in China. (source: 7th and 6th China national forest inventory) .. 169 

Table 51 Number of Chinese companies for ISIC20 – Wood and Wood Products, by Employment Size 2007–2012
 ...................................................................................................................................................................................... 170 
Table 52 Overview of China’s FB-I production and trade ........................................................................................... 171 

Table 53 Cost structure for the woodworking sub-sector in China for the year 2012 (see Table 42 for an 
explanation of the categories) ..................................................................................................................................... 175 
Table 54 - Summary table of forest-related and environmental policies for China.................................................. 182 
Table 55 - Summary table of trade-related policies for China ................................................................................... 183 

Table 56 Average monthly employment for the wood products manufacturing and paper manufacturing sectors in 
the US (2006-2015) ..................................................................................................................................................... 187 
Table 57 Number and size of US businesses in wood products and paper manufacturing sub-sectors in 2012 ..... 187 
Table 58 Woodworking sector – Number of companies by employment size 2007-2012 ....................................... 188 
Table 59 Overview of the USA F-BI production and trade in 2014 ........................................................................... 189 

iv 

 
 
Table 60 Cost structure for the woodworking sub-sector in the United States in 2012 (see Table 42 for an 
explanation of the categories) ..................................................................................................................................... 193 
Table 61 - Summary table of forest-related and environmental policies for the United States ............................... 198 
Table 62 - Summary table of climate and energy policies for the United States ...................................................... 199 
Table 63 Cross-cutting issues raised by US SMEs concerning trade with the EU .................................................... 201 
Table 64 - Summary table of trade  policies for the United States ........................................................................... 202 

Table 65 Pollution abatement capital expenditures – $US million (Pollution Abatement Costs and Expenditures).
 ..................................................................................................................................................................................... 205 
Table 66 Pollution abatement operating costs - $US million (Pollution Abatement Costs and Expenditures)..... 206 

Table 67 Pollution abatement operating costs by cost category –  $US million – cost category (Pollution 
Abatement Costs and Expenditures ) .........................................................................................................................207 
Table 68 Tropical wood product imports by selected countries 2001 and 2013 ..................................................... 208 

Table 69 Forest resources, industrial production by woodworking and pulp, paper and paperboard sub-sectors, 
and apparent consumption for the corresponding product groups by EU28, Brazil, China and USA. Data in each 
row are colour-coded as follows: cell with lowest number is white, cell with highest number has darkest shade of 
red colour.  For reference years, please see footnote to this table. ............................................................................ 210 
Table 70 Imports and exports of pulp ........................................................................................................................ 212 
Table 71 Imports and exports of paper ....................................................................................................................... 212 

Table 72 Cost structure by main cost categories and cost sub-categories for the woodworking sub-sector in EU, 
Brazil, China and USA (% of total production costs) ................................................................................................. 214 
Table 73 Hypothesis for cumulative cost assessment ............................................................................................... 228 
Table 74 Carbon cost pass-on rates, results from the literature     ............................................................................234 

v 

 
 
 
 
 
Figures 

Figure 1 Cumulative direct regulatory costs and its composition by legislative package -average annual share of 
added value 2005-2014 ................................................................................................................................................... 4 

Figure 2 Evolution of direct regulatory costs for the woodworking sectors over the period 2004-2015 as a 
percentage of added value ............................................................................................................................................... 5 

Figure 3 Evolution of direct regulatory costs and ETS indirect costs for the overall pulp, paper and paperboard 
sector - annual average 2005-2014 as a percentage of added value, with pass-on rate 1 ............................................ 6 

Figure 4 Cost structure by main cost categories for the woodworking sub-sector in EU, Brazil, China and USA (% 
of country total production costs) ................................................................................................................................... 8 

Figure 5 Cost structures by main cost categories for the pulp, paper and paperboard sub-sector in EU, Brazil, 
China and USA (% of production costs as included in RISI database) ......................................................................... 9 
Figure 6 The woodworking value chain ........................................................................................................................ 17 
Figure 7 The pulp, paper and paperboard manufacturing value chain ....................................................................... 18 
Figure 8 The furniture manufacturing value chain ..................................................................................................... 20 
Figure 9 The printing value chain ................................................................................................................................ 20 
Figure 10 Cost structure in the EU pulp, paper and paperboard sub-sector, million EUR/year, 2014 ..................... 23 
Figure 11 Cost structure in the EU pulp, paper and paperboard sub-sector, in %, 2014 ............................................ 24 
Figure 12 Cost structure in the EU woodworking sub-sector, million EUR/year, 2005 ............................................ 25 
Figure 13 Cost structure in the EU woodworking sub-sector, in %, 2005 .................................................................. 26 
Figure 14 Share of EU woodworking employment (left) and share of production value (right) by country - 2013 .. 27 

Figure 15 Share of EU pulp, paper and paperboard employment (left) and share of production value (right) by 
country - 2013 ................................................................................................................................................................ 27 
Figure 16 Phases for implementing the Cumulated Cost Assessment of the F-BIs ................................................... 30 
Figure 17 Legislative packages per product group ....................................................................................................... 32 
Figure 18 Cost categorisation ........................................................................................................................................ 34 

Figure 19 Comparison between the panel of interviewed companies and Eurostat sub-sectors – average turnover 
per employee, 2014 ........................................................................................................................................................ 39 
Figure 20 Summary of methodology for estimating the cumulative cost of legislation ............................................ 40 
Figure 21 Number of responses to the online survey by product group...................................................................... 43 
Figure 22 Evolution of added value for the woodworking sector (NACE code 16), in millions EUR ....................... 88 

Figure 23 Regulatory costs for the overall woodworking sector as % of added value, by legislative package and cost 
category – annual average 2005-2014 ......................................................................................................................... 90 
Figure 24 Evolution of costs for the overall woodworking sector as % of added value for the period 2005-2014 ... 91 
Figure 25 Wood mix cost variation, panel producer, Spain, Germany and Portugal plants, in €/m3 ...................... 95 

Figure 26 Regulatory costs for sawmilling and planing of wood as % of added value, by legislative package and cost 
category – annual average 2005-2014 .......................................................................................................................... 97 

Figure 27 Share of categories of costs for sawmilling and planing of wood by package – annual average for 2005-
2014 ................................................................................................................................................................................ 97 
Figure 28 Evolution of costs for sawmilling and planing of wood as % of added value for the period 2005-2014 .. 99 

Figure 29 Regulatory costs for manufacture of veneer sheets and wood-based panels as % of added value, by 
legislative package and cost category – annual average 2005-2014 ......................................................................... 101 

vi 

 
 
Figure 30 Share of categories of costs for manufacture of veneer sheets and wood-based panels by package – 
annual average for 2005-2014 .................................................................................................................................... 102 

Figure 31 Evolution of costs for manufacture of veneer sheets and wood-based panels as % of added value for the 
period 2005-2014 ........................................................................................................................................................ 103 

Figure 32 Regulatory costs for manufacture of other builders' carpentry and joinery as % of added value, by 
legislative package and cost category – annual average 2005-2014 ......................................................................... 105 

Figure 33 Share of categories of costs for manufacture of other builders' carpentry and joinery by package – 
annual average for 2005-2014 .................................................................................................................................... 106 

Figure 34 Evolution of costs for manufacture of other builders' carpentry and joinery as % of added value for the 
period 2005-2014 ........................................................................................................................................................ 107 

Figure 35 Regulatory costs for manufacture of wooden pallets and other wooden packaging as % of added value, 
by legislative package and cost category – annual average 2005-2014 .................................................................... 109 

Figure 36 Share of categories of costs for manufacture of wooden pallets and other wooden packaging by package 
– annual average for 2005-2014 ................................................................................................................................. 110 

Figure 37 Evolution of costs for manufacture of wooden pallets and other wooden packaging as % of added value 
for the period 2004-2015 ............................................................................................................................................. 111 
Figure 38 Evolution of added value for the pulp, paper and paperboard sector (NACE code 171)...........................113 

Figure 39 Direct Regulatory costs for the overall pulp, paper and paperboard sector as % of added value, by 
legislative package and cost category – annual average 2005-2014 .......................................................................... 115 

Figure 40 Evolution of direct regulatory costs for the overall pulp, paper and paperboard sector as % of added 
value for the period 2005-2014.................................................................................................................................... 117 

Figure 41 Overall direct regulatory costs and ETS indirect regulatory costs for the overall pulp, paper and 
paperboard sector - annual average 2005-2014, pass-on of 0.5 ............................................................................... 120 

Figure 42 Evolution of direct regulatory costs and ETS indirect costs for the overall pulp, paper and paperboard 
sector - annual average 2005-2014 with pass-on 0.5 ................................................................................................ 120 

Figure 43 Overall direct regulatory costs and ETS indirect regulatory costs for the overall pulp, paper and 
paperboard sector - annual average 2005-2014, pass-on of 1 ....................................................................................121 

Figure 44 Evolution of direct regulatory costs and ETS indirect costs for the overall pulp, paper and paperboard 
sector - annual average 2005-2014 with pass-on 1 .....................................................................................................121 

Figure 45 Direct regulatory costs for manufacture of pulp as % of added value, by legislative package and cost 
category – annual average 2005-2014 ........................................................................................................................ 124 

Figure 46 Share of categories of direct regulatory costs for manufacture of pulp by package – annual average for 
2005-2014 .................................................................................................................................................................... 124 

Figure 47 Evolution of direct regulatory costs for manufacture of pulp as % of added value for the period 2005-
2014 .............................................................................................................................................................................. 127 

Figure 48 Direct regulatory costs for manufacture of paper and paperboard as % of added value, by legislative 
package and cost category – annual average 2005-2014 ........................................................................................... 130 

Figure 49 Share of categories of direct regulatory costs for manufacture of paper and paperboard by package – 
annual average for 2005-2014 .................................................................................................................................... 130 

Figure 50 Evolution of direct regulatory costs for manufacture of paper and paperboard as % of added value for 
the period 2005-2014 .................................................................................................................................................. 133 
Figure 51 Production of wood products – Brazil ........................................................................................................ 156 
Figure 52 Production of pulp, paper and paperboard products – Brazil .................................................................. 156 

Figure 53 Import value of wood and paper products – Brazil [currency in US$ as international reporting standard]
 ...................................................................................................................................................................................... 156 
Figure 54 Import quantity of wood products – Brazil ............................................................................................... 156 
Figure 55 Import quantity of paper products – Brazil ............................................................................................... 156 

vii 

 
 
Figure 56 Export values of wood and paper products – Brazil [currency in US$ .................................................... 156 
Figure 57 Export quantity of wood products – Brazil ................................................................................................ 157 
Figure 58 Export quantity of paper products – Brazil ............................................................................................... 157 
Figure 59 Cost structures for Brazil and EU in relative terms, as % of production costs, 2005 .............................. 159 
Figure 60 Cost structure of Manufacture of pulp, Europe vs. Brazil, EUR/tonne, 2014 ......................................... 160 
Figure 61 Cost structure of Manufacture of paper and paperboard, Europe vs. Brazil, EUR/tonne, 2014 ............. 161 

Figure 62 Cost structures of inputs to the pulp, paper and paperboard sub-sector, Europe versus Brazil, in average 
EUR/tonne, 2014 ......................................................................................................................................................... 162 

Figure 63. Increase in the cost of wood production (INCAF – Indice Nacional de Custos da Atividade Florestal; 
National Index of Forestry Activity Costs) versus Brazilian Inflation (IPCA – Indice Nacional de Precos ao 
Consumidor Amplo; extended National Consumer Price Index). ............................................................................. 168 
Figure 64. Map of China indicating the Bohai Bay, Yangtze River Delta and Pearl River Delta Regions ............... 170 
Figure 65 Production of wood products – China ....................................................................................................... 172 
Figure 66 Production of pulp, paper and paperboard products – China .................................................................. 172 
Figure 67 Imports of wood and paper products – China [currency in US$ as international reporting standard] . 172 
Figure 68 Import quantity of wood products – China ............................................................................................... 172 
Figure 69 Import quantity of paper products – China .............................................................................................. 173 
Figure 70 Exports of wood and paper products – China [currency in US$ as international reporting standard] . 173 
Figure 71 Export quantity of wood products – China ................................................................................................ 173 
Figure 72 Export quantity of paper products – China ............................................................................................... 173 
Figure 73 Cost structures for China and EU in relative terms, as % of production costs, 2005 .............................. 176 
Figure 74 Cost structures in manufacturing of pulp, Europe vs China, EUR/tonne, 2014 ...................................... 177 
Figure 75 Cost structures in manufacturing of paper and paperboard, Europe vs. China, EUR/Tonne, 2014 ....... 178 

Figure 76 Cost structure of inputs to the pulp, paper and paperboard sub-sector, Europe versus China, average 
EUR/tonne, 2014 ......................................................................................................................................................... 179 
Figure 77 Production of wood products – United States ........................................................................................... 190 
Figure 78 Production of pulp, paper and paperboard  products – United States..................................................... 190 

Figure 79 Imports of wood and paper products – United States [currency in US$ as international reporting 
standard] ...................................................................................................................................................................... 190 
Figure 80 Import quantity of wood products – United States .................................................................................. 190 
Figure 81 Import quantity of paper products – United States .................................................................................. 191 

Figure 82 Exports of wood and paper products – United States [currency in US$ as international reporting 
standard] ...................................................................................................................................................................... 191 
Figure 83 Export quantity of wood products – United States ................................................................................... 191 
Figure 84 Export quantity of paper products – United States .................................................................................. 191 

Figure 85 Cost structures for the woodworking sub-sector US and EU in relative terms, as % of production costs, 
2005 ............................................................................................................................................................................. 194 
Figure 86 Manufacture of pulp, Europe vs. US, EUR/tonne, 2014 ........................................................................... 195 
Figure 87 Manufacture of paper and paperboard, Europe vs. US, EUR/tonne, 2014 .............................................. 196 

Figure 88 Cost structure of inputs to pulp, paper and paperboard sector by product, Europe versus the US, 
average EUR/tonne, 2014 ........................................................................................................................................... 197 

Figure 89 Relative evolution of company distribution in the woodworking sub-sector, per employment size class 
as percentage of total number of companies for the EU Brazil, China and USA ...................................................... 213 

viii 

 
 
Figure 90 Cost structure by main cost categories for the woodworking sub-sector in EU, Brazil, China and USA (% 
of country total production costs) ............................................................................................................................... 215 

Figure 91 Cost structures by main cost categories for the pulp, paper and paperboard sub-sector in EU, Brazil, 
China and USA (% of production costs as included in RISI database) ..................................................................... 216 

Figure 92 Cumulative direct regulatory costs and its composition by legislation package – average annual share of 
added value 2005-2014 ............................................................................................................................................... 221 

Figure 93 Sensitivity analysis of adjusted figures (as a % of turnover) based on different weights for the 
adjustment (0, 0.15, 0.25, 0.35 and 0.5) ................................................................................................................... 228 

ix 

 
 
 
 
 
List of acronyms 

Acronym 

ACE 

Alliance for Beverage Cartons and the Environment 

AEBIOM 

European Biomass Association 

AV 

AVCP 

BAT 

BREF 

Added value 

Assessment and verification of constancy of performance 

Best available technique 

Best available technique reference document 

CAPEX 

Capital expenditure 

CCA 

Cumulative cost assessment 

CEI-bois 

European Confederation of Woodworking Industries 

CEPI 

CHP 

Confederation of European Paper Industries 

Combined heat and power 

CITPA 

Confederation of Paper and Board Converters 

CLP 

CLT 

CPR 

DDS 

DG 

EAP 

EBIT 

Classification, Labelling and Packaging Directive 

Cross laminated timber 

Construction Products Regulation 

Due Diligence System 

Directorate General 

Environment Action Programme 

Earnings before interest and taxes 

EBITDA 

Earnings before interest, taxes, depreciation and amortisation 

EC 

ECHA 

European Commission 

European Chemicals Agency 

EDANA 

European Disposables and Nonwovens Association 

EED 

EEX 

EFIC 

Energy Efficiency Directive 

European energy exchange 

European Furniture Industries Confederation 

EFICEEC 

European Forest Institute Central-East European Regional Office 

EOS 

European Organisation of the Sawmill Industry 

i 

 
 
 
 
EPF 

EPR 

ETD 

ETS 

EU 

EUA 

EUR 

European Panel Federation 

Extended producer responsibility 

Energy Taxation Directive 

Emission Trading System 

European Union 

European emission allowance 

Euro 

EUTR 

European Timber Regulation 

FAO 

FAP 

FBI 

Food and Agriculture Organization of the United Nations 

Forest Action Plan 

Forest-based industries 

FEFPEB 

European Federation of Wooden Pallet and Packaging Manufacturers 

FLEGT 

Forest Law Enforcement, Governance and Trade 

GBP 

GOS 

HWP 

IED 

IEP 

ILUC 

Pounds 

Gross operating surplus 

Harvested wood products 

Industrial Emissions Directive 

Integrated Environment Permits 

Indirect land use change 

INTERGRAF 

European Federation for Print and Digital Communication 

IPPC 

ISPM 

IT 

Kwh 

LCPD 

Integrated Pollution Prevention and Control 

International Standards For Phytosanitary Measures 

Information technologies 

Kilowatt hour 

Large Combustion Plant Directive 

LULUCF 

Land use, land use change and forestry 

MDF 

Mw 

Mwh 

Medium density fibreboard 

Megawatt 

Megawatt hour 

NACE 

Statistical Nomenclature of Economic Activities 

NREAPS 

National Renewable Energy Action Plans 

OECD 

Organisation for Economic Cooperation and Development 

ii 

 
 
OPEX 

OSB 

REACH 

RED 

SBS 

SIEF 

SME 

Operating expenditure 

Oriented strand board 

Registration,  Evaluation,  Authorisation  and  Restriction  of  Chemicals 
Directive 

Renewable Energy Directive 

Structural Business Statistics 

Substance Information Exchange Forum 

Small and medium enterprises 

SVHC 

Substances of very high concern 

TOR 

UEA 

VA 

VAT 

VOC 

VPA 

Terms of references 

European Federation of Furniture Manufacturers 

Value added 

Value-added tax 

Volatile organic compound 

Voluntary Partnership Agreement 

iii 

 
 
Executive Summary 

Objectives and scope of the study 

The  aim  of  this  study  is  to  identify  the  cumulative  costs,  both  direct  and  indirect,  of  the  most 
financially burdensome EU legislation and policies that forest-based industry (F-BI) companies active 
in the EU28 have to comply with. Specifically, the study objectives are:  

   Quantification  of  the  cumulative  direct  and  (where  possible)  indirect  costs  of  relevant 

legislation and policies for the selected F-BI sub-sectors in the EU;  

   Demonstration  of  the  evolution  of  costs  of  the  relevant  legislation  and  policies  over  time 

(2005-14) and likely qualitative developments in the coming years;  

   Comparison  of  costs  and  provision  of  conclusions  on  the  cost  impact  of  EU  legislation  and 

policies on respective F-BI sub-sectors.  

Later  on,  a  qualitative  comparison  is  made  between  the  cost  structures  of  the  EU  F-BI  sub-sectors 
woodworking and pulp, paper & paperboard, given the legislative regime within which they operate in 
the  EU,  with  those  of  their  main  international  competitors,  operating  within  their  own  specific 
legislative  frameworks.  (NB  in  some  cases,  the  latter  may  include  relevant  EU  legislation).  Where 
relevant and possible, comments are given about implications for the competitiveness of the respective 
global regions. 

The study was initially designed to cover four sub-sectors of the EU forest-based industries, based on 
the statistical classification of economic activities in the European Community (NACE): woodworking 
(NACE 16), furniture  manufacturing  (NACE 31),  pulp and  pulp-based  manufacturing  (NACE 17) and 
printing  (NACE  18).  However,  after  the  initial  data-gathering  phase,  a  decision  had  to  be  taken  to 
confine  the  scope  of  the  study  to  only  two  F-BI  sub-sectors  –  woodworking  (NACE  16)  and 
pulp  and  pulp-based  manufacturing  (NACE  17)  –  due  to  the  very  low  rate  and  quality  of 
response to pilot interviews from companies of the other two sub-sectors, and also a lack of sufficiently 
detailed secondary data.  

Hence, the study covers the woodworking sub-sector and the pulp, paper and paperboard sub-sector, 
for  which  the  available  data  are  sufficient  to  produce  reasonably  representative  estimates.  These 
include  the  following  sub-sectors:  16.1  sawnwood;  16.21  wood-based  panels;  16.23  other  builders' 
carpentry  and  joinery;  16.24  wooden  pallets  and  other  wooden  pallets  and  other  wooden  packaging; 
17.11 pulp production and 17.12 paper and paperboard.  

All pieces of legislation seen as incurring high costs to  the EU forest-based industries are included in 
the  study.  The  relevant  regulations  and  policies  are  grouped  under  eight  legislative  packages, 
comprising the policy areas of: competition, climate and energy, environment, forest-related policies, 
employment  and  workers’  safety,  product  policy,  transport  and  trade.  However,  the  competition 
package  has  not  been  addressed  quantitatively  in  the  study;  businesses  reported  that  competition 
legislation  mainly  aims  at  shaping  the  competitive  environment  in  which  they  operate  and  that  it 
creates no, or very little, cost. 

This cumulative cost assessment (CCA) covers the impact to date of the existing legal framework (as at 
the  end  of  2014),  with  cost-related  indicators  that  cover  a  10-year  period  from  2005  till  2014 
(quantitative assessment). Following the assessment of the present effects of current EU legislation on 
the  forest-based  industries,  this  section  elaborates  on  future  regulatory  costs  likely  to  impact  the 
forest-based  industries,  either  based  on  current  legislation  with  future  cost  impacts  or  future 
legislation  (i.e.  drafted  or  already  in  the  adoption  process  phase  as  by  the  end  of  2014)  under 
qualitative assessment).  

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The territorial scope of this CCA is the EU28 and the selected global competitor countries, namely 
China, the United States, and Brazil. 

Methodology 

As  opposed  to  other  methods  assessing  the  costs  of  policies,  this  study  adopts  a  cumulative 
approach,  by  providing  a  quantitative  assessment  of  all  direct  costs  (monetary  obligations,  capital 
expenditure,  operating  expenses  and  administrative  burden)  and  (where  possible)  indirect  costs 
incurred by F-BI companies in the EU in relation to the most relevant EU legislation. This study does 
not  assess  the  benefits  of  EU  legislation  and  does  not  aim  to  provide  insights  related  to  the 
proportionality of costs and benefits of legislation, nor its efficiency or effectiveness. 

The methodology of this study draws on previous cumulative cost assessment exercises performed for 
some EU Member States and the European Commission, such as the latter’s CCAs for the aluminium 
and  steel  industries  respectively  (CEPS,  2013a  and  CEPS,  2013b)  and  for  the  Chemical  Industry 
(Technopolis,  2016).  It  also  draws  on  the  established  methodologies  that  have  been  used  for  several 
years  by  Member  States  and  the  European  Commission,  including  the  Standard  Cost  Model,  or  the 
Cost-driven Approach to Regulatory burdens (CAR) developed for the Dutch Government. Despite its 
significant advantages regarding feasibility, the  CCA method is less accurate than statistical methods, 
as it can only provide an estimate of the magnitude of cost borne by companies due to EU legislation.  

A  total  of  57  pieces  of  legislation  were  finally  selected  from  initial  prioritisation  by  industry 
associations  as  having  a  significant  impact  on  their  respective  sub-sectors.  Legislative  acts  were 
grouped  under  policy  packages,  based  on  the  similarity  of  objectives.  National  legislation  that  is  not 
transposed from EU legislation was excluded from the study. Companies - selected from the F-BI with 
the  aid  of  a  Mirror  Group  -  participated  in  the  study.  They  were  asked  to  report  only  the  costs 
associated  with  the  requirements  set  out  in  the  prioritised  EU  legislation.  The  selected  pieces  of 
legislation  were  further  analysed  and  the  actions  that  companies  have  to  take  to  comply  with  them 
were  identified.  The  actions  were  then  associated  with  cost  categories  identified  in  the  European 
Commission’s  Better  Regulation  Toolbox  (European  Commission,  2015a):  monetary  obligations, 
capital  expenditures,  operating  expenditures  and  administrative  burden  and  each  was  quantified 
accordingly. 

The legislative costs borne by F-BI companies were estimated by following a six-stage approach: 

  The  first  step  included  the  development  of  a  questionnaire  and  its  distribution  to  a 
panel  of  typical  plants.  The  selection  of  the  interviews  was  performed  with  the  support  of 
industry associations, on the basis of the following criteria: representativeness of activities and 
structure, comparability of companies and clear business operations.  

  Next,  data  were  collected  through  in-depth  interviews  with  the  selected  companies.  Overall, 
in-depth  interviews  and  on-site  visits  were  performed  for  49  typical  plants,  and  103 
responses were provided to the survey, covering 21 EU Member States.  

  On  the  basis  of  these  data,  an  estimation  of  the  costs  for  the  panel  companies  was 

performed.  

  This estimation was further validated through two validation and discussion workshops. 
In addition to this validation, testing and adjustments of the cost estimates were done using 
the results from the online survey.  

  Lastly,  the  results  and  input  from  all  steps  were  aggregated  producing  a  cumulative 

overview of regulatory costs for each sub-sector.   

  Finally, a quantitative estimation of ETS indirect costs - based on secondary data - was 
performed for the pulp, paper and paperboard sub-sector, while a qualitative assessment 
of  indirect  costs  related  to  the  price  of  raw  materials  was  performed  for  the 
woodworking sub-sector.  

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The analysis of data in the current study did not rely on statistical methods. Although the cumulative 
cost assessment methodology clearly presents advantages in terms of feasibility, it is less accurate than 
statistical methods, and mainly provides an estimate of the magnitude of cost borne by companies due 
to  EU  legislation.  Detailed  data  was  collected  among  49  typical  plants  selected  according  to  a  set  of 
criteria, and further adjusted based on the results from a larger sample of 103 responses through an 
online survey. Validation workshops with both the European Commission and the industry, along with 
results  from  the  online  survey,  were  in  line  with  cost  figures  provided  by  the  panel  companies.  Data 
was  collected  assuming  the  full  compliance  to  legislation,  which  is  not  always  the  case:  this  could 
therefore lead, in certain cases, to an overestimation of costs.  

A  methodological  challenge  in  the  assessment  of  administrative  burden  relates  to  the  difficulty  of 
identifying  the  origin  of  the  burden  —  whether  burdens  can  be  solely  attributed  to  the  minimum 
requirements of EU legislation or to going beyond minimum requirements (“gold-plating”) at national 
level.  This  was  taken  into  account  by  asking  companies  surveyed  to  report  the  portion  of 
administrative  burden  attributable  solely  to  implementation  of  the  European  legislation.  However, 
there is no obvious way to ensure that there is no overlap in administrative burden estimates. 

Main findings of the CCA 

The  EU  woodworking  industries  were  derived  from  NACE  code  16  and  include:  the  production  of 
sawnwood,  wood-based  panels,  builder’s  carpentry  and  joinery  products,  wooden  flooring,  wooden 
packaging and other wooden articles. Input materials within the woodworking value chain are, apart 
from  saw  logs  (fresh  wood),  industrial  by-products  (like  bark,  chips  and  dust)  and  used  materials 
(recovered wood). On the other hand, the pulp, paper and paperboard manufacturing sub-sector value 
chain is derived from NACE code 17 and includes all kinds of pulp and products made of pulp. 

The  variability  of  costs  across  the  different  sub-sectors,  as  illustrated  in  the  following  figure,  is 
significant and reflects differences in product groups and their value chains. Thus, the highest cost as a 
percentage of added value is observed in wooden containers and packaging, amounting to 16.4%, and 
the lowest in builders’ carpentry and joinery, at 1.3%. The cost for wood-based panels represents 10.8% 
of the sub-sector’s added value, for pulp 5%, for paper and paperboard 4.2% and for sawnwood 2.6%. 

Within  sub-sectors,  variability  reflects  the  size  of  companies  and  their  organisational  structures, 
efficiency, level of integration and product portfolio. For instance, SMEs in general incur higher costs 
compared  to  large  firms  because  the  costs  to  comply  with  legislation  are  not  linear  and  cannot  be 
amortised by SMEs on a large volume of products.  

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Figure 1 Cumulative direct regulatory costs and its composition by legislative package -average annual share of 
added value 2005-2014 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators  of 
turnover, AV and GOS from Eurostat, Structural Business Statistics 

The woodworking sub-sector 

When all legislation relevant to woodworking companies is cumulated, the estimated average annual 
total  direct  cost  borne  by  them  during  the  period  2005-2014  approaches  4.7%  of  added  value, 
representing around 1.3% of their turnover and 13.7% of the gross operating  surplus.  Two legislative 
packages clearly stand out as the main cause of legislative burden, namely the environmental and the 
climate  and  energy  packages,  generating  respectively  41.5%  and  36.3%  of  direct  regulatory  costs  for 
woodworking sectors. Among the cost categories, monetary obligations and operational expenditures 
dominate.  The  very  high  results  for  the  environmental  package  mostly  relate  to  the  relevant  parts  of 
the  phytosanitary  regulations  for  the  wooden  pallets  and  other  wooden  packaging  (e.g.  rules  on 
wooden  packaging  which  incorporate  the  ISPM  15  standard  for  treatment  and  marking,  which, 
although it is a standard developed by the International Plant Protection Convention from the U.N.’s 
Food  and  Agriculture  Organization,  has  been  incorporated  into  the  EU  phytosanitary  legislation)  to 
prevent the introduction of harmful,  plant-borne alien organisms. Significant  investments  have  been 
necessary for companies to collect and process returned products and wastes in  accordance with the 
principle of extended producer responsibility (e.g. costs of waste management are to be carried partly 
or  wholly  by  the  producer).  Personnel  costs  and  other  operating  and  maintenance  costs  are  also 
associated with these obligations. 

Major  milestones  of  the  evolution  of  costs  are  the  establishment  of  EU  climate  and  energy  targets, 
known  as  “20-20-20”  targets  for  a  low-carbon  economy,  the  revision  of  the  Renewable  Energy 
Directive in 2009, the adoption of the Integrated Pollution Prevention and Control (IPPC) in 2008 and 
the transposition of the Industrial Emissions Directive in 2013. Other legislative acts such as the Waste 
Framework  Directive  or  the  Construction  Product  Regulation  contribute  to  costs.  It  is  important  to 
note  that,  while  the  following  graph  certainly  illustrates  the  evolution  of  regulatory  costs  over  ten 
years, the trend is also impacted by the evolution of the ratio’s denominator, i.e. the value added of the 
sector. 

An assessment of the cumulative cost impact of specified EU legislation and policies on the EU 
forest-based industries 

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Figure  2  Evolution  of  direct  regulatory  costs  for  the  woodworking  sectors  over  the  period  2004-2015  as  a 
percentage of added value 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators  of 
turnover, AV and GOS from Eurostat, Structural Business Statistics 

Companies in the wood-based panels sector consistently reported to be affected by indirect costs  they 
attributed  to  climate  and  energy  policies,  and  more  specifically  to  the  Renewable  Energy  Directive 
(Directive  2009/28/EC).  Companies  reported  that  the  Directive  has  contributed  to  increase  the  raw 
material  costs  (mainly  wood),  and  led  to  the  substitution  of  wood-based  panels  by  less  expensive 
materials  in  some  cases.  However,  a  quantitative  estimate  of  the  effect  of  the  competition  with 
bioenergy for is not possible due to a lack of adequate data.  

When  all  legislation  relevant  to  pulp,  paper  and  paperboard  companies  is  cumulated,  the 
estimated average annual total direct cost borne  by the sub-sectors covered during the  period 2005-
2014 approaches 4.3% of added value, representing around 0.9% of their turnover, 10.8% of the gross 
operating surplus, 7.6% of EBITDA and 21.9% of EBIT.  

The same two legislative packages clearly stand out as the main cause of legislative burden, namely the 
climate and energy package and the environmental package, generating respectively 41.5% and 32% of 
direct  regulatory  costs  for  pulp,  paper  and  paperboard  sectors.  Among  the  cost categories,  monetary 
obligations, capital and operational expenditures dominate.  

Major milestones of the evolution of costs are the establishment of EU ETS, covering pulp, paper and 
paperboard since its start in 2005. The second increase in 2012/2013 may also be linked to the ETS, 
e.g. from 2013 the ETS requires a reduction of 21% of carbon emissions compared to 2005. The Energy 
Efficiency Directive also came into force during this period and it  would also have been  preceded by 
investments to meet new legal requirements.  

Results presented above apply to firms of the pulp, paper and paperboard industries where pulp mills 
sell their market pulp to third parties.  An average integrated company of pulp, paper and paperboard 
will  bear  direct  regulatory  costs  of  approximately  1%  of  turnover,  representing  7.68  EUR/tonne  of 
paper. 

Moreover,  pulp,  paper  and  paperboard  companies  undergoing  the  interview  process  as  well  as 
stakeholders  taking  the  online  survey  have  systematically  reported  the  significant  impact  of  ETS 
indirect costs of regulation, that occur when utility companies pass-on some of their ETS-related costs 
to the industry. Such indirect costs from electricity providers become particularly substantial as pulp, 
paper and paperboard are energy-intensive sectors. Indirect costs from ETS are close to four times as 

An assessment of the cumulative cost impact of specified EU legislation and policies on the EU 
forest-based industries 

5 

 
 
 
much as direct costs from the climate and energy package, which contains, inter alia, direct costs from 
the ETS. 

Figure 3 Evolution of direct regulatory costs and ETS indirect costs for the overall pulp, paper and paperboard 
sector - annual average 2005-2014 as a percentage of added value, with pass-on rate 1 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators  of 
turnover,  AV  and  GOS  from  Eurostat,  Structural  Business  Statistics  *  For  further  details  on  this  figure  and 
underlying hypothesis of Co2 price, see section 3.6.1.3. 

While companies from the  pulp,  paper and  paperboard sectors did not systematically report indirect 
costs  incurred  by  the  Renewable  Energy  Directive  (Directive  2009/28/EC),  it  is  likely  to  also  be  an 
issue for the pulp, paper and paperboard sectors, since they use the same types of fresh wood as part of 
their raw material intake.  

Existing legislation and prospective legislative acts (i.e. those new acts already identified but 
only  likely  to  have  their  cost  impacts  during  the  coming  years)  will  be  likely  to  generate  additional 
compliance costs for the forest-based industries to meet new objectives and standards.  

For the climate and energy package, such acts will probably include the Clean Air Policy Package 
and/or the roadmap for moving to a competitive low-carbon economy in 2050, the 2030 
climate  &  energy  framework  and  the  energy  roadmap  2050-  although  they  do  not  present 
quantifiable direct costs, they all aim to reduce carbon emission and energy consumption by improving 
efficiency. Effects from the Third Energy package are not clear-cut as the forest-based industries, while 
potentially benefiting from the liberalisation of energy markets, may also suffer indirectly from higher 
power prices because of EU deregulation measures. Similarly, the physical expansion of an integrated 
energy  market  may  be  accompanied  by  decreasing  energy  prices  since  barriers  between  EU  Member 
States will decrease. The  woodworking sector  is particularly concerned with the  enshrinement of the 
cascading  principle in a detailed legislation and with  the revision of the Renewable  Energy  Directive 
that may lead to an increase is wood price (i.e. raw material). On the other hand, a new proposal for 
the  LULUCF  legislation  has  been  published  in  July  2016,  which  should  potentially  limit  the 
administrative burden on businesses. There is also a high degree of uncertainty for the pulp, paper and 
paperboard  sub-sector,  relating  to  the  revision  of  the  ETS.  Concern  from  businesses  relate  to  data 
collection  and  verification  likely  to  bring  further  administrative  burden  and  to  the  lack  of 
harmonisation in EU compensation scheme that leads to rising electricity costs among Member States. 

An assessment of the cumulative cost impact of specified EU legislation and policies on the EU 
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6 

 
 
 
 
Currently,  the  pulp,  paper  and  paperboard  sub-sectors  are  included  in  the  Carbon  Leakage  List  and 
receive a higher share of free allowances. Future cost impacts from ETS will substantially depend on its 
ongoing revision and the implications for the updated carbon leakage list (2014-19). 

Environmental  legislation  likely  to  affect  the  woodworking  sector  in  the  future  relate  to  the 
harmonized EU VOC-Classes, depending on the products that will be covered in the new requirements 
of VOC emissions and potentially rising operating costs of labelling and administrative costs. On the 
other  hand,  the  main  costs  from  environmental  legislation  for  the  pulp,  paper  and  paperboard  sub-
sector  are  expected  to  emerge  from  the  Industrial  Emission  Directive,  as  BREFs  will  require  capital 
expenditures  in  new  machines  and  equipment,  operating  expenses  of  personnel,  training  and 
maintenance.  

Regarding the forest-related package, further and more consistent coordination of the enforcement 
of  the  EU  Timber  Regulation  is  encouraged  by  businesses  to  bring  down  the  current  costs  of 
administrative burden emanating from the different transposition of the regulation.  

Regarding  the  employment  package,  both  woodworking  and  pulp,  paper  and  paperboard  sub-
sectors  may  be  impacted  by  the  amendments  on  better  workers’  protection  against  cancer  causing 
chemicals,  now  under  proposal,  as  adding  13  new  substances  to  the  original  list  could  increase 
administrative  burden  for  hazard  identification  and  risk  assessments,  capital  expenditure  for 
equipment and operating costs of training.  

Insights on international competitiveness 

A  qualitative  comparison  is  made  between  the  cost  structures  and  costs  impacts  of  regulation  of  the 
EU F-BI sub-sectors woodworking and pulp, paper & paperboard, given the legislative regime within 
which they operate in the EU, with those of their main international competitors (Brazil, China and the 
United  States),  operating  within  their  own  specific  legislative  frameworks.  The  international 
comparison of cost structures and the cost impacts of regulation has been done using secondary data, 
and  further  complemented  with  the  results  from  two  questionnaires:  1)  a  questionnaire  for  relevant 
associations, federations and industry experts, followed up with telephone interviews; and 2) a shorter 
on-line questionnaire for companies in the target countries. 

Overall,  the  comparison  of  cost  structures  for  the  woodworking  sub-sectors  in  the  EU, 
Brazil,  China  and  USA  shows  significant  differences  in  the  relative  importance  of  particularly  raw 
materials costs, energy costs, labour costs and service costs. 

For the woodworking sector, raw material costs’ relative share of costs is much higher in China than in 
the  USA,  and  in  Brazil  but  similar  to  EU.  Prices  of  wood  raw  material  as  a  global  commodity  are 
expected to rise due to increasing demand for wood and wood-based products of verified legal origin. 
Employment  costs  are  relatively  highest  in  Brazil  (27%),  followed  by  the  USA  (22%).  In  China  the 
employment  costs  form  only  10%  of  total  costs.  In  monetary  terms,  average  employment  costs  are 
much lower in China than in Brazil and the USA. Increasing living standards particularly in China, but 
also  in  Brazil,  and  corresponding  employment  cost  increases  are  set  to  reduce  the  competitive 
advantage of these countries on this cost category.   

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Figure 4 Cost structure by main cost categories for the woodworking sub-sector in EU, Brazil, China and USA 
(% of country total production costs) 

Source: Euromonitor for US, China and Brazil (2012, 2013, 2014) and ToSIA for EU (2005)  

For  the  overall  pulp,  paper  and  paperboard  sector,  the  main  differences  between  costs  in 
EUR/tonne  produced  lies  mainly  in  wood  costs,  labour,  capital  costs  and  maintenance  costs. 
Electricity costs do not display large differences, except for the case of Brazil, where the negative share 
is to be attributed to the increasing self-generation capacity through the use of bioenergy (black liquor) 
to the detriment of oil and gas. The Chinese wood raw-material costs stand out for being the highest of 
the  four  global  regions.    This  may  at  least  partially  be  an  effect  of  lower  other  costs,  e.g.  labour.  In 
addition, the explanation for this can be traced back to the large amount of wood and pulp that China 
has  to  import  from  abroad  due  to  the  high  internal  demand  and,  as  a  consequence,  the  exposure  to 
market  exchange  rate  fluctuations  (i.e.  the  appreciation  of  the  RMB  in  the  last  years  contributed 
substantially  to  this  effect).  Labour  costs  are  the  highest  in  the  US  and  in  Europe,  but  these  are 
statistics  that  need  to  be  interpreted  in  a  context  of  high  labour  productivity  accompanied  by 
diminishing labour inputs in the two areas.  

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8 

0%10%20%30%40%50%60%70%80%90%100%EUCNBRUSRaw materialsEnergyLabourOther costs 
 
 
 
Figure 5 Cost structures by main cost categories for the pulp, paper and paperboard sub-sector in EU, Brazil, 
China and USA (% of production costs as included in RISI database) 

Source: RISI database 

A  country-specific  analysis  of  legislation  in  the  three  analysed  countries  feeds  a  comparative 
synthesis of the competitors’ likely cost impacts of the national and EU legislation. 

Regarding  climate  and  energy,  it  will  be  critical  for  the  forest-based  industry  in  how  far  political 
priorities  for  forest  biomass  production  are  set  towards  (renewable)  energy  or  (first)  material  use  of 
forest  biomass.  The  respective  regulations  are  under  continuous  political  debates  in  all  regions. 
Second, it will be critical how the mitigation potential of the forest based industries is accounted and 
politically  incentivized  or  not.  Climate-smart  forestry  holds  great  potential  as  a  contribution  to  an 
overall (global) climate change mitigation policy, but the political and academic debate relating to the 
mitigation  potential  of  forests,  forestry  and  the  forest  based  industry  could  result  in  quite  distinct 
future  policies  that  will,  in  turn,  possibly  greatly  impact  the  competitiveness  of  the  forest  based 
industries a) in comparison to other (competing) sectors and b) in a regional perspective. 

Regarding  the  environmental  legislation,  forest  related  environmental  policy  has,  in  all  four 
regions, been a major impacting factor for forest management in the last decades. Yet, environmental 
regulation  for  forest  management,  and  related  major  strategic  decisions  to  either  integrate  species 
protection and forest production, or separate them, has potentially significant impacts on the both the 
raw  material  costs  of  the  forest  based  industry  and  its  social  license  to  operate  –  with  both  aspects 
having potentially major/decisive impacts on the cost of the forest-based industry. 

Regarding  the  forest-related  legislation,  in  all  four  regions,  forest  legislation  sets  the  basic 
regulatory  requirements  for  forest  management  which  is,  in  turn,  crucially  important  (however  to 
different  degrees,  depending  on  the  import  orientation)  for  the  possibility  of  the  forest  based 
industries to achieve a continuous and cost-efficient supply of forest products. In the US, as well as in 
the EU, forest legislation shows great regional diversity with rules for sustainable forest management 
being  very  diverse  depending  on  the  country/state.  Moreover,  in  several  cases,  ordinances, 
programmes or plans have great effects on forest management practices despite being not codified law 
and provisions made by national legislation may be subject to notable discretion by the implementing 
authorities. 

An assessment of the cumulative cost impact of specified EU legislation and policies on the EU 
forest-based industries 

9 

 
 
 
 
Of  all  EU  legislation,  the  EU  Timber  Regulation,  considered  in  this  context  as  trade  legislation, 
comes forward as having an important impact on businesses and their production costs for particularly 
products destined to the EU market, in the three studied countries. Taking into account the bilateral 
trade  relations  between  the  four  regions,  legality  requirements  for  trade  with  the  EU  are  mostly  an 
issue for China due to its massive trade with EU while its national due diligence requirements are set 
systems not yet fully developed, then followed by USA and Brazil. 

Finally, regarding employment policy, a main feature on the international scene relies in the salary 
increases  that  have  put  labour  costs  up  in  Brazil,  China  and  US  as  well  as  the  EU,  but  most 
significantly  in  China  where  labour  costs  in  the  woodworking  sector  increased  nearly  three-fold 
between 2007-2012. This will possibly affect its competitiveness with lower wage countries in the near 
to medium future, and some companies might relocate to countries with still lower salaries.  

An assessment of the cumulative cost impact of specified EU legislation and policies on the EU 
forest-based industries 

10 

 
 
 
 
 
 
1 

Introduction 

1.1  Objectives of the study 

The  aim  of  the  Cumulative  Cost  Assessment  of  Forest-based  Industries  (CCA  F-BI)  is  to  identify  the 
cumulative  costs,  both  direct  and  indirect,  of  the  most  financially  burdensome  EU  legislation  and 
policies that forest-based industry companies active in the EU28 have to comply with. These costs are 
further  qualitatively  compared  to  the  costs  borne  by  companies  under  corresponding  legislation  in 
three of the main the EU competitor countries. Specifically, the study objectives are:  

   Quantification  of  the  cumulative  direct  and  (where  possible)  indirect  costs  of  relevant 
legislation  and  policies  for  the  selected  F-BI  sub-sectors  in  the  EU  and  a  few  key  non-EU 
competitor countries;  

   Demonstration  of  the  evolution  of  costs  of  the  relevant  legislation  and  policies  over  time 

(2005-14);  

   Comparison  of  costs  and  provision  of  conclusions  on  the  cost  impact  of  EU  legislation  and 
policies  on  respective  F-BI  sub-sectors  and  consequently  insights  into  the  EU  F-BI’s 
competitiveness vis-à-vis the non-EU competitors.  

The  CCA  F-BI  capitalises  on  the  lessons  learned  from  the  previous  CCAs  on  steel  and  aluminium 
industries (CEPS, 2013a; CEPS 2013b) and adopts a very similar methodology to the previous CCA on 
chemical industry (Technopolis Group 2016) in order to ensure that the results are as comparable as 
possible.  In  this  perspective,  all  CCAs  are  consistent  in  terms  of  cost  categories  analysed,  namely 
monetary obligations, capital expenditures, operating costs and administrative burden. The grouping 
of legislation under legislative packages is slightly different, in order to adapt to the specificities of an 
industry  (e.g.  ETS  included  in  a  package  called  “Emissions  and  processes”  in  CCA  Chemicals  and  in 
“Climate and Energy” in CCA FB-I). The indicators used to provide results may differ among CCA and 
within a CCA between the different sub-sectors, depending on the availability of data for the covered 
sectors:  for  instance,  the  CCA  Aluminium  uses  the  indicators  of  euro/tonne,  price-cost  margin, 
EBITDA,  price  of  raw  materials,  production  costs  and  market  price.  However,  for  both  CCAs 
Chemicals  and  FB-I,  indicators  used  are  turnover,  added  value  and  gross  operating  surplus  (with 
additional  indicators  of  EUR/tonne,  EBITDA  and  EBIT  for  pulp,  paper  and  paperboard.  It  must  be 
noted,  that  the  first  CCAs  concerned  very  much  more  homogenous  sectors  with  value  chains  having 
costs that are strongly influenced by raw material and energy prices. Forest-based industries represent 
extremely complex value chains, having secondary data sources that were only partially comparable to 
those available  in the first  studies. Hence, the approach in  CCA F-BI is calibrated to overcome these 
methodological challenges1. 

1.2  Scope of the study 

In analogy with a previous study2, CCA F-BI initially was designed to cover four sub-sectors of the EU 
forest-based  industries  based  on  NACE  Rev.2  categories  (Eurostat,  2015):  Woodworking  (NACE  16), 
Furniture  Manufacturing  (NACE  31),  Pulp  and  Pulp-based  Manufacturing  (NACE  17)  and  Printing 
(NACE 18). However, after the initial data gathering phase, the decision was taken to confine the scope 
of  the  study  to  only  two  F-BI  sub-sectors  –  Woodworking  (NACE  16)  and  Pulp  and  Pulp-
based  Manufacturing  (NACE  17)  –  due  to  the  very  low  response  rate  to  pilot  interview  requests 
from  companies  of  the  other  two  sub-sectors  and  the  lack  of  sufficiently  detailed  secondary  data. 
Hence, the coverage of this CCA encompasses the abovementioned two sub-sectors as determined by 
value chains and their value chain variants, which link their consecutive manufacturing steps3. 

1 For more details on methodology see Chapter 3  

2 Indufor (2013) Study on the Wood Raw Material Supply and Demand for the EU Wood-processing: Final Report. Helsinki   

3 For more details on value chains see Chapter 2 

An assessment of the cumulative cost impact of specified EU legislation and policies on the EU 
forest-based industries 

11 

 
 
 
                                                             
All  pieces  of  legislation  seen  as  incurring  high  costs  to  forest-based  industries  are  included  in  the 
study.  The  relevant  regulations  and  policies  are  grouped  under  eight  legislative  packages, 
comprising  the  policy  areas  of:  competition  (however,  not  quantitatively  assessed),  climate, 
environment, forest-related policies, employment and workers’ safety, products, transport and trade.4  

The  study  makes  both  an  ex-ante  and  an  ex-post  assessment  of  the  costs.  Firstly,  the  CCA  considers 
the effects of the existing EU legislation applying cost assessment methods partially from the ‘standard 
cost model’ (Better Regulation Toolbox, European Commission, 2015) used by the EU and its Member 
States.  In  the  second  stage,  the  probable/possible  future  legislative  cost  impacts  are  assessed 
qualitatively. Hence, the CCA covers two specific time periods: 

  

Impact  to  date  of  the  existing  legal  framework  (as  at  the  end  of  2014),  where  cost-related 
indicators should cover a 10-year period from 2005 till 2014 (quantitative assessment); 

   Likely  future  impacts  of  the  existing  legal  framework  (end  of  2014),  over  the  period  2014-
2030 for energy and climate policies, and 2014-2020 for other policies (qualitative 
assessment).  

The  territorial  scope  of  this  CCA  is  the  EU28.  The  geographical  focus  of  this  international 
comparison was  modified through the  project, following discussions with the  Mirror Group after the 
study  was  narrowed  down  in  an  initial  phase,  and  now  includes  three  countries  relevant  to  the 
reviewed sub-sectors: The United States of America, China and Brazil.  

It should be highlighted that, in accordance  with the  CCA’s specifications, the  potential benefits that 
arise from the EU legislation are not considered. The focus is exclusively on cost implications for the F-
BI. 

1.3  Structure of the report 

The report is structured in six chapters. Chapter two sets the scene for the analysis of the regulatory 
costs  by  defining  the  boundaries  of  the  value  chains  and  product  groups  that  are  considered  in  the 
scope  of  this  study.  The  overview  also  outlines  information  on  the  key  drivers  and  structure  of 
regulatory  costs  for  forest-based  industries,  in  particular  the  value  chains  and  cost  structures  of 
woodworking and the manufacturing of pulp, paper and paperboard.  

Chapter three presents the methodological approach of the study. It defines the key differentiating 
factors  of  a  CCA  compared  to  other  exercises,  such  as  impact  assessments  and  the  cost  benefit 
analyses.  The  chapter  further  explains  the  cost  categories  used  in  the  study  and  details  the  key 
implementation phases of the assessment (pilot interviews, to test the questionnaire and thence adapt 
it,  in-depth  interviews  to  collect  necessary  source  data  for  all  sub-sectors  and  an  online  survey  to 
validate the computed cost estimates). It also includes a reflection on the methodological assumption, 
challenges and limitations of the study approach.   

In  Chapter  four,  an  overview  of  the  selected  pieces  of  legislation  and  their  grouping  into  eight 
legislative packages is provided. The chapter presents a short summary of each legislative package and 
highlights the types of cost that respective legislation incurs to the industry.   

The  main  results  of  the  cost  assessment  are  presented  in  Chapter  five.  This  chapter  provides  an 
overall picture of the cumulative costs borne by the F-BI in total and for each legislative package and 
sub-sector separately. The evolution of the costs over the period 2005-2014 is mapped and presented 
for the two analysed sub-sectors as a whole (woodworking and pulp, paper & paperboard). The cost is 
presented for each legislative package as a share of added value, gross operating surplus (which is used 
as a proxy for profit), and turnover. Additional indicators (EBIT, EBITDA, €/tonne) are only provided 
for  the  pulp,  paper  and  paperboard  sectors  as  these  economic  indicators  were  not  available  for  the 
woodworking sector. Also for each legislative package the different types of cost are presented. Indirect 
costs  from  the  ETS  are  computed  in  a  quantitative  way  for  pulp,  paper  and  paperboard  industries, 

4 For more details on the relevant legislation see Chapter 4  

An assessment of the cumulative cost impact of specified EU legislation and policies on the EU 
forest-based industries 

12 

 
 
 
                                                             
while only a qualitative comment is provided for woodworking on the increased costs of raw materials 
due to the Energy Renewable Energy Directive.  

Lastly, Chapter six summarises information about three of the key EU competitor countries - China, 
the  United  States,  and  Brazil.  The  chapter  makes  international  comparisons  between  the  cost 
structures  of  manufacturing  of  woodworking,  pulp,  paper  and  paperboard  in  the  EU  and  respective 
competitor  countries,  together  with  qualitative  analyses  of  the  likely  cost  impacts  of  key  pieces  of 
domestic and EU legislation there. 

1.4  Organisation of work 

A Steering Group was set up by DG GROW in order to provide guidance to the consultancy team for 
the study; it was chaired by DG GROW/C2 and included other representatives from DG GROW along 
with  other  Commission  services  from:  Secretariat  General  (SG),  DG  Climate  Action  (CLIMA),  DG 
Energy (ENER), DG Environment (ENV), DG Research & Innovation (RTD), DG Transport (MOVE), 
DG Employment, Social Affairs and Inclusion (EMPL), etc.  

Moreover,  a  Mirror  Group,  composed  of  industry  representatives  from  all  four  sub-sectors,  was 
constituted  and  chaired  by  DG  GROW.  It  was  responsible  for  validating  findings  and  providing 
feedback on reports. More specifically, the Mirror Group supported on the following tasks: 

  Develop the value chains; 
  Prioritise legislation; 
  Test the questionnaires; 
 
  Circulate the questionnaire and mobilise companies; 

Identification of companies for interviews and surveys; 

An assessment of the cumulative cost impact of specified EU legislation and policies on the EU 
forest-based industries 

13 

 
 
 
 
 
2  Framing the EU forest-based industries 

This  section  sets  the  scene  for  the  analysis  of  the  regulatory  cost  by  defining  the  boundaries  of  the 
value  chains  and  product  groups  that  are  considered  in  the  scope  of  the  study.  The  overview  also 
outlines  information  on  the  key  drivers  and  structure  of  regulatory  costs  for  the  forest-based 
industries,  in  particular  for  the  woodworking  sub-sector  and  the  pulp,  paper  and  paperboard  sub-
sector.  

2.1  Use of value chains and product groups for defining the EU Forest-based Industries 

In the context of this CCA, the term ‘value chain’ implies a series of consecutive manufacturing steps, 
which link raw materials to final products through the various F-BI sub-sectors and product groups. In 
the  simplest  sense,  each  F-BI  sub-sector  could  be  described  as  a  value  chain.  However,  processing 
steps  in  different  product  groups  downstream  from  raw  materials  often  have  common  origins 
upstream, hence key parts of several F-BI sub-sectors may be linked into the same value chain. 

Also, the concept of a ‘value-chain variant’ is used, which means that there are two or more variations 
of a given main value chain. These variants differ in parallel parts of the corresponding steps (e.g. they 
differ  in  primary  processing)  but  also  have  one  or  more  other  steps  in  common.  For  example,  wood 
chips and other particles can be produced directly by chipping wood or as a co-product of sawmilling. 
Regardless of the primary processing technique, they can be used both as wood fuels, in the production 
of particleboard panels or in making pulp.   

At the beginning of the study and as set in the Terms of Reference (ToR), the scope was set to cover the 
following four EU forest-based industries sub-sectors: woodworking, furniture, pulp, paper and 
paperboard and printing. Consequently, four value chains – one for each of the sub-sectors - were 
developed (Figure 6, Figure 7, Figure 8 and Figure 9). The use of value chains and their variants 
thus provided a mapping of the F-BI sub-sectors and helped to set the scope of the study. 
The sub-sectors and product groups were used as a conceptual framework for the collection of primary 
data from companies and to select the most relevant pieces of legislation for each of them. The value 
chains are fundamentally based on the NACE Rev. 2 codes. However, the classification provided by the 
NACE  does  not  include  all  products  which  might  be  understood  as  forest-based  products  and 
production  processes,  therefore  additional  product  classifications  were  taken  into  account  (e.g.  the 
PRODCOM and the FAO classification were also considered). 

The  aim  of  the  value  chain  graphs  presented  (Figure  6,  Figure  7,  Figure  8  and  Figure  9)  is  to  show 
which  kind  of  products  are  assigned  to  which  defined  product  group.  Also  they  show  the  degree  of 
processing  (primary,  secondary  and  tertiary)  in  the  value  chain.  Presented  in  grey  are  the  product 
groups on which the cost assessment was done. The products covered by each of the product groups 
(in  grey)  are  presented  in  the  white  boxes5.  On  the  whole,  the  material  flow  is  from  left  to  right. 
However, some products consist of more than one preceding product, (e.g. wood-based panels consist 
of sawnwood, recovered wood, by-products and fresh wood).  

Some clarifications and definitions to be mentioned on value chain coverage are the following:  

   Textile  fibres  and  non-paper  speciality  cellulose  products  (e.g.  food  additives)  are  not 
covered in the study. Although these products are based on pulping processes, the number of 
companies  operating  in  the  market  is  low  whilst  their  business  focus  is  very  individual  –  nearly 
every  company  working  in  this  area  has  an  individual  business  focus.  The  number  of  companies 
producing these  products is too small to fulfil the aim of the study with regard to the number of 
companies  needed  for  interviews  and  survey.  Furthermore,  there  is  a  difference  in  the  types  of 

5  The  listing  of  products  within  the  higher-level  product  groups  is  non-exhaustive  but  shows  the  complexity  and  variety  of 
products within one product group and within the four sub-sectors. 

www.technopolis-group.com 

14 

 
 
 
 
                                                             
legislation having an impact on these business areas compared to more conventional forest-based 
products.  The  assessment  of  these  different  policy  documents  would  result  in  disproportionate 
additional work. 

   Forestry is not included in this assessment, except in so far as it has an impact on the 
cost  of  the  forest-based  industries’  main  raw  material,  wood.  The  basic  forest-related 
value chains start with raw timber being transported. The costs arising from the EU legislation and 
policies  related  to  wood  procurement  are  considered  (see  Legislation  package  4:  Forest-related 
policies), whereas forestry itself is not covered. Small-scale forest owners in particular have to bear 
high transaction costs, an aspect that is not found to be comparable with the F-BI. Furthermore, 
although  forestry  and  forest-based  industries  are  linked  through  their  value  chains,  they  are 
defined to be two separated sectors. 

   The following definition for recovered wood will be used: “Post-consumer wood includes all 
kinds  of  wooden  material  that  is  available  at  the  end  of  its  use  as  wooden  products.  Mainly 
comprises packaging materials (including pallets), demolition wood, timber from building sites 
and  fractions  of  used  wood  from  residential  (municipal  waste),  industrial  and  commercial 
activities” (Mantau et al., 2010, 93). 

  

Industrial  by-products  are  defined  according  to  the  following  definition  of  wood-
processing residues: Wood-processing residues can be differentiated in sawmill by-products and 
other  industrial  wood  residues.  Sawmill  by-products  are  “a  natural  resource  without  additives 
and  have  their  origin  in  one  specific  industrial  source,  whereas  other  industrial  wood  residues 
often  contain  additives/contaminants  and  have  a  wide  variety  of  scattered  sources.  Other 
industrial  wood  residues  are  residues  which  arise  during  the  further  processing  (resawing, 
planning)  and  the  production  of  manufactured  wood  products  (furniture,  construction)” 
(Mantau et al., 2010, 100). 

2.1.1 

The woodworking value chain 

The  EU  woodworking  industries  were  derived  from  NACE  Ch.  16  and  so  include:  the  production  of 
sawnwood,  wood-based  panels,  builder’s  carpentry  and  joinery  products,  wooden  flooring,  wooden 
packaging and other wooden articles. Input materials within the woodworking value chain are, apart 
from  saw  logs  (fresh  wood),  industrial  by-products  (like  bark,  chips  and  dust)  and  used  materials 
(recovered wood).  

Regarding each of the product groups and products, the following should be considered:  

   Fresh wood is not defined as a separate product-group. It is rather the starting material for the 
whole  woodworking  value  chain.  Other  raw  materials,  such  as  resins,  coatings  and 
impregnation chemicals are also use in woodworking manufacturing. However, these are not 
included as a product group in this study; 

   The sawmilling industry is defined as producing sawn and planed wood, and veneer sheets as 

defined by NACE Ch. 16; 

   The wood-based panel manufacturing includes the production of particle boards, OSB, MDF, 
hardboards,  plywood  and  other  varieties  out  of  small  industrial  roundwood  (also  sometimes 
referred  to  as  pulpwood),  by-products  from  sawmilling  (woodchips)  and  recovered  wood  as 
well as products from the sawmill industry and fresh wood; 

   Solid wood products include glulam, CLT and solid wood panels (KVH, Duo/Trio beams) and 

other products mainly used for construction; 

   Other  builders’  carpentry  and  joinery  includes  all  kinds  of  wood  used  for  construction 
purposes  (trusses,  beams  [e.g.  construction  beams],  formwork,  scaffolding,  frames,  etc.) 
prefabricated wooden buildings,  windows and doors. Sawn wood and wood based panels are 
input materials; 

15 

 
 
 
 
 
 
   Wooden  pallets  and  other  wooden  packaging  include  materials  for  the  purpose  of  packaging 

and transportation (e.g. industrial pallets); 

   The product group bioenergy products in the woodworking value chain comprises only wood 
pellets  and  wooden  briquettes  (part  of  16.29  ‘Manufacture  of  other  products  of  wood’),  used 
for the production of bioenergy and produced from industrial by-products and recovered wood 
to  be  used  outside  the  industry;  whereas  the  use  within  the  industry  to  produce  energy  (e.g. 
drying sawnwood) is part of the industrial operation and thus part of the woodworking value 
chain; 

   Cross-laminated  timber  (CLT)  is  a  product  having  high  market  growth,  along  with  other 
engineered wood products, even though its production only uses 0.5% of sawnwood and is not 
yet reported in any official statistics. Given its potential future  growth, including for exports, 
CLT production will be covered as one of the activities carried out by sawmilling companies. 

Figure 6 shows the graphical representation of the woodworking value chain.  

2.1.2 

The pulp, paper and paperboard manufacturing value chain 

The pulp, paper and paperboard manufacturing sub-sector value chain includes all kinds of pulp and 
products  made  of  pulp.  Regarding  each  of  the  product  groups  and  products,  the  following  are  to  be 
considered:   

   Pulp  production  includes  pulp  from  several  kinds  of  pulping  processes  (chemical:  dissolving 
and  non-dissolving;  mechanical,  semi-chemical  and  others).  To  produce  pulp,  paper  and 
paperboard,  non-fibrous  raw  materials  (e.g.  chemicals)  are  also  needed,  but  they  do  not 
represent a separate product category; 

   Graphic  papers  are  papers  used  for  printing  and  writing  purposes,  including  paper  for 
newspapers,  magazines  and  copy  papers  (e.g.  different  kinds  of  paper  grades  for  various 
graphic purposes); 

   Packaging  includes  paper  and  paperboard  used  for  corrugated  boxes,  transport  packaging, 
storage  and  product  display,  for  consumer  products  such  as  frozen  food,  cosmetics  and  for 
liquid containers, and bags for fruits and vegetables; 

  The  sanitary  product  group  includes  household  and  sanitary  paper  products  (e.g.  including 
toilet paper, handkerchiefs, tissues, etc.). Non-wovens are also included in this product group.  

  Bio-refinery  products,  textile  fibres  and  speciality  cellulose  products  are  not  fully  covered  in 
pulp and pulp-based manufacturing. Although these products are based on pulping processes, 
the  number  of  companies  operating  in  the  market  is  low  whilst  their  business  focus  is  very 
individual - nearly every company working in this area does have an individual business focus. 
Due to the expected future growth of the biorefinery sector, chemicals derived from tall oil are 
covered in the value chain as representatives of the sector. 

   Textile fibres, non-paper speciality cellulose (e.g. food additives) products are not included as 
the  number  of  companies  operating  in  the  market  is  low  whilst  their  business  focus  differs 
from company to company.  

Figure 7 shows the graphical representation of the value chain.  

16 

 
 
 
 
 
 
Figure 6 The woodworking value chain 

Primary 
processing 

Secondary processing 

Tertiary processing 

 Veneer sheets  

Plywood 

16.1 
Sawnwood  

16.21 
Wood-
based 
Panels  

Particle  and  fibre 
boards  

OSB 

MDF 

Hardboard/Softboard 

Particleboards 

Glulam 

16.23  Other 
builders’ 
carpentry 
and joinery 

t
r
o
p
s
n
a
r
t

&

t
n
e
m
e
r
u
c
o
r
P

Recovered 
wood  

By-products 
(chips,  bark, 
sawdust)  

 Solid 
(part of 16.21) 

wood 

products            

CLT 

Solid wood panels  

16.24 Wooden pallets & other wooden packaging  

16.29 Bioenergy products  

Wooden pellets 

Briquettes 

Source: Author’s elaboration 

Windows & doors 

Scaffolding 

Formwork 

Construction 
products 

Frames 

Beams, trusses 

Outdoor products 

Prefabricated wooden buildings  

s
e
l
a
s
,

n
o
i
t
u
b
i
r
t
s
i
d

,
g
n
i
t
e
k
r
a
M

16.22 Parquet floors  

17 

 
 
 
 
 
 
 
 
  
  
 
 
 
 
 
 
 
 
 
Figure 7 The pulp, paper and paperboard manufacturing value chain 

Primary processing 

Secondary processing 

Tertiary Processing  

Mechanical pulp  

Pulpwood 

Semi-chemical Pulp 

Graphic paper 

Newsprint paper  

Printing  &  writing  paper 
(uncoated  mechanical, 
mechanical, 
coated 
uncoated 
wood-free, 
coated wood-free) 

Chemical 
pulp 

Sulphite 
pulp 

Sulphate 
pulp 

Pulp      
- 

17.11 
Manufacture 
of 
(bleached 
unbleached, 
hardwood 
softwood 
pulp)  

- 

Recovered fibre pulp 

t
r
o
p
s
n
a
r
t

&

t
n
e
m
e
r
u
c
o
r
P

Other  fibres 
than wood 

Recovered 
paper 

Industrial 
by-products 

17.12 
Manufacture 
of  Paper  and 
paperboard 
(rolls 
sheets 
paper)  

and 
of 

Packaging  paper  & 
paperboard 

Container  board,  carton 
board,  wrapping  paper, 
other paper & paperboard 
for packaging 

17.2 
Manufacture 
of  Articles  of 
paper 
and 
paperboard  

Household & Sanitary Paper 

Other 
paperboard, 
industrial 
speciality paper 

paper  & 
incl. 
& 

e.g. cigarette paper, bank-
note paper, labels, etc.   

By-products: 
black 
liquor,  tall  oil,  hemi-
celluloses… 

19.20 Biofuels for transport  

Biochemicals (part of 20) (e.g. products of tall oil) 

Textile Fibres & non-paper cellulose applications 

 Source: Author’s elaboration 

18 

17.23 
stationery  

Paper 

Notebook, envelopes 

Sacks and bags of paper 

Liquid packaging board 

Packaging 
17.21 
(industrial 
and 
food  &  beverage 
packaging) 

Carton and corrugated cases  

Toilet  paper,  handkerchiefs, 
tissues, 
serviettes, 
napkins  

towels, 

Sanitary 
hygiene products 

towels, 

absorbent 

Paper  filter,  textiles,  medical 
applications... 

17.22  Household, 
Sanitary  &  13.95 
Non-woven 
products 

17.29 
other 
articles  of  paper 
and paperboard  

s
e
l
a
s
,

n
o
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2.1.3 

The furniture manufacturing value chain 

As  defined  in  the  NACE  Rev.  2,  the  Value  Chain  for  Furniture  Manufacturing  “includes  the 
manufacture  of  furniture  and  related  products  of  any  material  except  stone,  concrete  and  ceramic.” 
Two main groups of furniture products are defined:  

   Office and contract furniture: this product group refers to the kind of furniture, which is 
purchased by public facilities or companies. It includes furniture for public  facilities (schools, 
hospitals, theatres, churches), restaurants, hotels, companies, offices and shops, etc.   

   Domestic  furniture:  all  kind  of  household  furniture  (kitchen,  living  room,  dining  room, 
bedding,  etc.)  produced  for  private  households.  This  product  group  covers  the  two  NACE 
codes  31.02  “Manufacture  of  kitchen  furniture”  and  31.09  “Manufacture  of  other  furniture”, 
which  includes  the  manufacturing  of  sofas,  sofa  beds,  sofa  sets,  garden  chairs  and  seats, 
furniture for bedrooms, living rooms as well as the upholstery of chairs and seats and finishing 
such as spraying, painting and French polishing.  

However,  as  the  furniture  industry  is  very  heterogeneous  and  uses  various  input  materials,  a 
distinction  solely  based  on  NACE  codes  was  not  found  to  be  completely  sufficient  in  terms  of 
legislation:  office  and  domestic  furniture  e.g.  can  be  affected  by  the  same  legislation 
whereas these legislations may have a different impact on wood-based and metal-based 
furniture and vice versa. Therefore, the primary processing in the furniture value chain comprises 
not only the manufacturing of sawn & planed wood and wood-based panels (product groups which are 
both covered in the woodworking value chain) but also the manufacturing of leather, fabrics, plastics 
and  metal  as  input  materials  for  the  furniture  industry.  These  materials  do  not  represent  separate 
product  groups  in  relation  to  the  cost  assessment  but  aim  at  providing  a  more  complete  picture  of 
potential input products for furniture.  

The assignment of NACE codes to the primary processing materials is merely an approximation. The 
furniture industry uses diverse products of these materials and there are various NACE codes covering 
these different products. The assignment is as follows:  

   Leather - NACE 15.11 “Tanning and dressing of leather; dressing and dyeing of fur”  

   Fabrics - NACE 13.9 “Manufacture of other textiles” 

   Plastics  -  NACE  22.21  “Manufacture  of  plastic  plates,  sheets,  tubes  and  profiles”,  within  this 

group also foam is considered as there is no separate code explicitly for foam. 

   Metal - part of NACE section 25 “Manufacture of fabricated metal products, except machinery 

and equipment”  

Figure 8 presents the graphical representation of the furniture manufacturing value chain. 

19 

 
 
 
 
 
 
 
 
 
 
 
 
 
Figure 8 The furniture manufacturing value chain 

Primary processing 

Secondary processing 

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16.1 Sawn & Planed Wood 

Office & shop furniture 

16.21 Wood-based panels 

15.11 Leather & 13.9 fabrics 

22.21 Plastics & foam 

25 Metal 

31.01 Contract Furniture  

Furniture  for  public  facilities, 
companies, hotels 

31.02  &  31.09  Domestic 
Furniture 

Kitchen furniture 

Dining room furniture 

Bedroom furniture 

Living room furniture 

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Source: Author’s elaboration 

2.1.4 

The printing value chain 

The sub-sector “Printing” includes paper- and paperboard-based printing and service activities related 
to printing. The following is considered: 

   Paper-  and  paperboard-based  printing  includes  among  others  newspaper,  magazine,  book, 

commercial, catalogue and packaging printing. 

   Four  out  of the  six  main  printing  processes  are  considered,  namely  sheet-fed  offset,  heat-set 

offset, rotogravure and flexography.  

Figure 9 presents the graphical representation of the printing value chain.  

Figure 9 The printing value chain 

Primary processing 

Secondary processing 

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Pulp 

17.11 
(already 
covered  in  the 
pulp  &  pulp 
based 
manufacturing 
& converting)  

17.12  Paper  & 
Paperboard 
(already 
covered  in  the 
pulp  &  pulp 
based 
manufacturing 
& converting) 

Source: Author’s elaboration 

& 

(e.g. 

Writing 
printing 
paper 
uncoated 
mechanical, 
coated 
mechanical, 
coated 
uncoated 
wood-free)  

and 

& 

Converted 
Paper 
Paperboard 
Products 
(sacks, 
boxes,...)  

Sheet-fed 
offset 

 Books, 
brochures 

18.1  Paper- 
and 
paperboard-
based 
printing and 
service 
activities 
related 
printing 

to 

Heat-set 
offset 

Rotogravure 
(publication 
& packaging) 

Books, 
advertising, 
magazines, 
catalogues 

Packaging, 
magazines, 
catalogues, 
decorative 
papers, 
wallpaper 

Flexography 

Packaging, 
labels 

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20 

 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
2.2  Final scope and coverage for the Cumulative Cost Assessment 

The  study  team  encountered  considerable  difficulties  in  engaging  SMEs,  notably  in  the  furniture-
manufacturing  sub-sector  and  in  the  printing  sub-sector,  during  the  data  collection  phase.  As  a 
consequence, three possible options were proposed for conducting the in-depth data collection phase 
of the CCA. These options were:  

Option 1: “SME-friendly”  

In  order  to  simplify  and  reduce  the  burden  for  SMEs  to  participate  in  the  study,  the  possibility  of 
having  a  “SME  friendly”  questionnaire  was  proposed.  This  questionnaire  would  be  shorter  and  only 
include  a  subset  of  the  questions  posed  to  large  companies,  notably  focusing  on  monetary 
obligations, CAPEX and OPEX.  

Option 2: Retain comparability  

To  avoid  losing  comparability  between  enterprises  of  different  sizes  and  previous  cumulative  cost 
assessments,  it  was  proposed  to  reduce  the  number  of  sub-sectors  participating  in  the  study.  More 
specifically, those sub-sectors that are dominated by  SMEs, in this case  furniture  manufacturing 
and  printing,  could  be  excluded  from  the  study  in  order  to  achieve  broader  participation  in  the 
remaining sub-sectors. This would ensure comparability with other CCAs. 

Option 3: Qualitative assessment of SME-dominated sub-sectors  

Finally, an alternative to exclusion or dropping out sub-sectors (Option 2) was to produce a qualitative 
cost  assessment  based  on  data  collected  exclusively  through  an  on-line  survey  for  furniture 
manufacturing and the printing sub-sectors. The results of this assessment would be solely qualitative 
for both sub-sectors concerned.  

Option 1 and Option 3 presented above would not allow for comparability across F-BI sub-sectors or 
with other CCAs in terms of the cost categories that are to be analysed. Moreover, Option 3 would only 
present  a  qualitative  assessment,  which  was  far  from  the  original  and  main  objective  of  Cumulative 
Cost  Assessments.  The  study  team  thus  adopted  “Option  2,  Retain  Comparability”  for  the 
reminder of the study.  

The scope of the CCA was thus reduced to only include the pulp, paper and paperboard manufacturing 
and  woodworking  sub-sectors.  This  implied  dropping  the  printing  and  furniture  manufacturing  sub-
sectors fully from the CCA, including from the on-line survey and other qualitative assessment.  

2.2.1  Coverage of sub-sectors and product groups 

This  CCA  covers  two  sub-sectors  of  the  forest-based  industries  -  woodworking  and  pulp,  paper  and 
paperboard  manufacturing.  Given  the  quality  and  quantity  of  responses  received  during  the  data 
collection phase a few product groups within these two sub-sectors were also dropped  from the final 
quantitative calculations. A total of six product groups within the two sub-sectors were retained. These 
are presented in Table 1. 

21 

 
 
 
 
 
 
 
 
 
 
Table 1 Sub-sectors and product groups covered in the study 

Sub-Sectors 

# 

Product groups 

1 

2 

3 

4 

5 

16.1 Sawnwood 

16.21 Wood-based panels 

16.24 Wooden pallets and other wooden packaging 

16.23 Other builders' carpentry and joinery 

17.11 Manufacture of pulp 

6 

17.12 Manufacture of paper  & paperboard 

Woodworking 

NACE Code 16 

and 

Paper 

Pulp, 
Paperboard 
Manufacturing 

NACE Code 17 

Source: Eurostat, 2016 

2.3  Drivers of costs in EU forest-based industries 

The cost structures of various F-BI sub-sectors differ greatly and thus also the implications of different 
policies  vary.  The  cost  structures  are  dependent  on  the  complexity  of  manufacturing  processes  that 
sub-sectors  represent.  In  addition  to  that,  the  cost  impact  of  the  legislation  represents  the  relative 
importance of the legislative costs as compared to the total costs of production, or as compared to the 
added  value  of  the  product  (cost  ratios).  To  understand  the  relative  importance  of  cost  ratios  and 
differences between them, it is also important to understand the main drivers of manufacturing costs 
for the main production chains. 

The key factors affecting the cost of production in the forest-based industries are:   

   Raw materials: wood, recovered paper, market pulp, chemicals;  

   Energy: electricity and fuels; 

   Other costs: including labour, maintenance and capital costs. 

Important limitations in the availability of data prevent the elaboration of cost structures that would 
be  comparable  between  sub-sectors.  In  order  to  focus  their  efforts  on  the  already  extensive  cost 
assessment  exercise,  companies  were  not  required  to  provide  additional  data  on  their  cost  structure 
within the in-depth interviews or surveys. On top of this, such data is often considered as confidential 
by  companies  as  they  reflect  part  of  their  competitiveness  status.  In  this  regard,  the  considerations 
presented in this section are based on secondary data bases. The European cost structure for the pulp, 
paper and paperboard sub-sector emanates from the RISI database, and the European cost structure 
for the woodworking sub-sector has been sourced from the ToSIA database. Both databases and their 
main cost components are presented in the two following sections, 2.3.1 and 2.3.2. 

2.3.1 

Pulp, paper and paperboard sub-sector 

RISI data were used to understand the cost structures of the pulp, paper and paperboard sub-sector.6 
RISI is a proprietary information provider for the global forest products industry. Its database includes 
information of the pulp, paper and paperboard sub-sector for Europe and world-wide. Europe in RISI 
data is defined as EU25 (which is the whole European Union, without Bulgaria, Croatia and Romania 
and represents over 98% of the pulp, paper and paperboard production value of EU) plus Norway and 
Switzerland7. In data collection RISI uses publicly available information (pulp, paper and paperboard 

6 See: http://www.risiinfo.com/service/mill-data-costs/asset-database/   

7  Figures  have  not  been  adjusted  to  EU28  as  this  would  require  many  uncertain  manipulations  of  data  in  order  to  remove 
countries as  well  as  to  add  others. The  25  countries  cover  over  98%  of  the  pulp, paper  and  paperboard  industries  in  terms of 

22 

 
 
 
 
                                                             
directories,  industry  publications  and  conferences)  and  supplements  it  with  market  research, 
including surveys and interviews.  Explanations of each of these cost components under RISI are given 
in Appendix C8. 

Figure  10  and  Figure  11  summarise  the  cost  structure  in  pulp,  paper  and  paperboard  sub-sector  for 
EU25 countries plus Norway and Switzerland respectively in absolute and relative figures. As can  be 
seen from the aggregated figures, raw materials represent a very important share of production  costs, 
and have been calculated to amount to more than €36bn per year. Market pulp accounts for a slightly 
larger  part of the total material costs (more than €12bn  per year), while the cost of wood, recovered 
paper  and  chemicals  constitute  roughly  around  €8bn  per  year  each.  It  must  be  noted  that  there  are 
significant differences in the raw material base between the EU countries. For example, while Finland 
and  Sweden  use  mainly  pulpwood  and  chips  in  pulping,  Central  European  countries  rely  heavily  on 
recovered paper. 

The total energy costs per year in the countries covered by RISI dataset,  amount to almost €9bn per 
year,  where  fuels  account  for  €6.3bn  and  electricity  €2.6bn  per  year  for  the  pulp,  paper  and 
paperboard sector. Labour costs amount to around €6bn per year, and maintenance and capital costs 
are  calculated  to  constitute  €4.4bn  and  €5bn  per  year  respectively  for  pulp,  paper,  and  paperboard 
sector.  The  paper-making  sub-sector  shows  considerably  higher  energy  costs  in  the  production 
processes than the pulp industry. 

Figure 10 Cost structure in the EU pulp, paper and paperboard sub-sector, million EUR/year, 2014 

Source: RISI data 

production value and should be close in any case from the EU28. On top of this, a reliable picture of relative costs components is 
also provided (cost category as % of total production costs). 

8 For more details, please refer to RISI (2015) Methodology Business Impact Assessment Tool. Note that transport costs are not 
included in the RISI cost categorisation.  

23 

 
 
 
                                                                                                                                                                                              
 
 
Figure 11 Cost structure in the EU pulp, paper and paperboard sub-sector, in %, 2014 

Source: RISI data 

2.3.2  Woodworking sub-sector 

To  appraise  the  cost  structure  in  the  woodworking  sub-sector,  a  dataset  of  forest-based  value-chain 
process  indicators  was  employed.  This  dataset  was  originally  developed  in  the  FP7  project 
EFORWOOD  for  application  in  the  Tool  for  Sustainability  Impact  Assessment  (ToSIA).  ToSIA  is  a 
decision  support  tool  for  the  forest-based  sector.  Using  this  tool,  forest-based  industry,  national  and 
international  policy-makers,  and  researchers  can  analyse  the  sustainability  effects  of  changes  due  to 
deliberate actions (e.g. in policies or business activities) or due to external forces (e.g. climate change, 
global markets). ToSIA analyses environmental, economic, and social impacts of changes in forestry-
wood production chains, using a consistent and harmonised framework from the forest to the end-of-
life  of  final  products.  It  allows  users  to  analyse  different  kinds  of  sustainability  effects  in  a  balanced 
way.9  

The  dataset  includes  cost  data  for  the  sawmilling  sector  for  25  European  countries 10.  In  general,  the 
dataset  considers  mostly  larger  enterprises  and  the  related  cost  structures  are  hence  less  or  not 
representative for smaller and medium enterprises. The cost information is available for the following 
categories (ToSIA indicators), which are documented in the dataset for each production process: 

9 http://tosia.efi.int/. 

10  Austria,  Belgium,  Czech  Republic,  Denmark,  Estonia,  Finland,  France,  Germany,  Greece,  Hungary,  Ireland,  Italy,  Latvia, 
Lithuania,  Luxembourg,  Netherlands,  Norway,  Poland,  Portugal,  Slovakia,  Slovenia, Spain, Sweden,  Switzerland,  UK.  Figures 
have  not been adjusted  to  EU28 as  this  would  require  many  uncertain  manipulations  of  data  in  order  to  remove  countries  as 
well as to add others. The 25 countries cover over 96% of the woodworking industries in terms of production value and should 
be close in any case from the EU28. On top of this, a reliable picture of relative costs components is also provided (cost category 
as % of total production costs). 

24 

 
 
 
                                                             
   Raw materials from the forest wood chain (FWC): include prices paid for purchase of 
these materials. There are no raw material costs to be calculated if a process is carried out as a 
service. VAT and indirect taxes are excluded; 

   Raw  materials  from  outside  the  FWC:  include  prices  paid  for  purchase  of  materials 
needed for  production  but  which come  from outside the value chain.  VAT and indirect taxes 
are excluded; 

   Labour costs: costs paid for by the employer in the employment of labour, including: wages, 

social costs, bonuses, holidays, etc.; 

   Energy costs: costs paid for energy used in the production process; 

   Other  productive  costs:  including  depreciation:  costs  associated  with  the  framework 
conditions  of  a  process,  like  maintenance  costs  of  machines,  general  industrial  costs, 
administrative  costs,  sales  expenditures,  etc.,  but  it  is  unclear  if  all  the  data  consistently 
include infrastructure depreciation; 

   Non-productive  costs:  costs  related  to  general  process  costs  and  coming  from  corporate 

taxes, capital charges, VAT and any other taxes or charges. 

Figure 12 summarises the cost structure in woodworking sub-sector in the 25 EU countries covered by 
ToSIA dataset. Figures show that raw material costs constitute the most significant share of production 
costs,  where  raw  materials  from  forest  wood  chain  comprise  €10.8bn  and  raw  materials  outside  the 
forest-wood value chain around €4.4bn per year. Energy costs are calculated to  amount to €5bn  per 
year and labour costs to roughly €3.7bn. Other production costs and non-productive costs constitute 
approximately €1.7bn and €1.4bn per year respectively. However, it should be emphasised that these 
figures represent the woodworking sub-sector as a whole and the relative costs within the further sub-
divisions of woodworking can vary considerably. 

Figure 12 Cost structure in the EU woodworking sub-sector, million EUR/year, 2005 

Source: ToSIA data, 2005 

25 

 
 
 
 
Figure 13 Cost structure in the EU woodworking sub-sector, in %, 2005 

Source: ToSIA data, 2005 

2.4  Geographical panorama of the woodworking and pulp, paper and paperboard 

industries 

2.4.1 

The woodworking sector 

The  EU  woodworking  sector  is  characterised  by  geographical  concentration,  as  about  70%  of  the 
woodworking production value is located in only seven EU countries, namely Germany, Italy, France, 
Sweden, United Kingdom, Austria and Poland. Similarly, seven countries account for about 64% of the 
EU employment in the sector, led by Germany (15%) and closely followed by Poland, Italy and France.  

26 

 
 
 
 
 
 
Figure 14 Share of EU woodworking employment (left) and share of production value (right) by country - 2013 

Source: Eurostat, Structural Business Statistics, 2013 

2.4.2  The pulp, paper and paperboard sector 

 The  geographical  concentration  for  the  pulp,  paper  and  paperboard  sector  is  higher  than  in  the 
woodworking sector as up to 77% of the employment in the sector is concentrated  in seven countries. 
These are led by Germany (24%), followed by Sweden, Finland, France, Italy, the United Kingdom and 
Spain, and about 75% of the production value emanates from six countries, also led by Germany.  

Figure 15 Share of EU pulp, paper and paperboard employment (left) and share of production value (right) by 
country - 2013 

Source: Eurostat, Structural Business Statistics, 2013

27 

DE15%PL12%IT10%FR8%UK7%RO7%ES5%Others37%DE21%IT12%FR9%SE8%UK7%AU7%PL6%Others30%DE24%SE12%FI12%FR10%IT7%UK7%ES6%Others23%DE21%FI18%SE15%FR8%IT7%ES6%Others25% 
 
 
 
 
3  Methodology of the cumulative cost assessment 

3.1  A cumulative approach to cost assessment  

The  aim  of  this  study  is  to  identify  the  cumulative  costs  of  the  most  financially  burdensome  EU 
legislation  and  policies  that  companies  in  the  forest-based  industries  (F-BI)  which  are  active  in  the 
EU28  have  to  comply  with.  While  impact  assessments  traditionally  focus  on  one  specific  action 
undertaken  by  the  European  Commission  and  other  relevant  EU  institutions  (new  legal  act,  white 
paper, etc.), this study adopts a cumulative approach, by providing a quantitative assessment of all 
direct  costs  (monetary  obligations,  capital  expenditure,  operating  expenses  and  administrative 
burden) and (where possible) indirect costs incurred by F-BI companies in the EU, in relation to the 
most relevant EU legislation and policies (e.g. specific indirect costs from ETS for the pulp, paper and 
paperboard industry).  

This study does not assess the benefits of EU legislation or policies and does not aim to provide 
insights related to the proportionality of costs and benefits of legislation or policies, nor their efficiency 
or  effectiveness.  Furthermore,  a  cumulative  approach  is  to  be  distinguished  from  a  non-
cumulative  approach  as  traditionally  used  in  a  cost-benefit  analysis  (CBA).  The  cost-benefit 
approach  examines  the  incremental  costs  and  benefits  related  to  policy  proposals  against  a  baseline. 
This implies that a CBA focuses on the  net change in costs  and  benefits, relevant to a specific  policy 
decision,  not  the  aggregate  (or  cumulative)  level  of  regulatory  costs  and  benefits  (European 
Commission,  2015).  On  the  other  hand,  the  cumulative  cost  assessment  (CCA)  focuses  on  whole 
sectors,  rather  than  focusing  on  a  particular  policy  proposal  or  legislation,  and  aggregates  the  costs 
generated by a selection of relevant existing EU legislation and other policy instruments. Hence, this 
cumulative cost assessment does not focus on a policy field and does not aim at assessing whether the 
regulatory framework is fit for purpose in a policy field, which is an approach used when conducting 
fitness checks. Thus, a CCA can point out which are the most burdensome regulatory areas (legislative 
packages) and which have instead a limited impact, which constitutes very important information for 
policy-making. 

The assessment of cumulative cost impacts of specified EU legislation and policies on European forest-
based  industries  (CCA  F-BI)  falls  under  the  framework  of  the  EU’s  Regulatory  Fitness  and 
Performance Programme (REFIT11), which is aligned to the principle of Smart Regulation, which is an 
expression  of  the  European  Commission’s  commitment  to  a  simple,  stable,  clear  and  predictable 
regulatory framework for business, workers and citizens.  

While there is not yet any recognised standard methodology for the assessment of cumulative impacts, 
the  methodology  of  this  study  draws  on  previous  similar  cumulative  cost  assessment  exercises 
performed  by  Member  States  (e.g.  Kostengestuurde  Aanpak  Regeldruk,  by  SIRA  consulting  for  the 
Netherlands) and the European Commission. For the overall CCA approach the previous studies on the 
aluminium  and  steel  industries  (CEPS,  2013a  and  CEPS,  2013b)  have  been  consulted;  and  a  similar 
methodological approach to the CCA for the Chemical Industry (Technopolis, 2016) has been adopted. 
However,  with  regard  to  the  quantification  of  the  impact  of  the  single  regulatory  items  or  areas  and 
their  attribution  to  the  various  costs  categories,  CCA  studies  are  based  on  the  established 
methodologies that have been used for several years by Member States and the European Commission. 
This  includes  the  Standard  Cost  Model,  and  the  Cost-driven  Approach  to  Regulatory  burdens  (CAR) 
developed for the Dutch Government.  

The  Standard  Cost  Model  methodology  (SCM)  is  used  by  several  Member  States  (Network  Standard 
Cost Model,  2005), as  well as the  European Commission, as  part of  its REFIT programme 1 2  and the 
“Better Regulation Toolbox” (European Commission, 2015). The CAR methodology, which is used by 
the Dutch government (SIRA, 2015) is similar to the SCM, but its scope is broader regarding the types 

11 Better Regulation, REFIT, http://ec.europa.eu/smart-regulation/refit/index_en.htm 

12 http://ec.europa.eu/smart-regulation/refit/admin_burden/scm_en.htm 

28 

 
 
 
                                                             
of  cost  covered  and  gives  more  emphasis  to  linking  legislation  cost  with  the  cost  structure  of 
companies.  

Methodologies  to  measure  legislative  burdens  follow  this  principle  summarised  by  the  European 
Commission  in  its  presentation  of  the  SCM:  “the  purpose  of  the  SCM  methodology  is  to  produce 
estimates  that  allow  an  order  of  magnitude  of  the  burdens  in  different  regulatory  areas  to  be 
identified. Considering the level of detail and the number of parameters,  it is not cost-efficient to 
seek statistically valid results, rather than more general estimates” (European Commission, 
Better Regulation Toolbox, 2015).  

Applying  statistical  methods  would  require  large  samples  with  a  significant  number  of  strata,  due  to 
the complexity of the system. Such approaches are disproportionally expensive  and time-consuming, 
and they are not feasible within the time frame and budget of a cost assessment exercise. Thus, instead 
of statistical valid samples, the concept of typical companies (based on plants that are typical 
of  their  product  group)  is  used,  for  example,  in  the  Better  Regulation  Toolbox  ( European 
Commission,  2015,  p.369)  or  the  methodology  used  by  the  Dutch  government  (SIRA,  2015,  p.40).  A 
typical plant is not an average firm in statistical terms but an entity that is neither particularly 
efficient  nor  inefficient  in  terms  of  complying  with  the  legislation.  Thus,  short  of  being  statistically 
representative, it can be taken as reasonably representative of the sample population. 

Following  a  variation  of  the  above  approach,  data  collection  in  the  current  study  did  not  rely  on 
statistical methods. Detailed data were collected from a panel of typical plants identified using a 
set  of  tangible  criteria,  which  were  then  validated  in  two  workshops  and  calibrated  using  a  larger 
sample  of  companies  by  means  of  an  on-line  survey.  Finally,  the  data  were  aggregated  to  the  whole 
population.  The  method  is  explained  in  more  detail  in  the  following  sections.  Despite  the  significant 
advantage regarding feasibility, the method is less accurate compared to statistical methods, and it can 
only  provide  an  estimate  of  the  order  of  magnitude  of  cost  borne  by  companies  due  to  EU 
legislation. 

Figure  16  presents  four  key  phases  followed  to  implement  this  CCA.  Firstly,  the  identification  of 
legislation  that  incurs  costs  to  the  forest-based  industries  was  carried  out.  Further,  the  actions  that 
companies have to undertake to comply  with the identified pieces of legislation  were scoped and the 
cost  typology  was  created.  The  third  step  concerned  the  analysis  of  F-BI  characteristics  and  the 
identification of typical plants. Finally, the last phase comprised all activities related to the collection 
of data and the estimation of costs.  

29 

 
 
 
Figure 16 Phases for implementing the Cumulated Cost Assessment of the F-BIs 

Source: Authors’ elaboration 

3.2  Phase 1: Identification of legislation incurring costs for European forest-

based industries 

The project team articulated an initial list of legislation, regulatory measures and policy documents 
drawn from study terms of reference and the Forest Policy and Innovation Database of the European 
Forest Institute Central-East European Regional Office (EFICEEC).13 The database focuses exclusively 
on international and EU policy documents having an impact on the forest-based sector as a whole. The 
first screening indicated that as many as 570 policies (some  international but mostly EU documents) 

13 http://policydatabase.boku.ac.at  

30 

 
 
 
 
                                                             
might  have  an  impact  (direct  or  indirect)  on  EU  forest-based  industries  (comprising  the  four  sub-
sectors  that  were  initially  considered).  This  list  was  further  reviewed  resulting  in  a  list  of  245  policy 
entries, divided across nine policy areas or ‘legislative packages’. The division into different legislative 
packages was made in terms of commonly identified policy areas (e.g., competition, and climate).  

The  second  step  was  to  bring  the  draft  list  of  legislative  acts  and  non-legislative  policies  to  12 
Industry Associations representing the four sub-sectors initially included in the study. This was done, 
in  part,  through  scoping  interviews  and  by  distributing  a  policy  matrix  where  each  association 
(representing  respective  sub-sectors  and  product  groups  as  noted  in  Table  2)  could  highlight  and 
prioritise  the  most  relevant  policy  documents,  using  a  1  to  5  scale  reflecting  cost  impact,  as  well  as 
indicate which legislation they think incur direct or indirect costs. This process resulted in a reduced 
list  of  106  legislative  acts  and  non-legislative  policies  across  eight  packages.  One  legislative  package 
(Industry and Other Policies) was at this stage deleted, as it was not ranked as  important enough nor 
considered by the industries as generating any direct costs. 

Table 2 Industry associations contributing to the prioritisation of legislation 

Industry Association 

Sub-sector/product group (NACE codes) 

International Confederation of Paper and Board 
Converters in Europe (CITPA) and the Alliance for 
Beverage Cartons and the Environment (ACE) 

(17.21) Packaging (industrial and food & beverage packaging); 
(17.29) Other articles of paper & paperboard. 

Confederation of European Paper Industries (CEPI) 

(17.11) Manufacture of pulp; 

(17.12) Manufacture of paper and paperboard; 

European Disposables and Non-wovens Association 
(EDANA) 

(17.22) Household and sanitary paper goods; 

(13.95) Non-woven cellulose products. 

European Federation for Print and Digital 
Communication (INTERGRAF) 

(18.1)  
Sheet-fed offset printing; 

Heat-set offset printing; 

Rotogravure printing; 

Flexography printing. 

European Organisation of the Sawmill Industry (EOS) 

(16.1) Sawnwood 

European Confederation of Woodworking Industries 
(CEI-Bois)   

(16.22) Solid Wood products 

(16.22) Flooring 

(16.23) Other builders’ carpentry and joinery 

European Panel Federation (EPF) 

(16.21) Wood-based panels 

European Federation of Wooden Pallet and Packaging 
Manufacturers (FEFPEB) 

(16.24) Wooden pallets and other wooden packaging 

European Furniture Industries Confederation (EFIC) 
and the European Federation of Furniture 
Manufacturers (UEA). 

(31)  

Contract Furniture 
Domestic Furniture 

European Biomass Association (AEBIOM) 

(16.29 & 19.20) Bioenergy products 

Source: Author’s elaboration 

The third and final step was to further reduce the list of legislative acts and non-legislative policies 
to  a  manageable  number.  This  was,  in  part,  done  by  grouping  legislative  acts  (e.g.  EU  Emission 
Trading System) based on the similarity of their cost generation mechanism and removing some non-
legislative policies that would only generate unquantifiable costs (e.g. Europe 2020 strategy) as well as 
through continued iterations with the industry associations and a final consultation with the European 
Commission.  This  process  resulted  in  a  list  of  57  policy  entries.  This  final  list  of  legislative  acts  and 
non-legislative  policies  was  at  this  stage  further  distinguished  into  two  categories:  one  category 
consisting of 41 policy entries  where the calculation of regulatory costs was considered  possible (e.g. 

31 

 
 
 
REACH  and  ECHA  regulations)  and  one  category  of  16  policy  entries  where  a  qualitative  approach 
seemed more appropriate (e.g. key roadmaps, strategies and reports).  

The final prioritised EU policy framework, consisted of the following: 

   eight  packages  grouped  on  the  basis  of  their  overarching  and  specific  policy  objectives: 
Competition,  Climate  and  Energy,  Environment,  Forest-related,  Products,  Employment, 
Transport, Trade (see Figure 17) 

   57 policy entries where several entries cover more than one legislative act and non-legislative 

policies. 

The number of policy areas for which cost data was collected was dependent on the legislation that was 
prioritised for each product group. Figure 17 illustrates each legislative package to be filled by product 
group.  

Figure 17 Legislative packages per product group 

Notes: * Furniture manufacturing covered semi-solid/ solid wood, panel-based, upholstered and 
metal-based furniture. Please note that upholstered and metal-based furniture did not prioritise 
the competition and forest-related packages. **Printing covered sheet-fed offset, heat-set offset, 
rotogravure and flexo printing. Source: Authors’ elaboration 

The  complete  list  of  legislative  acts  and  non-legislative  policies  covered  in  the  study  can  be  found  in 
Chapter 4.  

32 

 
 
 
 
 
 
 
3.3  Phase  2:  Identification  of  the  actions  required  for  compliance  and 

creation of a cost typology 

The  selected  pieces  of  legislation,  grouped  into  eight  packages,  were  analysed  and  the  actions  that 
companies  have  to  take  to  comply  with  them  were  identified.  The  actions  were  then  associated  with 
cost  categories  identified  in  the  European  Commission’s  Better  Regulation  Toolbox  (European 
Commission,  2015a),  and  previous  cumulative  cost  assessment  studies  for  the  steel  and  aluminium 
industries  (CEPS,  2013a  and  CEPS,  2013b)  and  the  Chemical  industry  (Technopolis  Group,  2015). 
Chapter 5 presents the results of the analysis per legislative package. 

Those studies had identified two main categories of costs: direct costs and indirect costs.14 

Direct  costs are directly incurred due to compliance with the legislation.  Two types of costs can be 
identified under this category: 

   Specifically  identified  cost  types  defined  in  detail  in  the  legislation  or  other  administrative 
acts, so the exact cost amount can be reliably estimated (e.g. REACH registration fees, taxes or 
levies, etc.)  

   Costs  not  identified  as  such  in  the  legislation  but  directly  borne  by  companies  in  order  to 
comply with the requirements and standards set by the legislation, although the exact cost is 
defined by investment decisions of the companies, the specific business environment and price 
structures, the technologies available or other factors not directly related to or affected by the 
legislation. An example of such types of cost is investment in technologies to reduce emissions, 
to comply with the limits set by legislation. Although the legislation defines the limits  — and 
often  requires  the  use  of  the  best  available  technology  —  the  final  selection  of  the  specific 
technology  and  equipment,  and  hence  its  cost,  is  the  firm’s  decision.  The  estimation  of  such 
cost is straightforward although the accuracy of the estimate depends on information provided 
by the companies. 

Indirect  costs  are  also  generated  as  a  result  of  legislative  requirements.  However,  either  they  are 
incurred by other companies upstream in the value chain, and passed on to F-BI companies through 
the  price  of  inputs  (e.g.  wood),  or  they  are  related  to  opportunity  costs  due  to  the  substitution  of 
products and the loss of markets. Although some of the passed-on (also referred as pass-through) costs 
could be estimated (e.g. the effect of climate legislation on electricity prices), several of its components 
(e.g.  opportunity  cost)  are  difficult  to  quantify  and  their  estimation  can  only  be  based  on  strong 
assumptions.  

In the context of this report, scenarios for the quantification of indirect costs due to carbon  pass-on in 
electricity prices for the pulp, paper and paperboard sector are made in chapter 5. Lack of plant level 
information on electricity consumption for the woodworking companies and other information did not 
allow the same exercise to be run for the woodworking sector as a whole. Nonetheless, indirect costs 
for climate and energy are analysed qualitatively for the panel product  group. Other than this, due to 
the  ambiguities  of  the  indirect  costs  and  the  limited,  mainly  qualitative,  information  provided  by 
companies,  no  robust  assumptions  could  be  made  for  the  estimation  of  other  indirect  cost  and, 
therefore, they have had to be excluded from the assessment. 

Thus, the typology of cost used in this study includes the following types of direct costs, 
which are illustrated in Figure 18.  

   Monetary  obligations  are  regulatory  charges  such  as  fees,  levies,  or  taxes  on  certain 
stakeholders. The identification and computation of such costs are rather straightforward, as 
regulatory  charge  amounts  are  usually  known  and  their  extent  is  clearly  communicated  to  a 
company. Examples include national environmental taxes and charges, and net costs for CO2 
emission allowances for industries covered by the EU’s Emissions Trading Scheme (ETS). 

14  A  third  category  named  “enforcement  cost”  is  also  included  in  the  cost  classification,  however  it  is 
incurred by the public administration and the authorities responsible for the enforcement of the legislation 
and thus not included in costs to industry. 

33 

 
 
 
                                                             
   Administrative  burden  is  defined  as  the  additional  cost  of  fulfilling  the  information 
obligations  to  public  authorities  or  other  third  parties  as  required  by  legislation.  It  is 
important  to  note  that  administrative  burden  is  thus  different  from  administrative  cost,  as 
administrative  burdens  only  represent  part  of  administrative  cost  and  do  not  integrate 
business-as-usual  costs  that  would  nonetheless  occur  in  the  absence  of  legislation. 
Administrative  burden  can  be  incurred  internally  (e.g.  staff  time)  or  externally  by  retaining 
help  and  advice  such  as  verification,  which  may  or  may  not  be  mandatory.  The  types  of 
administrative  burden  identified  in  previous  studies  on  cumulative  costs  include:  cost  of 
personnel, laboratory testing (internal or subcontracted), consultants, and necessary training.  

   A methodological challenge in the assessment of administrative burden relates to the difficulty 
of  identifying  the  origin  of  the  burden  —  whether  burdens  can  be  solely  attributed  to  the 
minimum requirements of EU legislation or to going  beyond minimum requirements (“gold-
plating”) at national level. This was taken into account by asking companies surveyed to report 
the  portion  of  administrative  burden  attributable  solely  to  implementation  of  the  European 
legislation.  However,  there  is  no  obvious  way  to  ensure  that  there  is  no  overlap  in 
administrative burden estimates. 

   Substantive  Compliance  Costs:  Substantive  Compliance  Costs  are  provisions  made  to 
comply  with  regulations,  which  can  be  further  broken  down  according  to  the  following 
categories: capital costs (CAPEX) and operating costs (OPEX).  

Figure 18 Cost categorisation 

 Source: Author’s elaboration 

Capital  costs  include  any  acquisition  or  upgrading  of  physical  assets,  (land,  building  or  equipment), 
usually “fixed costs”, but also investment costs from investments necessary to meet legal obligations. 
Investment  costs  can  be  one-off  costs  (e.g.  new  equipment  needed)  or  recurrent  costs  (periodical 
training  or  tests).  Operating  and  Maintenance  Costs  include  additional  expenses  for  personnel 
(wages),  energy  inputs,  materials,  consumables  associated  with  legal  acts,  and  are  usually  “variable 
costs”. Indirect compliance costs are related to the fact that other stakeholders in the value chain have 
to comply with other legislation. Such costs are passed on by upstream companies or passed back to 
producers  by  downstream  users.  A  number  of  undue  effects  of  legislation,  like  transaction  costs, 
reduced competition and adjudication or litigation costs, generate indirect costs that are relevant for 
the competitiveness of the industry but are very difficult to quantify, given the fact that very often they 
are one-off costs, and very variable across sub-sectors.    

34 

DIRECT CompliancecostsMonetary ObligationsRegulatory ChargesFees, taxes and chargesSubstantive ObligationsAdministrative BurdenRegulatory costs passed on to other sectorsINDIRECT Compliancecosts InternalCost of administrative personnelExternalCost of verificationCapitalExpendituresAcquisition or upgrading of physical assetsOperating CostsPersonnel and maintenance 
 
 
 
3.4  Phase 3: Identification of typical plants  

3.4.1  Criteria for selecting typical plants 

Plants  selected  for  the  interviews  with  the  companies  must  comply  with  legislation  with  a  degree  of 
efficiency  that  should  be  “typical”  of  their  product  group  in  order  not  to  bias  the  outcomes  of  the 
analysis.  Therefore,  an  effort  was  made  to  collect  data  on  plants  that  were  typical  regarding  their 
product  group  and  not  only  their  company.  This  compliance  efficiency  of  plants  was  expected  to 
vary  according  to  several  factors  and  the  group  of  plants  should  therefore  reflect  a  series  of  ex-ante 
criteria at the selection stage. In this regard, the aim  of the selection  process  was to have a  group of 
plants  that  satisfies  the  criteria  of  the  CAR  (Cost-driven  Approach  to  Regulatory  burdens) 
methodology  (SIRA,  2015)  –  as  was  the  case  for  the  steel  and  aluminium  CCAs,  which  defines  three 
criteria that a “typical” plant should conform to: 

   The  plant  of  a  company  should  be  considered  as  representative  in  terms  of  activities  and 
structure  of  the  other  plants  of  the  same  product  group.  A  panel  of  plants  that  reflect  the 
production chains, processes and products of the product group should also present a degree 
of compliance efficiency that can be considered as typical for the product group. 

   The plant should be comparable to other plants in the product group in terms of business and 
business operations. This implies that large and small plants should be selected and that the 
size effect is to be taken into account in the calculations (large vs SME). 

   The plant should present clear business operations and one should be able to associate costs to 
specific activities. For large plants, one must therefore be able to target the analysis in terms of 
sites and activities. 

Overall  efficiency  of  the  plants  should  also  be  comparable  to  the  product  group  efficiency  (i.e. 
efficiency  not  specifically  related  to  complying  to  the  legislation,  but  to  the  general  activities  of  the 
firm) as legislative cost is part of the wider operating and production costs and this overall efficiency 
also  affects  compliance  efficiency.  Turnover  per  employee  has  been  used  as  a  proxy  for  overall 
efficiency to compare the panel of plants and the  product group as a whole.  Added value would be a 
better  indicator,  but  it  is  not  available  at  plant  level.  The  comparison  between  the  panel  and  the 
product  group  overall  should  show  if  the  selected  plants  are  close  to  the  product  group  average  or 
diverge from it. In case larger (lower) productivity indicators be observed in the panel of firms, one can 
expect costs figures to be under(over)-estimated. 

The  online  survey  (see  Phase  4  below)  also  contributes  to  verifying  the  typicality  of  the  set  of 
companies  by  adding  more  (but  less  detailed)  data  points  to  the  information  compiled  during  the 
earlier parts of study. A sensitivity analysis over different sets of weights for the online survey and the 
in-depth  interviews  was  implemented.  Overall,  results  after  the  adjustment  were  stable  according  to 
the various scenarios and the direction of the adjustment is not systematic.  The lack of a systematic 
bias supports the assessment that the approach is robust. The results of the sensitivity analysis are also 
presented in Appendix A. 

3.4.2  Selection of companies for pilot and in-depth interviews 

Forest-based  industries  were  first  analysed  according  to  fundamental  parameters  (e.g.  number  of 
companies, size, turnover, employment, country distribution, etc.). This provided an initial overview of 
the F-BIs, the sub-sectors and their product groups. Firms were then invited to participate to the study 
through in-depth interviews (initially through a Pilot phase that enable fine-tuning the questionnaire 
based on pilot companies’ feedback). 

The selection of the interviews was performed on the basis of the above criteria (representativeness of 
activities and structure, comparability of companies and clear business operations) with the support of 
industry associations. Not all companies were willing to participate to the study during the interview 
phase  because  of  significant  constraints  in  terms  of  burden  (data  collection  represents  a  time-
consuming and costly process, especially when cost of legislation is not systematically identified by the 

35 

 
 
 
companies)  and  confidentiality  issues  (sensitivity  of  the  collected  information  due  to  their  strategic 
value). 

As  a  result,  not  all  companies  contacted  responded  positively  to  the  invitation.  Table  3  presents  an 
overview of the final panel of companies that took part in the in-depth interviews. While not all pre-
selected  companies  were  involved  in  the  interviews,  this  final  panel  of  companies  still  reflects  the 
initial selection criteria. 

Table 3 The panel of typical plants 

NACE 
code 

Label 

Large  Small  Countries 

%  covered  of 
product  variety 
in the sector* 

16.1 

16.21 

16.23 

16.24 

Manufacture of sawnwood and 
planing of wood 

Manufacture  of  veneer  sheets 
and wood-based panels; 

Manufacture of other builders' 
carpentry and joinery 

Manufacture of wooden pallets 
and other wooden packaging 

17.11 

Manufacture of pulp 

17.12 

Manufacture  of  paper  and 
paperboard 

2 

4 

2 

11 

19 

2 

2 

2 

5 

SE, DE, EE 

FI,  BE,  RO,  IT, 
UK, PT 

AT, FI, PT, IT 

IT,IT,UK,  PT, 
SP 

DE,  AT,  SE,  FI, 
IT, PT, UK 

FI,  SE,  ES,  AT, 
FI,  IT,  UK,  NL, 
FR, PT,  

91% 

82% 

77% 

98% 

100% 

100% 

Source: Author’s elaboration * Note: Based on production value 

Concerning  the  representativeness  of  activities  and  structure  of  the  product  groups,  the  production 
value of each product group by detailed products as they are reported in Prodcom for the EU28 (Total 
production by PRODCOM list NACE Rev.2, table DS-066342, 2014)) was put into perspective with our 
group of typical plants (see Table 3 and Table 4). Companies that participated in in-depth interviews 
cover  the  majority,  if  not  all,  of  the  most  important  products  (in  terms  of  sold  production  value  of 
EU28 companies) for each product group. The product group for which the coverage of products is the 
lowest is 16.23 “Other builders and carpentry”. For this product group, interviewed companies do not 
cover  windows  of  wood  (22%  of  value  of  sold  production)  nor  shuttering  for  concrete  constructional 
work, shingles and shakes of wood (1% of sold production value). However, the coverage of the  group 
of  companies  includes  the  main  products  of  the  product  group,  which  represent  together  77%  of  the 
sold production value (builders’ joinery and carpentry of wood, prefabricated buildings of wood, and 
doors and their frames and thresholds of wood). 

Overall, the coverage of products by the companies interviewed effectively illustrates the heterogeneity 
of the activities, production processes and technologies associated with the different products in each 
product  group.  Furthermore,  the  country  coverage  of  the  panel  of  companies  also  supports  the  fact 
that the selected companies are present in countries that account together for the large majority of the 
activities  of  the  EU  forest-based  industries.  In  terms  of  turnover,  the  countries  covered  by  the  study 
represent more than 90%  of the woodworking, and more than  83.5% of  pulp,  paper and paperboard 
industries in the EU.  

36 

 
 
 
 
 
 
 
 
Table 4 Value of production sold by product group 

Products by product group 

16.1 Sawnwood 

Spruce wood (Picea abies Karst.), fir wood (Abies alba Mill.) 

Coniferous wood; sawn or chipped lengthwise, sliced or peeled, of a thickness > 6 mm, 
end-jointed, sanded or planed 

Pine wood (Pinus sylvestris L.) 

Coniferous wood in chips or particles 

Wood, sawn or chipped lengthwise, sliced or peeled, of a thickness > 6 mm (excluding 
coniferous and tropical woods and oak blocks, strips and friezes) 

Coniferous wood continuously shaped (including strips and friezes for parquet flooring, 
not assembled) 

Coniferous wood sawn or chipped lengthwise, sliced or peeled, of a thickness of > 6 mm 
(excl. planed or sanded, and spruce "Picea abies Karst.", silver fir "Abies alba Mill." and 
pine "Pinus sylvestris L.") 

Other 

16.21 Wood-based panels 

Particleboard, of wood 

Fibreboard (excluding medium density fibreboard [MDF]), of wood or other ligneous 
materials, whether or not bonded with resins or other organic substances, of a density 
exceeding 0,8 g/cm³ 

Medium density fibreboard (MDF), of wood or other ligneous materials, whether or not 
bonded with resins or other organic substances, of a thickness exceeding 9 mm 

Oriented strand board (OSB), of wood 

Veneered panels and similar laminated wood (excluding with block board, laminboard or 
batten board) 

Medium density fibreboard (MDF), of wood or other ligneous materials, whether or not 
bonded with resins or other organic substances, of a thickness not exceeding 5 mm 

Coniferous and tropical wood veneer sheets and sheets for plywood, sawn lengthwise, 
sliced or peeled, of a thickness ≤ 6 mm excluding end-jointed, planed or sanded 

Plywood consisting solely of sheets of wood (excluding of bamboo), each ply not exceeding 
6 mm thickness, with at least one outer ply of non-coniferous wood (excluding tropical 
wood) 

Medium density fibreboard (MDF), of wood or other ligneous materials, whether or not 
bonded with resins or other organic substances, of a thickness exceeding 5 mm but not 
exceeding 9 mm 

Veneered panels and similar laminated wood with blackboard, laminboard or batten 
board 

Plywood consisting solely of sheets of wood (excluding of bamboo), each ply not exceeding 
6 mm thickness (excluding products with at least one outer ply of tropical wood or non-
coniferous wood) 

Fibreboard (excluding medium density fibreboard [MDF]), of wood or other ligneous 
materials, whether or not bonded with resins or other organic substances, of a density 

Sold 
production 
value of the 
sector 
(Prodcom) 

Coverage 
by 
interviewed 
companies 

yes 

yes 

yes 

yes 

yes 

yes 

yes 

yes (also 
other 
products) 

yes 

yes 

yes 

yes 

yes 

yes 

no 

no 

yes 

yes 

yes 

yes 

29% 

21% 

14% 

8% 

8% 

6% 

5% 

9% 

31% 

10% 

8% 

6% 

5% 

5% 

5% 

5% 

5% 

4% 

3% 

3% 

37 

 
 
 
 
 
 
 
Products by product group 

exceeding 0,5 g/cm³ but not exceeding 0,8 g/cm³ 

Particle board and similar board of ligneous materials (excluding wood) 

Other 

16.23 Other builders and carpentry 

Builders’ joinery and carpentry of wood (excluding windows, French windows and doors, 
their frames and thresholds, parquet panels, shuttering for concrete constructional work, 
shingles and shakes) 

Prefabricated buildings of wood 

Doors and their frames and thresholds, of wood 

Windows, French windows and their frames, of wood 

Shuttering for concrete constructional work, shingles and shakes, of wood 

16.24 Wooden containers and packaging 

Flat pallets and pallet collars of wood 

Cases, boxes, crates, drums and similar packing’s of wood (excluding cable drums) 

Casks, barrels, vats, tubs, and coopers products and parts thereof of wood (including 
staves) 

Box pallets and load boards of wood (excluding flat pallets) 

Cable-drums of wood 

17.11 Pulp 

Chemical wood pulp, soda or sulphate, other than dissolving grades 

Chemical wood pulp, dissolving grades 

Mechanical wood pulp; semi-chemical wood pulp; pulps of fibrous cellulosic material 
other than wood 

Chemical wood pulp, sulphite, other than dissolving grades 

17.12 Paper and paperboard 

Graphic paper 

Packaging paper and paperboard 

Sanitary and household paper 

Other paper and paperboard 

Sold 
production 
value of the 
sector 
(Prodcom) 

Coverage 
by 
interviewed 
companies 

3% 

8% 

29% 

26% 

22% 

22% 

1% 

48% 

29% 

11% 

9% 

2% 

77% 

11% 

7% 

4% 

40.5% 

47.5% 

7.7% 

4.3% 

yes 

no 

yes 

yes 

yes 

no 

no 

yes 

yes 

yes 

yes 

no 

yes 

yes 

yes 

yes 

yes 

yes 

yes 

yes 

Source: Eurostat (Prodcom) and Historic Statistics 1991-2014, CEPI 

In order to ensure comparability of the data collected, companies were asked to report data for a plant 
or mill that they considered as typical, i.e. average in terms of productivity, cost-efficiency and overall 
characteristics.  This  reduces  the  possibility  to  observe  data  related  to  plants/mills  that  are  outliers 
within a given company. Furthermore, cost data were rescaled (see Appendix A on main assumptions) 
during the calculations in order to transform the cost figures in figures that are more comparable and 

38 

 
 
 
 
 
 
 
 
 
 
 
appropriate for aggregation. Size (SMEs or large) was also a characteristic that was taken into account 
during the data collection process and the production of cost figures.15 

A  critical  aspect  of  the  data  collection  process  consisted  in  ensuring  that  data  provided  by  the 
companies  were  correctly  referring  to  the  targeted  activities  (i.e.  the  company  has  clear  business 
operations  and  it  is  possible  to  focus  the  data  collection  on  a  specific  activity).  This  issue  especially 
concerned large companies. In order to address this aspect, the interviewers ensured that companies 
responded  for  a  specific  plant/mill  in  order  to  reduce  the  scope  of  the  data  collection  to  a  specific 
activity, product group and country of operation.  

In  addition  to  the  above  criteria  (CAR  criteria),  overall  efficiency  of  the  interviewed  companies  was 
assessed for each product group by comparing their productivity (in terms of turnover per employee) 
with  the  same  indicator  for  the  product  group  in  Eurostat.  According  to  Figure  19,  indicators  of 
productivity are comparable in terms of scale for all product groups. For the Sawnwood product group, 
there  is  a  more  pronounced  divergence  between  the  figures  of  the  panel  of  companies  and  Eurostat 
figures,  indicating  that  the  sample  is  characterised  by  a  larger  productivity  in  comparison  with  the 
product group as a whole at EU28 level. This implies that there  was a larger risk of underestimating 
the  cost  figures  for  this  sector  based  on  the  interview  data  only,  which  led  to  an  adjustment  of  cost 
ratios with survey answers (see section 3.5). Conversely, for the pulp product group, there was a risk of 
overestimating the cost figures based on the interview data. However, survey answers were in line with 
the initial cost figures. 

Figure 19 Comparison between the panel of interviewed companies and Eurostat sub-sectors – 
average turnover per employee, 2014 

 Source: Sub-sector data from Eurostat; panel data from authors 

3.5  Phase 4: Collection of data and estimation of cost  

The  legislative  cost  borne  by  F-BI  companies  was  estimated  by  following  a  six-stage  approach 
illustrated in Figure 20. The first step included the development of a questionnaire and its distribution 
to  a  panel  of  typical  plants.  Next,  data  were  collected  through  in-depth  interviews  with  the  selected 
companies.  On  the  basis  of  these  data,  an  estimation  of  the  costs  for  the  panel  companies  was 
performed. This estimation was further validated through two validation and discussion workshops. In 
addition  to  this  validation,  testing  and  calibration  of  the  cost  estimates  were  done  using  the  results 

15 SMEs are defined as companies with less than 250 employees. Large companies are companies with 250 
or more employees.  

39 

 
 
 
                                                             
from  the  online  survey.  Lastly,  the  results  and  input  from  all  steps  were  aggregated  producing  a 
cumulative overview of regulatory costs at EU level.  

Figure 20 Summary of methodology for estimating the cumulative cost of legislation 

Source: Authors’ elaboration 

Step  1:  Development  of  a  questionnaire  and  its  distribution  to  a  panel  of 
typical plants  

Four  sub-sector-specific  questionnaires16  were  designed  together  with  the  respective  industry 
associations,  company  stakeholders  and  the  European  Commission  in  order  to  collect  primary  data 
from companies. The questionnaires were designed in such a way as to maintain comparability across 
cost categories and legislative packages, and to spot possible inconsistencies during data collection. By 
filling  in  the  questionnaires,  companies  were  expected  to  provide  information  about  the  typical  total 
cost per legislative act and hence also per legislative package. A company information form, to collect 
company  plant-level  data  on  relevant  information  for  the  CCA,  was  also  sent  together  with  the 
questionnaire.  During  this  step,  also  detailed  guidelines  for  companies  on  how  to  fill  out  the 
questionnaire  were developed. A  help-desk was set-up to support the companies at any point during 
the process.  

16 In total, one questionnaire for pulp and paper, and three for woodworking (a general questionnaire, one for panels (16.21) and 
one  for  packaging  (16.24))  were  designed.  The  questions  and  legislative  packages  are  the  same  across  sectors  and  product 
groups. Taking into account the prioritisation of different legislations across sectors and product groups in woodworking, some 
legislations included under specific legislative packages varied.  

40 

 
 
 
                                                             
Step 2: Data collection and interviews 

A  set  of  pilot  interviews  with  companies  was  performed  to  test  the  questionnaire,  obtain  the  first 
absolute cost figures and thence adapt the questionnaire and its distribution process to the industrial 
realities of the F-BI sub-sectors. Further in-depth interviews, with a selected pool of companies, were 
carried  out  to  collect  the  necessary  source  data  for  all  targeted  sub-sectors  and  product  groups.  A 
number of interviews, in particular for woodworking sector, were performed on-site which allowed the 
inter-active gathering of additional qualitative insights from companies on the issues of EU regulatory 
burden.  

All  legislative  acts  included  in  the  questionnaires  were  scanned  by  the  interview  team  in  order  to 
support  the  process  of  data  collection  (i.e.  guide  the  companies)  and  also  to  assess  whether  the 
answers  received  were  in  line  with  what  the  prior  literature  review  had  suggested.  Also  national 
industrial experts were contacted in some cases (e.g. Finland, Germany, Portugal and Italy), to make 
sure that the answers were referring to European and national legislation.  

During  this  stage  secondary  quantitative  data  were  collected  for  multipliers,  comparators  and 
validation and filling in missing values in time series. To have a solid basis for comparability, whenever 
possible secondary data used were taken from Eurostat. Other secondary data (e.g. number of pallets – 
see step 5) were also used to identify inconsistencies and outliers, as well as to validate data collected 
via  the  questionnaires.  In  cases  of  inconsistencies  or  outliers,  data  were  checked  again  with  the 
companies  and  adjusted  taking  into  account  the  additional  information  received  and  secondary  data 
(see Appendix A). Data sources and uses can be summarised as follows: 

Table 5 Sources and uses of data 

Type of data 

Source 

Use 

Regulatory costs 

Comparators at 
company/plant level 

Primary data from interview 
questionnaire 
Primary data from online survey 
Secondary data from additional reports, 
mostly related to indirect costs 

Build  numerator  of  cost 
ratio 

Primary  data  from  panel  companies 
(turnover,  #  of  employees,  production 
quantity, etc.) 
Secondary  data 
(company 
production quantity)  

from  RISI  database 
employees, 

turnover,  #  of 

Ensure a diversified sample 

Comparators at sub-sector 
level 

Secondary  data  from  Eurostat,  Structural 
Business  Statistics,  time  series:  turnover, 
added value, gross operating surplus 
Secondary  data 
sectoral 
reports,  e.g.  Historical  Statistics  1991-2014, 
CEPI: production quantity, EBITDA, EBIT 

from  other 

Transpose initial 
cost/turnover ratio to 
other comparators 
(cost/EBIT, cost/EBITDA, 
etc.). 

Secondary data from RISI database for 
detailed plant presentation: type of products, 
capacity, turnover, # of employees, etc. 
Secondary  data  from  Eurostat,  Structural 
Business  Statistics,  time  series:  turnover, 
added value, gross operating surplus 
Secondary  data  from  Prodcom  database, 
Eurostat,  2014:  production  value  by  product 
and product group. 

Compare the panel of plants 
with sectoral characteristics 

Indicators  to  validate  group 
of companies 

Source: Author’s elaboration 

41 

 
 
 
 
Step 3: Estimation of legislative costs for the groups of companies  

The  outcome  of  Step  1  and  Step  2  was  an  initial  set  of  grids  with  proxy  companies’  cost  estimates 
covering  all  pieces  of  legislation  concerned.  At  that  stage  costs  were  aggregated  in  order  to  produce, 
where  possible,  a  preliminary  view  of  costs  per  sub-sector,  product  group  and  the  evolution  of  costs 
over time as share of added value. Details on the calculations are presented in Appendix A. 

Step 4: Validation of cost estimates 

Three  validation  workshops17  were  organised  to  present  the  results  of  the  initial  calculations  to 
companies  and  other  pre-identified  stakeholders  (mainly,  experts 
industry 
representatives and European Commission representatives). The first validation workshop  presented 
the  results  of  the  pulp  and  pulp-based  manufacturing  value  chain.  The  second  validation  workshop 
concerned  the  results  for  woodworking  value  chain.  The  validation  workshop  for  woodworking 
concluded that the trends and the order of magnitude of the data provided were generally in line with 
the expected results. For pulp, paper and paperboard, the industry association CEPI asked for further 
investigation on outliers, comparators and indirect costs. A  third validation workshop was performed 
in Finland, in order to submit interim results to three Finish experts (on climate/energy, environment 
and transport), which were found consistent with the Finns’ own assessment of highlighted legislation 
and subsequent costs. 

industry, 

from 

Step 5: Testing and adjustment of data with an online survey 

In parallel to the validation workshops an online survey was conducted to validate the computed cost 
estimates.  The  survey  was  in  two  parts:  1)  a  cost  validation  for  predefined  cost  types  and  legislative 
packages and 2) an assessment of indirect costs in relative terms, with close-ended questions, without 
asking for absolute figures.  

In order to increase the response rate, the online survey was kept simple and short. Companies were 
asked  to  select  the  most  appropriate  cost  range  among  a  list  of  ranges,  expressed  as  a  percentage  of 
turnover,  for  each  legislative  package  and  each  category  of  direct  cost.  The  link  to  the  questionnaire 
was  distributed  to  companies  through  national  associations  and  to  the  companies  e-mail  addresses 
found  in  company  databases  such  as  Orbits.  In  total,  103  responses  (91  complete,  12  partial)  were 
provided  to  the  survey.  Overall,  respondents  had  to  provide  answers  for  at  least  three  legislative 
packages to be taken into account. 

Responses from companies with 250 employees or more cover 52.4% of the sample, which indicates a 
bias towards larger enterprises, e.g. only 5.8% of the sample is from small enterprises with less than 10 
employees.  There  is  a  close  to  50/50  split  between  the  sub-sectors  (47.5%  from  pulp,  paper  and 
paperboard and 52.5% from woodworking). The least represented sub-sectors are builders' carpentry 
and joinery (6.8%) and pulp production (8.7%). Companies from 21 different countries replied to the 
online survey. There are many replies particularly from Austria, Germany and Sweden (corresponding 
to  35.9%  of  the  total  sample).  Otherwise,  the  distribution  is  quite  even  across  the  remaining  17 
countries.  The  three  countries  from  which  the  most  responses  were  received  (Austria,  Germany  and 
Sweden)  already  cover  over  70%  of  EU  woodworking  (NACE  code  16,  manufacture  of  wood  and  of 
products of wood and cork, except furniture; manufacture of articles of straw and plaiting materials), 
and of pulp, paper and  paperboard (NACE code 171,  manufacture of pulp,  paper and paperboard) in 
terms  of  production  value.  Overall,  the  21  countries  cover  over  98%  of  both  woodworking  and  pulp, 

17  Upon  the  request  of  Finnish  Forest  Industries  Federation,  a  small  additional  validation  workshop  was  held  on  15  February 
2016 in Helsinki  

42 

 
 
 
 
 
                                                             
paper and paperboard sectors, as only countries with very little production value in  these sectors are 
missing (e.g. Ireland, Greece, Croatia, Cyprus, Luxembourg, Hungary, and Malta)18. 

Table 6 Number of responses to the online survey by product group  

Country 

Panel of typical plants 

Online Survey 

17.11 Manufacture of pulp  

17.12 Manufacture of paper 
& paperboard 

16.1 Sawnwood 

16.21 Wood-based panels 

16.23 Other builders' 
carpentry and joinery 

16.24 Wooden pallets and 
other wooden packaging 

Total 

Source: Authors’ elaboration 

11 

19 

4 

6 

4 

5 

49 

9 

40 

21 

11 

7 

15 

103 

Total number of 
responses 
20 

59 

25 

17 

11 

20 

152 

Figure 21 Number of responses to the online survey by product group 

Source: Authors’ elaboration 

18 Data for production value can be sources on Eurostat, Structural Business Statistics, Table 
[sbs_na_ind_r2], last available data 2014. 

43 

 
 
 
 
 
 
 
 
                                                             
Table 7 Number of responses to the online survey by country 

Panel of typical 

plants 

Online Survey 

Total number of responses 

Country 

Austria 

Belgium 

Bulgaria 

Czech Republic 

Denmark 

Estonia 

Finland 

France 

Germany 

Italy 

Latvia 

Lithuania 

Netherlands 

Poland 

Portugal 

Romania 

Slovak Republic 

Slovenia 

Spain 

Sweden 

United Kingdom 

6 

1 

1 

6 

1 

5 

8 

2 

5 

1 

2 

7 

4 

11 

5 

3 

1 

1 

3 

5 

3 

10 

3 

4 

3 

4 

4 

5 

2 

4 

8 

15 

6 

103 

18 

6 

3 

1 

1 

4 

11 

4 

15 

11 

4 

3 

6 

4 

10 

1 

2 

4 

10 

22 

10 

152 

Total 

49 

Source: Authors’ elaboration 

The  online  survey  was  used  to  adjust  the  initial  results  calculated  based  on  the  pilot  and  in-depth 
interviews.  Costs  were  adjusted  by  size,  product  group,  legislative  package  and  cost  category.  The 
survey results also account for country variability due to transposition of EU legislation into national 
legislation.  For each category, the initial average cost figures were adjusted (upwards or downwards) 
based on the difference observed between the initial figure and the on-line survey results. 

The  idea  of  the  adjustment  is  to  take  into  account  information  from  additional  companies  in  the 
calculations.  The  set  of  interviewed  companies  was  indeed  limited  in  order  to  collect  detailed 
information at the legislative level, on the evolution of costs in time and qualitative clarifications from 
the  companies.  Such  detailed  information  was  necessary  to  ensure  a  good  understanding  of  the  cost 

44 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
data collected. However, as explained in section 3.4, while the typicality of interviewed companies was 
ensured  to  the  extent  possible,  cost  figures  for  some  sectors  could  still  be  underestimated  or 
overestimated because of specificities of interviewed companies that cannot be easily observed. Hence, 
information from a larger set of companies can help to address potential biases. 

However,  combining  data  from  the  interviews  with  data  from  the  on-line  survey  might  not  improve 
cost figures if results from the latter source are even more biased (with the same direction of bias) than 
results  from  interview  data.  Survey  data,  while  covering  a  larger  set  of  companies,  might  not 
necessarily  provide  a  more  precise  information  at  the  company  level.  The  analysis  performed  in 
section 3.4 gives an insight on the direction of a potential bias in the initial calculations. For example, 
cost figures for the sawnwood product group  were likely to be underestimated  if the calculations are 
based on the interviewed firms only. This allowed us to assess the relevance of the direction of the 
adjustments.  Furthermore,  the  weight  given  to  the  initial  cost  figures  is  larger  and  survey  results 
account only for 25% of the final cost figures (different weights were tested). This lower weight for the 
on-line  survey  reflects  the  importance  of  the  validation  process  (time  dedicated  to  interviews, 
workshops) that was applied to the initial figures before conducting the survey. Hence the adjustment 
consists of a marginal correction of the initial figures. The detail of the calculations with the survey are 
available in Appendix A. 

The  final  cost  of  phytosanitary  treatment  for  pallet  producers  was  calculated  separately  in  order  to 
avoid extrapolating this specific cost to other products in the product group 16.24  Wooden pallets and 
other  wooden  packaging.  The  average  cost  for  a  single  pallet  was  calculated  based  on  the  detailed 
information provided by the pallet producers during the in-depth interviews. This cost was multiplied 
by the number of pallets observed in Prodcom (Eurostat). As a consequence, the average cost related to 
the  environmental  legislative  package  was  reduced  from  3.5%  to  2.8%  of  turnover  for  this  product 
group. 

Step 6: Aggregation of costs at EU level  

To present total costs at EU level, during the last step the core multipliers were applied and data was 
presented  in  relative  terms.  Results  are  grossed  up  using  turnover.  Grossed-up  costs  are  then 
presented as share of added value, gross and operating surplus for all sub-sectors. Depending on the 
availability of public and private data, €/tonne and percentage of EBIT and EBITDA were also used as 
comparators.  Accordingly,  this  was  only  possible  for  pulp,  paper  and  paperboard  but  not  for 
woodworking.  

3.6  Quantitative estimation of ETS indirect costs 

This  section  is  concerned  with  the  impact  of  ETS  on  electricity  prices,  and  more  specifically  on  the 
extent that this effect is passed-through to the price that the  pulp, paper and paperboard sector pays 
for electricity. A  quantitative estimation of ETS indirect cost was only  performed for the  pulp,  paper 
and paperboard sub-sector but not for the woodworking product group, as woodworking companies in 
general did not report any significant burden occurring from this ETS indirect costs and thus there was 
no  basis  for  calculation.  (Indirect  costs  related  to  the  price  of  raw  materials  such  as  wood  were  also 
reported as significant to woodworking companies and are addressed qualitatively in section 5.1.3).  

An explanation of the main effect of the ETS on electricity prices and subsequently on  pass-on rates, 
along with a literature review on pass-on rates as well as an assessment of the pass-on rates to be used 
for the calculation of pass-on rate for the pulp, paper and paperboard sector, can be found in Appendix 
B. 

For  energy-intensive  industries,  like  pulp,  paper  and  paperboard,  electricity  prices  can  be  a 
determinant factor in influencing competitiveness. The introduction of the ETS in 2005, has developed 
a  market  around  carbon  emission  allowances  (European  Union  Allowances:  EUAs),  traded  as  a 
commodity, and has triggered other industrial mechanisms of response and adaptation; one of these is 

45 

 
 
 
 
the  extent  by  which  the  price  paid  for  carbon  allowances  can  be  passed-on  to  industrial  and  final 
consumers (i.e. pass on rates). 

The  objective  was  to  provide  the  indirect  cost  of  ETS  per  year  between  2005  and  2014.  Such 
computation  was  only  performed  for  the  pulp,  paper  and  paperboard  sectors,  as  data  were  only 
available for this sub-sector. 

The equation used to calculate the indirect costs is an adapted version of the one used in the steel and 
aluminium studies (CEPS, 2013): 

𝑰𝒏𝒅𝒊𝒓𝒆𝒄𝒕 𝒄𝒐𝒔𝒕 𝒐𝒇 𝑬𝑻𝑺 (€)

=  𝑒𝑙𝑒𝑐𝑡𝑟𝑖𝑐𝑖𝑡𝑦 𝑝𝑢𝑟𝑐ℎ𝑎𝑠𝑒𝑑 (𝑘𝑊ℎ)   ×  𝑐𝑎𝑟𝑏𝑜𝑛 𝑖𝑛𝑡𝑒𝑛𝑠𝑖𝑡𝑦 𝑜𝑓 𝑒𝑙𝑒𝑐𝑡𝑟𝑖𝑐𝑖𝑡𝑦  (

𝑡𝑜𝑛𝑛𝑒 𝑜𝑓 𝐶𝑂2
𝑘𝑊ℎ

)

×   𝐶𝑂2 𝑝𝑟𝑖𝑐𝑒  (

€
𝑡𝑜𝑛𝑛𝑒 𝑜𝑓 𝐶𝑂2

) ×  𝑝𝑎𝑠𝑠 𝑜𝑛 𝑟𝑎𝑡𝑒 − 𝑆𝑡𝑎𝑡𝑒 𝐴𝑖𝑑 𝑐𝑜𝑚𝑝𝑒𝑛𝑠𝑎𝑡𝑖𝑜𝑛𝑠 (€) 

Indirect  costs  were  computed  for  pulp,  paper  and  paperboard  activities  together,  as  the  electricity 
purchase related to pulp, paper and paperboard separately were not available.  

According to this equation, the five components of indirect costs were: 

  Electricity purchased: amount of electricity in kWh purchased from the grid to produce 

pulp, paper and paperboard 

  Carbon intensity of electricity: emission of CO2 in tonnes per kWh 
  CO2 price: market price of CO2 
  Pass-on rate: proportion of ETS costs that the electricity providers pass on to the pulp, paper 
and paperboard sub-sector  - their customers,  which can be also defined as the proportion of 
the price paid for carbon allowances that is passed on to the industry. 

  State Aid compensations: compensations specifically addressing indirect costs of ETS for 

the pulp, paper and paperboard industry. 

In order to assess the sensitivity of results, we considered different values for some parameters, where 
relevant, i.e. CO2 prices and pass-on rates. Hence, our analysis is performed with two CO2 prices for 
2007 so as to take into account the transition between Phase I and Phase II of ETS, and different pass-
on rates were used in the calculations. 

3.6.1.1  Component 1: electricity purchased (kWh) 

Data on electricity purchased from the grid at the country level between 2005 and 2014 are used for 
the indirect costs computation (source: RISI database, provided by CEPI). Data were converted from 
GWh  to  kWh.  The  data  cover  the  following  countries:  Austria,  Belgium,  Czech  Republic,  Finland, 
France,  Germany,  Italy,  Netherlands,  Poland,  Portugal,  Slovak  Republic,  Spain,  Sweden  and  United 
Kingdom.  The  data  cover  fewer  countries  than  the  ones  included  in  the  general  cumulative  cost 
exercise;  however,  they  are  representative  of  over  95%  of  EU  production  value  of  pulp,  paper  and 
paperboard  and  have  thus  not  been  adjusted  as  electricity  purchased  can  be  directly  correlated  with 
the  production  of  pulp,  paper  and  paperboard.  All  electricity  data  can  be  differentiated  for  each 
country; this allows to also differentiate the other components of the above equation by country.  

The above formula only relates to electricity purchased from third-party electricity providers and not 
bio-electricity  produced  by  pulp,  paper  and  paperboard  mills  in  order  to  isolate  indirect  costs  from 
direct costs of ETS (the latter are taken into account in the direct compliance costs figures). 

The steel and aluminium studies use a ratio kWh/tonne representing electricity intensity, instead of an 
absolute electricity figure. In this report, indirect costs were directly calculated in Euros instead of cost 
per tonne. This is due to the fact that electricity data are available for the production of pulp, paper and 
paperboard together. Hence, it is not possible to identify a specific cost per tonne of pulp and a cost per 
tonne of paper. 

46 

 
 
 
 
3.6.1.2  Component 2: carbon intensity of electricity (tonne of CO2/kWh) 

Data  on  maximum  regional  carbon  intensity  of  electricity  were  used  to  approximate  the  carbon 
intensity  of  electricity.  As  in  the  studies  on  steel  and  aluminium,  such  data  were  sourced  in  the 
Communication from the Commission: Guidelines on certain State aid measures in the context of the 
greenhouse  gas  emission  allowance  trading  scheme  post-2012  (2012/C158/04).  This  data  source 
provides maximum regional carbon intensity per country for 2012. Given the lack of data to produce 
time  series  and  which  could  be  considered  as  rather  stable,  we  used  data  from  2012  for  the  whole 
period.  

The  table  below  summarises  estimates  of  CO2  emissions  per  kWh  from  electricity  generation,  per 
country, per year. 

Table 8 Carbon intensity (CO2/Mwh and CO2/kwh per year) 

Country 

Austria 

Belgium 

Czech Republic 

Finland 

France 

Germany 

Italy 

Netherlands 

Poland 

Portugal 

Slovak Republic 

Spain 

Sweden 

United Kingdom 

Mwh 

0.76 

0.76 

1.06 

0.67 

0.76 

0.76 

0.6 

0.76 

0.88 

0.57 

1.06 

0.57 

0.67 

0.58 

Kwh 

0.00076 

0.00076 

0.00106 

0.00067 

0.00076 

0.00076 

0.0006 

0.00076 

0.00088 

0.00057 

0.00106 

0.00057 

0.00067 

0.00058 

Source: Communication from the Commission: Guidelines on certain State aid measures in the 
context of the greenhouse gas emission allowance trading scheme post-2012 (2012/C158/04). 

47 

 
 
 
 
 
 
 
 
3.6.1.3  Component 3: CO2 price 

Spot  prices  and  future  prices  for  allowances  (European  Allowances:  EUA)  on  auction  markets  (main 
market is the European Energy Exchange EEX) provide the prices of CO2 used for the calculations. We 
suggest to use the prices from the steel and aluminium study until 2012. The prices are calculated as 
follows: 

  2005: yearly average spot price, reported daily by the European Environment Agency) 
  2006-2012: yearly average of settlement prices for December future of the same year (source: 

EEX). 

  Prices for 2013 and 2014 have been added using yearly average sport price based on weekly 

data points. 

  As  2007  corresponds  to  the  end  of  Phase  I  of  the  ETS  and  to  the  beginning  of  Phase  II,  we 
provide scenarios with the actual yearly average of settlement prices for the December future 
price of the same year (price=0.74), which reflects the drop in the spot price due to an over-
allocation of permits, and – as an alternative – a computation based on the average of weekly 
settlement prices for the December future price of the next year, namely 2008 (price=19.56) - 
this includes market expectations and possibly reflects price trends). 

Table 9 CO2 price (euros per tonne) 
2006 

2005 

2007 

21.82 

0.74 or 
19.56 
Source: CEPS (2013) and EEX. 

18.62 

2008 

2009 

2010 

2011 

2012 

2013 

2014 

23.03 

13.31 

14.48 

13.77 

7.56 

4.47 

5.95 

Future  prices  are  used  between  2006  and  2012,  not  spot  prices.  Historical  spot  prices  for  EUA  over 
this period were not available from EEX.  These spot prices would have been a direct reflection of the 
effective prices on the market. However, the study uses future prices with a short horizon (December 
of  the  year  in  this  case).  As  future  prices  converge  to  spot  prices  when  approaching  maturity,  such 
future prices are expected to be a good proxy of the effective CO2 price on the market, even if prices in 
first months of the year will be a reflection of short-term expectations. 

3.6.1.4  Component 4: pass-on rate 

The  steel  and  aluminium  studies  used  a  fourth  component  in  the  equation  (so-called  pass-on  rate) 
according  to  different  scenarios:  rate  being  equal  to  1  (upper-bound  scenario)  i.e.  a  pass-on  of  full 
costs, 0.8 (intermediate scenario) and 0.6 (lower bound scenario), i.e. only 60 % of costs passed on. 

In  this  report,  different  scenarios  for  the  rate  are  used  and  measure  indirect  costs  accordingly.  A 
thorough  analysis  and  choice  of  pass-on  rates  should  be  ideally  done  at  country  level  (to  take  into 
account  differences  in  the  electricity  markets).  However,  this  level  of  detail  is  not  possible  in  the 
context of this study as the literature does not provide relevant pass-on rates for each country and for 
the  whole  time  period.  Based  on  a  thorough-going  analysis  of  literature  (see  Appendix  B),  it  is 
proposed to use pass-on rates of 0.5 and 1 for all countries.  

3.6.1.5  Component 5: State Aids compensations 

Compensation via subsidies occurred from 2014 onwards and so should ideally be subtracted from the 
calculation  of  indirect  costs.  Such  cases  of  compensations  are  consultable  in  the  COMP  database  on 
cases  (http://ec.europa.eu/competition/elojade/isef/index.cfm). Table 10 presents the amounts of the 
compensations reported in this database. However, identified amounts of compensation schemes are 
provided for a list of sub-sectors and cannot be split in a straightforward way. As compensations were 
only introduced from 2014 onwards, results from 2005 to 2013 will not be affected by this change.  

48 

 
 
 
 
 
Table 10 State Aids compensation including the pulp, paper and paperboard sector19 

Country 

Expenditure (in millions) 

United Kingdom20 

Germany 

Spain 

Netherlands 

Greece 

Lithuania 

Slovakia 

2014: GBP 19.632 

2014: EUR 314.2 

2014: EUR 0 (5  million EUR 2013-2014) 

2014: EUR 53.455 

2014: EUR 14.4 

2014: EUR 0 (13.1 million EUR 2014-2020) 

250 million EUR 2014-2020 

Source: DG COMP database,  http://ec.europa.eu/competition/elojade/isef/index.cfm, as consulted on May 2016

19  State  Aids  compensation  schemes  are  drafted  for  a  group  of  sectors  and  public  data  does  not  allow  any 
disentangling of aid per sector. Sectors under the different schemes (in different countries) cover different 
sectors.  

20 The Carbon Price Floor compensation scheme is outside the scope of this decision. 

49 

 
 
 
 
 
                                                             
4  Overview of the relevant legislation 

This  chapter  examines  European  Union  legislation  and  related  policies  that  have  been  identified  as 
having  a  high  relevance  for  the  forest-based  industry  in  terms  of  generating  costs.  The  aim  is  to 
characterise  through  ‘legislative  packages’  the  EU  legislation  (e.g.,  directives,  regulations)  and  policy 
documents (e.g., strategies) that impose a direct and/or indirect cost on the industry.  

From the first screening that indicated that as many as 570 policies may have an impact on EU forest-
based industries (see section 3.2), 245 pieces of legislation and related policy instruments were initially 
selected for inclusion in this cost assessment (e.g. excluding forestry related legislation). Following the 
prioritisation process, as outlined in section 3.2, 57 policy entries (often covering more than one piece 
of legislation), were grouped into eight legislative packages based on shared policy objectives and types 
of  associated  costs.  The  selected  legislation  within  the  scope  of  the  study  includes  regulations, 
directives, laws or other legal acts in force at any time for the period 2005-2014, even if they were later 
repealed  or  amended  by  other  legislation.  Communications  (non-legal  policy  acts)  have  in  some 
instances  also  been  included  when  they  are  directly  related  to  specific  legislation  or  when  they  have 
been noted to be of particular importance to some subsectors.  

The  emphasis  of  the  present  chapter  is  to  provide  an  overview  of  the  legislation  and  to  identify  the 
types  of  cost  carried  by  the  forest-based  industries  due  to  specific  pieces  of  legislation  under  the 
respective  legislative  packages.  It  should  be  noted  that  some  pieces  of  legislation,  although  being 
adopted  before  the  end  of  2014  (e.g.  Industrial  Emissions  Directive  2010/75/EU),  have  not  been 
included in the quantitative aspects of the cost assessment since they came into  force after the end of 
2014. Legal acts relevant to the forest-based industry being adopted or repealed after  the designated 
study  period  was  only  considered  qualitatively  when  reflecting  on  effects  leading  up  to  2030  (see 
Section 5.9). 

4.1  Production steps affected by legislation 

Regulatory requirements occur at different steps in a production chain: regulation can impact the cost 
of  raw  material  and  energy,  the  cost  of  labour,  the  cost  of  equipment  and  maintenance,  the  cost  of 
safety and the cost of placing products on the market. Thus the cost of legislation affecting the  forest-
based  industries  varies  between  subsectors  and  depends  on  the  structure  and  the  complexity  of  the 
manufacturing  process  (e.g.  number  of  manufacturing  steps  and  type  of  equipment,  etc.).  Some 
subsectors are affected by many pieces of legislation and  some pieces of legislation require measures 
that are more expensive than others. 

EU legislation and policies that incur direct or indirect costs for forest-based industries correspond to 
a complex web of legislative and policy documents. This presents one of the core challenges as regards 
to assessing costs and impacts on the value chains and its variants. That is, few policies can be said to 
have  a  direct  and  unambiguous  cost  impact  for  one  single  stage  of  processing  for  one  single  value 
chain.  

To illustrate this problem, the basic forest-related value chains in this assessment start with the wood 
being transported (as such excluding upstream forestry activities). It continues with various phases in 
manufacturing  wood  and  wood-fibre  products,  further  processing,  marketing  and  consumption,  and 
ends with recycling or disposing of wood-based materials. All steps (primary to tertiary processing) of 
the value chains have different importance for the respective sub-sectors included in this assessment 
(woodworking  and  pulp,  paper  and  paperboard  manufacturing).  Each  sub-sector  is  also  subject  to 
varying effects from given legislation, and aside from varying effects; several pieces of legislation that 
were expected to have an impact on the forest-based industries set unclear targets.  

50 

 
 
 
 
 
Taking this complexity into account, the following sub-sections will clarify the types of policy areas as 
classified  by legislative  package that  have a cost impact. In addition, the type of  cost linked with the 
legislative package will be clarified. Distinction is made between monetary obligations such as fees, 
costs  arising  from  administrative  burden  (such  as  the  preparation  of  dossiers,  notifications, 
applications  or  other  necessary  information)  and  costs  arising  from  substantive  obligations 
(including  capital  and  operational  expenditures)  such  as  testing,  investment  in  laboratory 
equipment, labour, etc. 

4.2  Package 1: Competition legislation 

4.2.1  Overview of the legislative package 

EU  competition  law  does  not  necessarily  make  one  think  about  forest-based  industries,  but  it  does 
affect  how  all  enterprises  operate  within  the  EU.  For  example,  to  preserve  well-functioning  product 
markets,  the  Commission  must  prevent  anti-competitive  behaviour  (e.g.  agreements  between 
companies that restrict competition). This applies to forest-based industries as much as it does to any 
other  sector.  The  EU  competition  rules  essentially  include  anti-trust  procedures,  preventing  anti-
competitiveness rules and rules on mergers and acquisitions etc. More specific to this cost assessment 
are the guidelines that cover national regional aid and state aid for environmental protection and the 
revised state aid guidelines (financial compensation for indirect emissions). 

4.2.2  Type of cost linked with the legislative package 

Monetary obligations, administrative burden and substantive obligations: 

The legal regime of EU state aid (see revised state aid guidelines SWD/2012/131) aims - due to direct 
or  indirect  government  interventions  -  at  avoiding  distortions  of  competition  and  trade  among 
member states in the internal EU market. It therefore creates no, or very little, regulatory costs for the 
forest-based industries. Instead, it is one factor that shapes the competitive environment in which the 
industries  operate  within  the  EU.  Thus,  after  discussion  with  the  F-BI,  its  costs  were  not 
calculated in the study. 

The  current  guidelines  on  state  aid  for  environmental  protection  and  energy  2014-2020 
(2014/C/200/01)  will  be  in  force  until  the  end  of  2020  and  aim  at  limiting  support  to  renewable 
energy while making it more cost-effective to reduce actual energy costs. For instance, to increase cost 
efficiency,  feed-in  tariffs  will  be  replaced  by  a  bidding  process.  Small  installations  can  be  exempted 
from this process. This will have an effect on future costs, dealt with qualitatively. 

For energy-intensive sectors (such as the production of  pulp, paper and paperboard) some support is 
still  allowed  under  these  guidelines  so  as  not  to  put  them  in  a  disadvantaged  position  compared  to 
other  companies  in  the  global  trading  arena.  In  order  to  reduce  distortions  of  competition  for 
companies,  Member  States  may  grant  aid  in  the  form  of  tax  reductions  for  undertakings  that  are 
energy intense and to companies that are exposed to international trade. Operating and investment aid 
for  the  production  of  renewable  electricity,  the  production  of  biofuel  and  cogeneration,  as  well  as 
energy infrastructure, is also possible under these guidelines. State aid  legislation is essentially about 
balancing  the  negative  effects  of  aid  on  competition  with  its  positive  effects  in  terms  of  common 
interest. This also entails efforts at ensuring that competitiveness is enhanced while avoiding subsidy 
races between Member States. 

51 

 
 
 
 
Table 11 Overview of Competition legislation 

Package 1: Competition legislation 

Group 1. Measures affecting sectoral competitiveness 

Revised State aid guidelines (financial compensation for indirect emissions) 
(SWD/2012/131)  

Guidelines on State aid for environmental protection and energy 2014-2020 
(2014/C 200/01)  

Pre 
2004 

2004 

2005 

2006 

2007 

2008 

2009 

2010 

2011 

2012 

2013 

2014 

2015 

 

 

 Adoption  Transposition or enforcement by competent authorities;  Repealed or amended;  Assessed qualitatively;  Published and/or forwarded to the Parliament and/or Council. 

53 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4.3  Package 2: Climate and Energy legislation 

4.3.1  Overview of climate legislation 

There are many policy documents on climate change that have direct implications for the forest-based 
industries.  At  the  EU-level,  most  of  the  policy  instruments  concerned  with  climate  change  are 
furthermore interlinked with energy legislation, however, these will be introduced separately. It should 
nevertheless  be  noted  that  while  climate  and  energy  correspond  to  two  distinct  policy  fields,  they 
cannot be entirely separated from each other when considering forest-based industries. They are even 
bundled together, for example, in the EU climate and energy package, which has been designed to help 
the EU reach its targets for the reduction of emissions of greenhouse gases by 20% before 2020. 

The  EU  Emissions  Trading  System  (ETS),  launched  in  2005,  presents  one  cornerstone  of  the  EU’s 
policy  to  combat  global  warming  and  it  is  considered  as  key  to  reducing  industrial  greenhouse  gas 
emissions cost-effectively. It is currently in its third phase, running from 2013 to 2020. The ETS works 
on a ‘cap and trade’ principle. A cap is set on the total amount of greenhouse gases that can be emitted. 
Companies  then  receive  allowances  as  a  share  of  the  cap  and  they  can  trade  allowances  with  one 
another in case they are not used (Directive, 2003/87/EC). For example, the system allows the use of 
credits from projects to enhance forest sinks in third countries under the Joint Implementation/Clean 
Development  Mechanisms  established  under  the  Kyoto  Protocol.  Although,  in  Phase  3,  auctioning  is 
the  default  method  for  allocating  emission  allowances  to  companies  participating  in  the  ETS  (before 
allocation was mainly free), some industries will continue to receive a share of allowances for free until 
2020  and  beyond.  Free  allocation  is  carried  out  on  the  basis  of  benchmarks  of  greenhouse  gas 
emissions performance.  

A  reform  of  the  ETS  is  currently  ongoing.  As  a  first  step  of  this  reform,  the  EU  recently  adopted  a 
decision to create a market stability reserve for the ETS (Decision 2015/1814). The aim of the reserve is 
to  correct  the  large  surplus  of  emission  allowances  which  has  built  up  in  the  ETS  and  to  make  the 
system more resilient in relation to supply-demand imbalances. The Commission has at this stage also 
issued a second proposal, which represents a broader review of the ETS (European Commission 2015, 
COM/2015/337)  that  aim  to  take  the  Council's  guidance  on  the  role  the  EU  ETS  should  play  in 
achieving  the  EU's  2030  greenhouse  gas  emission  reduction  target  and  make  it  law.  The  proposed 
changes  may  bring  additional  changes  to  the  carbon-trading  market  and  have  implications  for  the 
future of the forest-based industry.  

The  auctioning  of  greenhouse  gas  emission  allowances  is  further  regulated  by  two  Commission 
Regulations  (176/2014  and  1031/2010).  Sectors  and  sub-sectors  considered  to  be  exposed  to  a 
significant  risk  of  carbon  leakage  between  2015-2019  will  receive  a  higher  share  of  free  allowances 
(Commission  Decision  2014/746/EU).  The  first  carbon  leakage  list  was  applicable  for  the  free 
allocation  of  allowances  in  2013  and  2019.  The  carbon  leakage  list  for  2020-2024  is  currently  being 
prepared (Stakeholder consultation analysis, issued 17.12.2014). Among those sub-sectors considered 
for free allowances are manufactures of articles from cork, pulp, paper and paperboard. 

Following  the  revision  of  the  EU  ETS  Directive  in  2009,  several  Commission  Decisions  (e.g., 
2011/278/EU regarding the harmonised free allocation of emission allowances and 2013/447/EU and 
concerning  the  standard  capacity  utilisation  factor)  and  one  Commission  Regulation  (601/2012)  on 
monitoring  and  reporting  of  greenhouse  gas  emissions  have  been  adopted  and  are  considered  as 
relevant  to  the  forest-based  industries  since  they  specify  detailed  rules  that  have  to  be  taken  into 
account.  These  include  factors  necessary  to  enable  authorities  to  calculate  the  amount  of  free 
allocation to be provided to new installations in the period 2013 to 2020 as well as updated rules for 
monitoring and reporting of emissions that are applicable from Phase 3. 

The  2030  climate  and  energy  policy  framework  (European  Commission,  2014b)  builds  on  the  2020 
climate and energy package. It puts forward a new governance framework based on national plans to 
assess  progress  over  time  as  well  as  a  reform  of  the  EU  ETS  to  address  the  surplus  of  emission 

54 

 
 
 
 
allowances  that  has  built  up  in  recent  years  and  a  binding  target  to  increase  the  share  of  renewable 
energy  and  energy  efficiency  (following  the  review  of  the  Energy  Efficiency  Directive)  by  2030.  The 
framework highlights the significant inter-linkages between climate change and energy as well as other 
policy  areas  (e.g.  environment  and  transport).  It  also  demonstrates  that  the  policy  areas  defined  for 
this  assessment  are  somewhat  broad.  For  instance,  the  2020  climate  and  energy  package  does  not 
address energy efficiency targets directly, however, they are introduced in the 2030 framework.  

Land  Use,  Land  Use  Change  and  Forestry  (LULUCF)  represents  another  cornerstone  of  the  EU's 
emission-reduction  efforts.  It  is  part  of  the  Roadmap  for  Moving  to  a  Competitive  Low  Carbon 
Economy  (European  Commission,  2011a)  and  provides  accounting  rules  that  are  meant  to  help 
strengthen the capacity of forests to preserve and capture CO2 (Decision, 529/2013/EU). While forests 
and  forestry  are  not  part  of  this  assessment,  the  LULUCF  accounting  rules  address  a  gap  in  EU's 
greenhouse  gas  inventory  opening  up  for  the  prospect  of  preserving  forests  as  carbon  sinks  in  the 
future.  This  has  been  indicated  as  one  contributor  to  increasing  indirect  costs  of  raw  materials. 
However,  efforts  towards  using  forests  for  carbon  sequestration  rest  with  the  Member  States.  So 
therefore  prospects  to  integrate  and  valorise  carbon  sequestration  under  current  regulations  and 
schemes  are  limited  and  the  direct  impact  of  LULUCF  on  the  forest-based  industries  is  difficult  to 
pinpoint  with  any  certainty.  LULUCF  also  includes  three  “harvested  wood  products”  (HWP: 
sawnwood,  wood-based  panels,  paper).  However,  the  EU’s  rules  for  accounting  these  are  yet  to  be 
adopted as legislation. 

The  Commission  report  on  indirect  land-use  change  related  to  biofuels  and  bioliquids  (European 
Commission  2010)  did  not  suggest  concrete  approaches  for  how  to  tackle  risks  arising  from  indirect 
land use change (ILUC) from increased biofuels demand and related greenhouse gas emissions, it did 
however acknowledge the problem and set the scene for further action. This was picked up in the new 
rules  that  came  into  force  in  2015  that  amend  the  current  legislation  on  biofuels,  in  particular  the 
Renewable  Energy  Directive  and  the  Fuel  Quality  Directive,  to  reduce  the  risk  of  indirect  land  use 
change  and  to  prepare  the  transition  towards  advanced  biofuels  (Directive  2015/1513).  The 
Commission  has  in  addition  acknowledged  sustainability  concerns  surrounding  biomass  production. 
However, in the absence of a EU sustainability scheme, it has suggested voluntary criteria to tackle the 
problem,  which  may  have  contributed  to  increasing  indirect  costs  as  raw  material  prices  have  risen. 
For  instance,  by  promoting  the  use  of  ligno-cellulosic  resources  as  feedstock  for  biofuels  (without 
excluding pulpwood) it becomes a multiplying factor that increase costs. Furthermore, the revision of 
the Renewable Energy Directive and Fuel Quality Directive aiming at addressing ILUC, may create an 
additional incentive to convert pulpwood into liquid fuel, which in turn may generate tensions on the 
procurement market. It is also unclear what the implications of the recent proposal for a regulation on 
the inclusion of greenhouse gas emissions and removals from land use, land use change and forestry 
into the 2030 climate and energy framework (COM/2016/479) may have. 

4.3.2  Overview of energy legislation 

Although  most  of  EU  energy  legislation  does  not  target  specific  sectors,  including  the  forest-based 
industries, it does affect the availability and the price of energy. Energy legislation affects direct energy 
costs  when  forest-based  industries  produce  their  own  electricity  as  well  as  indirectly  when  they  buy 
and  sell  it  on  the  grid.  When  Member  States  impose  taxes  on  energy  consumption,  energy  intensity, 
CO2  emissions  of  specific  energy  sources  and  renewable  energy  schemes  funding,  the  impact  of  EU 
energy  legislation  on  costs  is  direct.  Furthermore,  in  this  case,  EU  energy  legislation  have  been 
indicated  to  indirectly  impact  costs  as  power  producers  have  passed  on  part  of  their  added  costs  to 
forest-based companies purchasing power from the grid. 

The  Energy  Efficiency  Directive  (2012/27/EC)  repealed  among  other  legislative  acts,  the  Combined 
Heat and Power Directive (2004/8/EC). It establishes a common framework of binding measures for 
the promotion of energy efficiency to ensure the achievement of the 20-20-20 targets. Member States 
are  requested  to  set  their  own  energy  efficiency  plans  and  energy  efficiency  targets  for  the  period 
2014–2020  and  must  submit  those  to  the  Commission.  Under  the  directives  provisions,  large 
enterprises  (not  SMEs)  are  obliged  to  carry  out  energy  audits  every  four  years  to  identify  ways  to 

55 

 
 
 
reduce  energy  consumption.  National  energy  efficiency  measures  are  implemented  on  the  basis  of 
voluntary  agreements,  taxes,  or  incentives  including  subsidies,  tax  discounts  or  a  pay  back  of  CO2 
certificates.  The  requirements  of  the  Energy  Efficiency  Directive  generate  direct  costs  incurred  from 
substantive  obligations  for  investments  in  energy  monitoring  systems,  efficient  boilers  and 
cogeneration units as well as costs incurred from information obligations related to energy audits and 
to  administrative  procedures  for  permits  where  new  power  production  units  are  installed.  It  should 
nonetheless be noted that there are also clear incentives to comply with obligations as established by 
the directive as increased energy efficiency also generates energy cost savings. These (or any) types of 
benefits are however not accounted for in this report as it is a cost assessment.  

The Third EU Energy Package (directives 2009/72 and 2009/73, regulations 714/2009 and 715/2009) 
refers  to  the  functioning  of  the  EU  internal  energy  market.  Its  aims  at  unbundling  energy  suppliers 
from network operators while strengthening regulators independence as well as creating cross-border 
cooperation and increased market transparency. To better support the national implementation of the 
Third Energy Package the European Commission (2012) has reviewed its transposition and as a matter 
of  fact  proposed  an  Action  Plan  for  both  Member  States  and  the  European  Union,  which  does  not 
generate  direct  costs  for  the  forest-based  industries  as  energy  prices  have  dropped  following 
deregulation. 

The  Energy  Taxation  Directive  (2003/96/EC)  sets  minimum  rates  for  energy  taxation  related  to 
energy-bearing  products  (mineral  oils,  coal,  natural  gas  and  electricity)  and  the  CO2  emissions  of 
specific energy sources. It also aims to help reducing market distortions resulting from national energy 
legislation  and  that  the  measures  adopted  under  different  national  energy  legislations  and  those 
adopted  under  the  ETS  Directive  are  consistent  with  the  2020  objectives.  The  directive  impacts  the 
sectors not covered under ETS (pulp, paper and board are covered by ETS) by imposing a minimum 
tax rate based on the CO2 and the energy content of the energy consumed. The Commission presented 
a  proposal  to  revise  the  directive  in  2011,  but  this  has  been  unsuccessful  and  the  proposal  was 
withdrawn in 2015.  

The Renewable Energy Directive (Directive 2009/28/EC) establishes a common framework for the use 
of energy from renewable sources in order to limit greenhouse gas emissions and to promote cleaner 
transport. Member States have taken on binding targets to increase the share of renewable energy in 
their  energy  consumption  by  2020.  Meeting  the  targets  of  the  legislation  will  require  large-scale 
changes to current land-use patterns. The mechanism of funding for implementing national schemes 
to  develop  the  production  of  renewable  energy  is  left  to  each  Member  States  which,  in  most  of  the 
cases, use taxes and levies included in energy bills. Levies imposed by Member States vary significantly 
across  Europe,  however,  these  requirements  may  result  in  direct  costs  incurred  from  monetary 
obligations (renewables levy) charged by Member States via energy bills. This relates more directly to 
forest-based industries as it concerns the use of forest biomass for energy generation. 

The  Renewable Energy  Directive (RED) illustrates the significant inter-linkages  between climate and 
energy legislation at the  EU level. It also highlights the connection  between biomass production and 
wood  mobilisation  and  the  forest-based  industries,  although  this  is  not  part  of  this  assessment.  For 
instance,  the  non-binding  Biomass  Action  Plan  (European  Commission  2005)  was  developed  to 
promote production and use of biomass as an alternative source of energy. It has been argued by some 
in  the  forest-based  industries  that  this  non-legally  binding  component  of  the  EU’s  renewable  energy 
policy has generated indirect costs due to increasing electricity prices, transport fuels and raw material 
costs as a consequence of raw material competition. However, no hard evidence has been presented for 
this  and,  logically,  it  is  only  some  of  the  legal  provisions  of  RED  which  could  have  an  impact  on 
biomass  markets.  The  RED  also  requires  developing  a  sustainability  scheme  for  biofuels  and  bio-
liquids used for transport to avoid unsustainable biomass production because of an increasing demand 
for  renewable  energy.  In  2010  the  Commission  set  biomass  sustainability  recommendations  for 
Member States and is currently considering if and how such criteria should be made mandatory. The 
EU  has  also  adopted  a  Fuel  Quality  Directive  (2009/30/EC)  with  the  mandatory  target  to  reduce 
greenhouse gas intensity of fuels used in transport by 6% while adhering to sustainable production. 

56 

 
 
 
Pre 
2004 

 

ETS 

Table 12 Overview of Climate and Energy legislation 

Package 2: Climate & Energy legislation 

Group 1. Climate Change 

EU Emission Trading System (Decision 1359/2013/EU; 2009/29/EC; 
2003/87/EC; 96/61/E)  

Reform of the European carbon market (COM/2014/20)* 

Auctioning of greenhouse gas emission allowances (Commission Regulation 
(EU) No 176/2014; Commission Regulation (EU) No 1031/2010) 

Carbon leakage list 2015-2019 (Commission Decision 2014/746/EU) 

Carbon leakage list 2020-2024 (Stakeholder consultation analysis, issued 
17.12.2014)  

Harmonised free allocation of emission allowances (Commission Decision 
2011/278/EU) 

Standard capacity utilisation factor (Commission Decision 2013/447/EU) 

Monitoring and reporting of greenhouse gas emissions (Commission 
Regulation (EU) No 601/2012) 

2004 

2005 

2006 

2007 

2008 

2009 

2010 

2011 

2012 

2013 

2014 

2015 

 

First 
phase 

 

Second 
phase 

 

Third 
phase 

 

 

 

 

   

 

 

 

57 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Package 2: Climate & Energy legislation 

Pre 
2004 

2004 

2005 

2006 

2007 

2008 

2009 

2010 

2011 

2012 

2013 

2014 

2015 

Commission decision on the standard capacity utilisation factor pursuant to 
Article 18(2) of Decision 2011/278/EU (Commission Decision 2013/447/EU) 

Policy framework for climate and energy in the period from 2020 to 2030 
(COM/2014/15) 

Addressing the challenges of deforestation and forest degradation to tackle climate 
change and biodiversity loss (COM/2008/645)  

Land Use, Land Use Change and Forestry (LULUCF) (Decision 529/2013/EU)  

Group 2. Energy 

Renewable Energy Directive (Directive 2009/28/EC; Directive 2001/77/EC; 
Directive 2003/30/EC) 

 

Proposal for a new RES directive (COM/2012/595)** 

Energy Efficiency Directive (2012/27/EC and Council Directive 2013/12/EU; 
Directive 2004/8/EC) 

 

Implementing the Energy Efficiency Directive (COM/2013/762) 

 

 

 

Promotion of cogeneration based on a useful heat demand in the internal 
energy market (Directive 2004/8/EC) 

 

 

Third Energy Package 

Common rules for the internal market in electricity (Directive 2009/72/EC;   

 

 

 

 

 

 

 

 

 

 

 

 

58 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Package 2: Climate & Energy legislation 

Pre 
2004 

2004 

2005 

2006 

2007 

2008 

2009 

2010 

2011 

2012 

2013 

2014 

2015 

Directive 2003/54/EC) 

Common rules for the internal market in natural gas (Directive 2009/73/EC; 
2003/55/EC) 

 

Conditions for access to the natural gas transmission networks (Regulation 
715/2009; 1775/2005) 

 

Conditions for access to the network for cross-border exchanges in electricity 
(Regulation 714/2009; 1228/2003) 

Energy Taxation Directive (Directive 2003/96/EC) 

 

 

Group 3. Other  

Report on indirect land-use change related to biofuels and bioliquids 
(COM/2010/811)  

Report on sustainability requirements for the use of solid and gaseous biomass 
sources in electricity, heating and cooling (COM/2010/11)  

Biomass Action Plan  (COM/2005/628)  

 

 

 

 

 

 

 

 

 

 Adoption  Transposition or enforcement by competent authorities;  Repealed or amended;  Assessed qualitatively;  Published and/or forwarded to the Parliament and/or Council. 

* Please note that the proposal was adopted during this assessment as Decision (EU) 2015/1814 of the European Parliament and of the Council of 6 October 2015 concerning the 
establishment and operation of a market stability reserve for the Union greenhouse gas emission trading scheme and amending Directive 2003/87/EC. 

** Please note that the proposal was adopted during this assessment as Directive (EU) 2015/1513 of the European Parliament and of the Council of 9 September 2015 amending Directive 
98/70/EC relating to the quality of petrol and diesel fuels and amending Directive 2009/28/EC on the promotion of the use of energy from renewable sources. 

59 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4.3.3  Type of cost linked with the legislative package 

Monetary obligations: Climate & Energy 

Several  industries  falling  under  the  scope  of  ETS  have  received  allowances  in  excess  of  their  real 
emissions and have banked these to cover further expansion of their production capacity or to generate 
profits from trading. However, such benefits are not assessed here. Nevertheless, one of the major cost 
sources of this package concerns the purchase of CO2 allowances under the ETS system. These costs 
can vary depending on the market price of CO2 in the trading system, the amount of free allowances 
accessible in a given year, and the benchmark value setting the amount of free allowance based on the 
average best 10% of operators in the sector. The ETS also have significantly different impacts on each 
respective sub-sector, which essentially depends on how energy-intensive each sub-sector is.  

Renewable  energy  levies  are  charged  based  on  the  consumption  of  electricity.  There  are  however 
significant differences across countries and also between sub-sectors in the forest-based industries as 
some Member States exempt some energy-intensive companies from the renewable electricity support 
levies for competitiveness reasons. In addition, some companies produce their own renewable energy 
and  may  receive  subsidies  for  this.  In  other  cases,  companies  producing  their  own  energy  from 
renewable sources may pay certification fees that are counted as a cost. 

The  Energy  Efficiency  Directive  requires  an  independent  energy  audits  for  large  companies  (see  Art. 
8.4.).  In  case  of  non-compliance  with  auditing  provisions,  Member  States  may  decide  the  level  of 
penalty. 

Energy products and electricity are only taxed under the Energy Taxation Directive when they are used 
as motor or heating fuel. Energy from renewable resources is exempted from this tax. It should also be 
mentioned  that  the  directive  specifically  allows  Member  States  a  total  or  partial  exemption  or 
reduction  in  the  level  of  taxation  for  energy  used  and  electricity  produced  from  combined  heat  and 
power  generation  (so-called  “cogeneration”  or  “CHP”)  which  affects  costs  for  the  forest-based 
industries. 

Substantive obligations: Climate & Energy 

Substantive  obligations  resulting  from  ETS  include  investments  for  emission  abatement  equipment, 
energy and process efficiency beyond the so-called business as usual. Such investments are made for 
the  purpose  of  reducing  emissions,  hence,  reducing  the  purchase  of  emissions  allowances  and 
investments that would not be needed in the absence of ETS. It should also be noted that the ETS may 
cause industrial consumers to face an extra indirect cost that arises from increased production  costs. 
This would principally be  due to ETS compliance costs for electric utilities that  in turn pass on their 
costs  to  client  companies.  This  does  however  vary  considerably  between  Member  States  and  sub-
sectors depending on their activities. 

For  companies  to  contribute  to  energy  efficiency  and  renewable  energy  targets,  investments  in 
equipment  are  often  necessary.  Personnel  and  other  operating  costs  are  also  associated  with  these 
investments.  For  example,  some  companies  that  produce  in-house  electricity  have  invested  in 
equipment  that  combine  heat  and  power  generation,  resulting  in  additional  capital  and  personnel 
costs for the installation and operating costs during the operation of the co-generators.   

Administrative burden: Climate & Energy 

Compliance with the EU ETS is managed at the factory level and administrative burdens are as such 
borne by the companies themselves. These can include one-off costs for the start-up process once the 
ETS  is  going  into operation at the company level (this include  necessary investments for monitoring 
compliance  and  training  of  staff),  recurring  personnel  costs,  training  for  the  familiarisation  of  the 
system,  external  expert  costs  (hiring  a  verifier)  and  investments  into  infrastructure  necessary  for 
monitoring.  It  also  encompasses  recurring  cost  for  monitoring,  reporting  and  verification,  including 
personnel  costs,  operating  costs  and  external  costs  for  verification  (consultants,  experts  etc.). 
Regulatory changes between the ETS phases also bring some costs for the industry. For instance, direct 
emissions reported under the ETS system determine free allowances, based on benchmarks, as well as 

60 

 
 
 
the leakage list. Thus, amending the “carbon-leakage list” under the ETS Directive across phases may 
in turn cause companies which are not on the list to face increasing direct and indirect costs due to a 
shortage of free allowances. 

Similar types of costs are associated with the issuance, renewal and updating of environment permits. 
Administrative  burden  are  born  during  the  inspections  for  checking  compliance  with  the  legislation 
after the issue of permits. 

The energy audits that large companies are obliged to perform at least every four years incur personnel 
costs  for  the  organisation,  implementation  and  documentation  of  the  audit,  including  any  costs  for 
hiring external consultants. The first audits should however only be performed during 2015 and will as 
such only affect the cost during the future period in this assessment. 

The  certification  process  for  companies  producing  electricity  from  renewable  resources  generates 
personnel costs for the  preparation of all necessary documentation. Similarly, administrative  burden 
are  generated  for  the  preparation  of  the  necessary  permits  for  cogeneration.  For  example,  industrial 
players  must  in  case  of  refurbishment  of  industrial  installations  generating  waste  heat  at  a  useful 
temperature  level  with  a  total  thermal  input  >20MW  carry  out  a  cost-benefit  analysis  to  assess 
whether it is possible to introduce co-generation in heating (Directive 2004/8/EC).  

4.4  Package 3: Environmental legislation  

4.4.1  Overview of the legislative package 

The  cost  assessment  does  not  include  forestry  as  part  of  the  value  chain  and  the  emphasis  in  this 
legislative  package  is  as  such  principally  on  policies  related  to  industrial  emissions,  air  quality, 
acidifying  substances,  wastewater  emissions  and  waste  incineration.  This  includes  the  Industrial 
Emission  Directive  (IED)  (2010/75/EU)  –  as  the  successor  of  the  IPPC  Directive  (2008/1/EC,  as 
codified version of Directive 96/61/EC) starting from 1st of January 2014– the limitation of emissions 
of  volatile  organic  components  (VOC)  from  organic  solvents  Directive  (1999/13/EC),  the  Large 
Combustion  Plants  Directive  (LCPD)  (2001/80/EC),  and  the  Best  Available  Techniques  (BATs) 
reference documents (BREFs). All these legislative acts are concerned with minimising pollution from 
industrial activities. Most of these legislative acts have furthermore been repealed and replaced by the 
IED  at  this  stage,  but  are  included  in  this  assessment  as  the  study  period  covers  2005-2014  during 
which time they were still in force.  

(Commission 

(August  2007),  and  wood-based  panels 

They also include rules designed to prevent or reduce emissions into air, water and land and to prevent 
the generation of waste, in order to achieve a high level of protection of the  environment as a whole. 
BREFs  have  been  adopted  for  the  production  of  pulp,  paper  and  board  (Commission  implementing 
decision  2014/687/EU),  large  combustion  plants  (October,  2011),  waste  treatment  (August  2006), 
surface  treatment  using  organic  solvents,  including  wood  and  wood  products  preservation  with 
chemicals 
implementing  decision 
2015/2119/EU).  The  relevant  regulations  (under  the  IED)  set  the  conditions  that  industries  should 
fulfil  in  order  to  receive  permits,  and  Member  States  take  the  necessary  measures  to  ensure  that  no 
installation  is  operated  without  a  permit.  The  permit  should  include  all  the  measures  necessary  to 
achieve  a  high  level  of  environmental  protection  to  ensure  that  the  installation  is  operated  in 
accordance  with  the  general  principles  governing  the  basic  obligations  of  the  operator.  The  permit 
includes emission limit values for polluting substances, or equivalent mitigations measures, emission 
monitoring  equipment  and  appropriate  installations  to  prevent  emissions  to  air,  water,  soil  and 
groundwater. An important element of the permits is the requirement to adopt the BATs to achieve a 
high level of environmental protection. It should furthermore be noted that it is only the BATs that are 
presented on the Commission implementing decision, not the whole BREF reference document. ‘BAT 
conclusions’ is a document containing the parts of a BAT reference document (BREF) laying down the 
conclusions  on  best  available  techniques.  These  documents  are  the  reference  for  setting  the  permit 
conditions to installations covered by the IED. 

61 

 
 
 
The  Directive  on  the  Limitation  of  Emissions  of  Certain  Pollutants  from  Large  Combustion  Plants 
(“LCPD”:  Directive  2001/80/EC)  also  sets  limits  for  emissions  of  pollutants  (e.g.  sulphur  dioxide, 
nitrogen  oxides  and  dust)  emitted  from  large  combustion  plants.  It  requires  significant  cuts  in 
emissions starting 2008, with some exclusions for the years 2008-2015, if the operator agrees to not 
operate the respective plant for more than 20.000 hours. The LCPD directive was replaced by the IED 
Directive with effect from 1 January 2016, but has been included here due to it being in effect during 
the study period 2005-2014. 

The Waste Incineration Directive (2000/76/EC) aims at reducing negative effects on the environment 
caused  by  the  incineration  and  co-incineration  of  waste.  Respective  incineration  and  co-incineration 
plants must have permits specifying, among other things, categories and quantity of waste to be able to 
carry out their activities. Limit values for air emissions are also set by this directive. Residues must be 
reduced to a minimum or recycled according to the directive. Member states are required to establish 
penalties  in  case  of  non-compliance.  The  Waste  Incineration  Directive  was  also  replaced  by  the  IED 
with effect from 7 January 2014 and has been included here due to it being in effect during the study 
period 2005-2014. 

There  is  a  substantial  body  of  legislation  related  to  ambient  air  quality  and  emissions  to  air.  Among 
these  are  the  Air  Quality  Framework  Directive  (96/62/EC),  the  ambient  air  quality  and  cleaner  air 
directive (2008/50/EC) and the Clean Air Legislative package (consisting of a communication on the 
'clean air programme for Europe' and three legislative proposals on emissions and air pollution). The 
Clean  Air  Legislative  package  covers  aspects  concerned  with  reducing  national  emissions  of  certain 
pollutants  (European  Commission  2013),  limiting  emissions  into  the  air  from  medium-sized 
combustion plants below 50 MW such as energy plants (European Commission 2013). The Air Quality 
Framework Directives specifies all pollutants for which air quality standards and objectives that have 
to be introduced by Member States. The ambient air and cleaner air directive, while merging existing 
legislation into one single legal act, sets standards and target dates for reducing concentrations of fine 
particles. The total emission limit for four pollutants responsible for: acidification, eutrophication and 
ground-level  ozone  pollution  (sulphur  dioxide,  nitrogen  oxides,  volatile  organic  compounds  and 
ammonia)  are  set  by  the  National  Emission  Ceilings  Directive  (2001/81/EC)  by  each  Member  State. 
On-going discussion around the Clean Air Legislative package may however mean an extension of the 
emission  limits  past  the  present  application  deadline  of  2020  as  well  as  potentially  new  reduction 
commitments.  

The  Waste  Framework  Directive  (2008/98/EC)  establishes  basic  concepts  and  definitions  related  to 
waste  management  and  introduces  the  extended  producer  responsibility  and  the  polluter  pays 
principle  as  well  as  two  new  recycling  and  recovery  targets  (concerning  household  waste  as  well  as 
construction and demolition waste) to be achieved by 2020 at the latest. The two principles have direct 
cost  implications  for  the  industry  as  the  principle  of  extended  producer  responsibility  includes  the 
acceptance of returned products and the  waste that remains after those products have  been used, as 
well as the subsequent management of the waste and financial responsibility for such activities.  This 
includes obligation to provide publicly available information as to the extent a product is re-usable and 
recyclable.  This  principle  leads  to  direct  compliance  costs,  including  administrative  burdens  due  to 
information obligations. The polluter pays principle, which states that the costs of waste management 
shall be borne by the original waste producer or by the current or previous waste holders, also leads to 
substantive obligations for the forest based industry. Other waste-related legislation is concerned with 
landfill  (Directive  99/31/EC  and  Decision  2000/738/EC),  Waste  Water  Treatment  (Directive 
91/271/EEC), and packaging waste (PWD: Directive 94/62/EC). 

It is, aside from industry-specific legislation, also relevant to note that some environmental policy and 
legislation affect the industries directly but at an earlier stage of the value chain. Amongst these is the 
Environment  Action  Programme,  which  has  significantly  shaped  the  development  of  the  EU 
environment policy since the early 1970s and in extension also forest-based industries. The framework 
for  the  Seventh  Environment  Action  Programme  (7th  EAP)  was  accepted  by  the  Parliament  and 
Council in 2013 (Decision, 1386/2013/EU), and it proposes nine priority (or thematic) objectives that 
draw  on  a  number  of  recent  initiatives  in  the  field  of  environmental  policy,  including  the  Resource 

62 

 
 
 
Efficiency  Roadmap  (European  Commission,  2011b),  the  EU  2020  Biodiversity  Strategy  (Resolution, 
2011/2307(INI))  and  the  Low  Carbon  Economy  Roadmap  (European  Commission,  2011a).  These 
policy documents highlight the interrelations  between different policy areas at different stages of the 
value chain, including stages that are not included in this assessment.  

The  legally  binding  Natura  2000  network  arguably  represents  a  cornerstone  of  the  EU 
environmental  policy  that,  arguably,  also  affects  earlier  parts  of  the  value  chain  not  included  in  this 
assessment.  It  is  composed  of  the  Birds  Directive  (2009/147/EC),  which  sets  out  a  bird-protection 
regime  and  the  Habitats  Directive  (92/43/EEC),  which  sets  out  protection  regime  for  habitats  and 
other  species  on  EU  level.  It  aims  to  facilitate  an  integrated  conservation  approach  that  combines 
conservation goals with traditional land uses. The type of actions under the Natura 2000 network are 
principally  seen  as  having  indirect  implications  for  the  forest-based  industries,  especially  as  it  may 
have caused prices for raw materials to increase. It was only evaluated on a qualitative basis in the in-
depth  interviews.  It  has  been  estimated  that  the  amount  of  wood  not  available  for  industry  due  to 
biodiversity legislation is 68 million tonnes per year (EFI 2008). 

The  Environmental  Liability  Directive  (2004/35/EC)  establishes  a  framework,  based  on  the  polluter 
pays principle, to prevent or remedy environmental damage on protected species and natural habitats, 
water and soil. Companies  carrying out dangerous activities as listed in the directive fall under strict 
liability, companies pursuing other activities  not directly covered by the directive are liable for fault-
based  damage  to  protected  species  or  natural  habitats.  This  can  create  enforcement  costs  (however, 
not  part  of  this  cumulative  assessment  exercise)  after  a  causal  link  between  activities  and  damages 
have been established.  

Phytosanitary  regulations  –  covering  a  collection  of  food  safety  and  animal  and  plant  health  related 
regulations – set criteria for goods entering the EU as these must be in accordance with sanitary and 
phytosanitary requirements to prevent the entry and  spread of diseases and pests into new areas. In 
this  case,  forest-based  industries  may  be  affected  when  there  are  requirements  for  phytosanitary 
certificates for regulated articles. It is in particular manufacturers of wood packaging that are affected 
by  specific  rules  targeting  their  products  (wooden  pallets  and  other  wooden  packaging)  that 
incorporate the standard for phytosanitary treatment and related marking (e.g.  ISPM 15 FAO/IPPC). 
For instance, any wood packaging for export must meet the requirements of the country where it was 
manufactured  as  well  as  the  requirements  of  the  destination  country.  Direct  costs  (fees,  charges  and 
administrative burden) are related to attaining a certificate as well as in that should a consignment fail 
inspection, the importer will have to carry the penalty cost. 

63 

 
 
 
 
Table 13 Overview of Environmental legislation 

Package 3: Environment legislation 

Group 1. Industrial Emissions 

Industrial Emissions Directive (Directive 2010/75/EU) 

Reducing emissions of volatile organic compounds (VOCs) (Directive 
1999/13/EC) 

Waste incineration (Directive 2000/76/EC) replaced by the IED (Directive 
2010/75/EU) but applicable until January 2014 

Integrated pollution prevention and control (IPPC Directive) (Directive 
2008/1/EC) replaced by the IED (Directive 2010/75/EU) but applicable until 
January 2014 

Pre 
2004 

 

 

Limitation of emissions of certain pollutants from large combustion plants 
(Directive 2001/80/EC) 

 

Best Available Techniques References (BREFs) 

Production of Pulp, Paper and Board (Commission implementing decision 
2014/687/EU) 

Production of Wood-based Panels (Final draft - July 2014) 

Wood and Wood Products Preservation with Chemicals (Review just started) 

Waste Treatment (Reference document - August 2006) 

 

2004 

2005 

2006 

2007 

2008 

2009 

2010 

2011 

2012 

2013 

2014 

2015 

 

 

 

 

 

 

 

 

 

64 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Package 3: Environment legislation 

Surface Treatment using Organic Solvents (Reference document - August 
2007) 

 

Pre 
2004 

2004 

2005 

2006 

2007 

2008 

2009 

2010 

2011 

2012 

2013 

2014 

2015 

Group 2. Air Quality 

Clean Air Legislative package (COM/2013/918)  

Proposal Directive on reduction of national emissions of certain atmospheric 
pollutants (COM/2013/920)  

Proposal Directive on the limitation of emissions of certain pollutants into the 
air from medium combustion plants (COM/2013/919)*  

Air Quality framework Directive (Directive 96/62/EC) 

National Emission Ceilings (NEC) (Directive 2001/81/EC) 

Ambient air quality and cleaner air for Europe (Directive 2008/50/EC) 

Group 3. Waste Management  

Waste Framework Directive (Directive 2008/98/EC) 

Waste Water Treatment Directive (Directive 91/271/EEC) 

Packaging and Packaging Waste Directive (Directive 94/62/EC) 

Proposal for a new Packaging and Packaging Waste Directive 
(COM/2013/761)** 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

65 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Package 3: Environment legislation 

Proposal for amending Directives 2008/98/EC on waste, 94/62/EC on 
packaging and packaging waste, 1999/31/EC on the landfill of waste, 
2000/53/EC […] (COM/2014/397)*** 

Landfill of waste (Directive 99/31/EC) 

Implementation of Directive 1999/31/EC on the landfill of waste (Decision 
2000/738/EC) 

Group 4. Environment  

Environmental liability with regard to the prevention and remedying of 
environmental damage (Directive 2004/35/CE) 

Phytosanitary Import Regulation (e.g., International Standards for Phytosanitary 
Measures No. 15 (ISPM 15) developed through the International Plant Protection 
Convention) 

7th Environment Action Programme (Decision 1386/2013/EU)  

Pre 
2004 

 

 

 

 

2004 

2005 

2006 

2007 

2008 

2009 

2010 

2011 

2012 

2013 

2014 

2015 

 

 

Natura 2000 (including Habitats Directive 92/43; Birds Directive 2009/147)    

 

 

 Adoption  Transposition or enforcement by competent authorities;  Repealed or amended;  Assessed qualitatively;  Published and/or forwarded to the Parliament and/or Council. 

* Please note that the proposal was adopted during this assessment as Directive (EU) 2015/2193 of the European Parliament and of the Council of 25 November 2015 on the limitation of 
emissions of certain pollutants into the air from medium combustion plants. 

** Please note that the proposal was adopted during this assessment as Directive (EU) 2015/720 of the European Parliament and of the Council of 29 April 2015 amending Directive 
94/62/EC as regards reducing the consumption of lightweight plastic carrier bags. 

*** Please note that the proposal on waste has been withdrawn and a new package has been proposed (see COM/2015/0593, COM/2015/0594, COM/2015/0595, COM/2015/0596). 

66 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4.4.2  Type of cost linked with the legislative package 

Monetary obligations 

Under  the  scheme  of  the  IED,  companies  have  to  pay  charges  and  fees  associated  with  industrial 
activities  at  the  national  level  that  require  a  licence  and/or  emission  permit.  There  are  monitoring 
agencies and/or inspection requirements that may generate direct charges. These include for example 
costs  related  to  the  inspection  and  monitoring  requirements  or  permits  for  incineration  and  co-
incineration plants. Other costs can be associated with control, monitoring or inspection requirements 
linked to air quality standards. Taxes and fees might also apply when wastes end up in landfills, which 
vary according to national legislation.  

Substantive obligations 

Companies  operating  under  a  permit  based  on  IED  must  invest  in  BATs.  These  may  generate,  in 
general  terms,  three  types  of  cost  in  connection  with  investment  costs  (i.e.  resources  invested  in  the 
retrofitting  of  plants  and/or  in  the  adoption  of  more  environmentally-friendly  technologies),  and 
operating expenses (i.e. incremental expenses associated with environmental protection investments, 
such as the maintenance of new equipment or facilities, or the implementation of other environmental 
protection  measures, such  as the  incremental  expenses associated with the use of higher  quality raw 
materials). 

Compliance  costs  arise  for  the  forest-based  industries  because  of  establishing  BATs  for  permitted 
installations. Permit conditions are regularly updated by Member States (see Art. 14/3). There are also 
compliance  costs  for  permits  as  regards  to  waste  treatment  (incineration)  for  companies  that  treat 
waste  themselves.  Indirect  costs  only  arise  through  an  increased  cost  for  employing  waste-trading 
companies further down the value chain as well as upstream, where all supply of paper for recycling is 
also under the waste legislation. 

The Air Quality Directive set limits for emissions to air and requires monitoring, control and emissions 
abatement  equipment,  such  as  exhaust  fumes  recycling  and  treatment,  sulphur,  dust  and  particulate 
matters removal, NOx and VOC catalytic burners, and process equipment that goes beyond “business-
as-usual” practices. Personnel costs and other operating costs are also associated with the investments 
noted above.   

Investments for waste-water treatment can include the installation of secondary or tertiary treatment 
and  related  measurement  systems  to  monitor  an  installation.  Investment  is  also  necessary  for 
collecting and processing returned products and wastes in accordance with the principle of extended 
producer  responsibility.  Personnel  costs  and  other  operating  costs  are  also  associated  with  these 
obligations. Indirect costs arise in the form of higher costs paid by operators as a result of the effects of 
EU environmental legislation on operators active in other stages of the value chain, typically suppliers 
of key inputs. In the case of EU environmental legislation, indirect costs relate to the higher prices of 
electricity  paid  by  producers  as  a  result  of  compliance  costs  incurred  by  power  plants  in  order  to 
conform to emission limits stipulated in EU legislation. 

Administrative burden 

Administrative  burden  associated  with  the  IED  refer  to  expenses  that  incur  for  the  fulfilment  of 
administrative obligations as stipulated in the legislation, such as the costs related to the registration, 
the notification or the permitting of certain activities or the costs sustained for  the supply of data or 
information  for  monitoring  or  policy  making  purposes.  Two  categories  of  administrative  burden 
the 
incurred 
issuance/renewal/updating  of  the  Integrated  Environmental  Permits  (IEP)  and  costs  connected  with 
carrying out of inspections for checking compliance  with the conditions  based  on which the  IEP was 
issued. 

considered,  namely, 

producers  were 

associated  with 

costs 

the 

by 

To  comply  with  the  waste  management  legislation,  several  documents  and  information  should  be 
provided depending on the type of product and the waste management method applied. These include: 

67 

 
 
 
the preparation of waste documentation for checks at landfill gates, the provision of publicly available 
information as to the extent to which the product is re-usable and recyclable, packaging and labelling 
of  hazardous  wastes  as  well  as  keeping  records  for  the  waste  management  of  hazardous  products, 
including  information  such  as  the  quantity,  nature  and  origin  of  the  waste,  and,  where  relevant,  the 
destination,  frequency  of  collection,  mode  of  transport  and  treatment  method  foreseen  in  respect  to 
the  waste.  This  may  generate  a  significant  increase  in  administrative  burden  since  companies 
producing or dealing with non-hazardous waste will have to keep records on the quantity, nature and 
origin of the waste. 

Administrative  burden  associated  with  phytosanitary  certification  and  inspection  arise  for  those 
companies that import from non-EU countries (including wood, plants and plant products other than 
wood)  and/or  export  to  countries  that  require  certification.  For  instance,  if  a  specific  good  does  not 
comply with the import requirements they may be rejected and companies would effectively loose the 
shipment. There is consequently an interest in ensuring that the phytosanitary certification is properly 
applied, which in turn generate an administrative burden for the company in question. 

4.5 

 Package 4: Forest-related legislation  

4.5.1  Overview of the legislative package 

This assessment focuses on industries that are dependent on forest products (in this case woodworking 
as well as pulp, paper and paperboard industries) and on EU legislation that impose a direct cost for 
forest-based companies. It is as such relevant to note that the right to formulate forestry policy in the 
EU  is  retained  by  each  Member  State,  which  has  its  own  national  forest  laws  and  regulations.  Legal 
action with an impact on forest-based industries is as such principally taken in other policy areas (e.g. 
energy, climate and the environment). Nonetheless, despite the absence of a EU forest policy, there is 
the  EU  Forest  Strategy  and  the  now  concluded  Forest  Action  Plan  (FAP)  that  as  non-legally  binding 
documents provided a framework for forest action.  The new forest strategy was issued in September 
2013  (European  Commission,  2013b)  and  it  responds  to  the  new  challenges  facing  the  forest-based 
sector. The strategy identifies key principles needed to strengthen sustainable forest management and 
improve competitiveness and job creation, in particular in rural areas, while ensuring forest protection 
and delivery of ecosystem services. The strategy also specifies how the EU wishes to implement forest-
related policy. One of the main developments has for example been to bring the forest strategy in line 
with the 20-20-20 targets. The strategy and the action plan is not part of this assessment, as it was not 
considered  to  generate  any  significant  costs  for  the  forest-based  industries  during  the  prioritisation 
process.  It  is  only  noted  here  as  it  provides  a  background  for  what  is  generally  considered  as  forest-
related policy at the EU level. 

For  this  cost  assessment,  forest-related  policy  rather  refers  exclusively  to  the  EU  Timber  Regulation 
(Regulations 995/2010, 607/2012 and 363/2012) and the Forest Law  Enforcement, Governance and 
Trade  (FLEGT)  Regulations  (Regulations  2173/2005  and  1024/2008),  concerned  with  stopping  the 
circulation  of  illegally  logged  wood.  The  FLEGT  Regulations  aims  to  reduce  illegal  logging  by 
strengthening sustainable and legal forest management, improving governance and promoting trade in 
legally produced wood outside the EU. As part of the process to tackle these issues, the EU Action Plan 
for Forest Law Enforcement, Governance and Trade (the FLEGT Action Plan) was published in 2003 
to  help  improve  forest  governance  and  reduce  levels  of  illegal  wood  harvesting  and  related  trade, 
including  the  prevention  of  the  import  of  illegal  wood  into  the  EU  from  FLEGT  partner  countries. 
FLEGT’s  prime  aim    is  to  improve  the  supply  of  legal  wood  in  those  countries  and  to  increase  the 
demand for wood coming from responsibly managed forests. It also covers aspects such as promoting 
public  procurement  policies,  supporting  private-sector  initiatives  and  .  The  FLEGT  Action  Plan,  and 
especially  its  Voluntary  Partnership  Agreements  (VPAs)  between  wood-producing  countries  and  the 
EU, aims to ensure that wood from those countries being sold in the EU is verifiably legally logged and 
traded. VPAs are based on the national laws in each producing country (as bilateral trade agreements) 
and all have to date been endorsed by the national government, civil society and companies, as well as 
the main EU institutions (Commission, Council and Parliament). The VPAs ensure that wood can be 
traced back to its point of origin. This is foreseen via legality assurance schemes (LAS), which provide 

68 

 
 
 
traceability for any wood consignment from its point of origin in the forest right down to its point of 
export to the EU. At the latter, a “FLEGT legality licence” may be issued which must accompany that 
consignment  to  the  EU  and  which  forms  part  of  the  administrative  procedure  for  release  to  the  EU 
market. 

The  EU  Timber  Regulation  (EUTR:  Regulation,  995/2010)  as  part  of  the  implementation  of  the 
FLEGT Action Plan, came into effect in 2013 . The EUTR lays down the obligations of operators who 
place wood and wood products on the EU market for the first time. It prohibits the selling of illegally 
harvested  wood  or  wood  products  derived  from  such  wood  and  requires  those  operators  to  exercise 
“due diligence”. The EUTR outlines the due diligence obligations  as a so-called Due Diligence System 
(DDS). To this end, operators may devise their own DDS or use a proprietary scheme, hired or loaned 
from  a  monitoring  organisation  (MO).  Wood  carrying  a  FLEGT  licence,  or  CITIES  permit,  is 
considered to comply with the EUTR. 

It furthermore requires traders (i.e. those downstream of the first placing on the EU market) of wood 
and  wood  products  to  keep  records  of  their  suppliers  and  customers.  The  Commission  has  also 
adopted  procedural  rules  for  the  recognition  and  withdrawal  of  recognition  of  monitoring 
organisations  (Commission  Delegated  Regulation  363/2012)  and  has  also  adopted  an  implementing 
regulation  on  the  risk  assessment  and  risk  mitigation  measures  that  are  part  of  the  due  diligence 
system, as well as on the frequency and nature of checks that competent authorities will conduct on the 
monitoring  organisations,  to  ensure  they  comply  with  all  requirements  (Commission  Implementing 
Regulation  607/2012).  In  addition  to  the  regulation  itself,  the  Commission  has  also  released  the  EU 
Timber  Regulation  Guidance  Document  in  2013  (European  Commission  2013e).  The  Guidance 
Document  provides  explanations  on  certain  aspects  of  the  EUTR  and  it  attempts  to  explain  the 
provisions of the EUTR. For instance, the document  defines operators according to how the  wood is 
made available on the EU market, which varies depending on whether the wood is harvested inside or 
outside the EU. 

Together, the EUTR and the other FLEGT regulations aim at preventing illegal wood being placed on 
the EU market, and thus indirectly to help promote sustainable forest management in countries which 
supply wood to the EU.  

An  independent  evaluation  on  the  effectiveness  of  the  EU  Timber  Regulation  -  covering  its  first  two 
years of implementation - has been published. (Terre Environnement Aménagement 2016). The EUTR 
evaluation  report  reviews  the  functioning  and  effectiveness  of  the  EUTR  according  to  the  EU  'Better 
Regulation'  guidelines.  It  notes,  amongst  other  things,  that  the  EUTR  has  been  “highly  relevant  for 
tackling  illegal  logging  and  related  trade  by  changing  market  behaviour  patterns  and  progressively 
establishing  supply  chains  free  of  illegally  harvested  timber”.21  However,  it  also  notes  that  so  far  the 
overall  implementation  of  the  EUTR  remains  insufficient  and  that  there  are  still  four  not  fully 
compliant Member States,  coupled together  with  them allocating  insufficient resources to competent 
authorities in charge of enforcement of the EUTR. At  the same time, awareness  amongst the  private 
sector still needs to improve, especially amongst SMEs and micro firms, whilst amongst those which 
are already aware of the EUTR and its implications, few - mostly the largest firms - engage monitoring 
organisations. 

21 See http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52016SC0033&from=EN. 

69 

 
 
 
 
                                                             
Table 14 Overview of Forest-related legislation 

Package 4: Forest-related legislation 

Measures concerned with illegally logged wood 

EU Timber Regulation (Regulation 995/2010, Commission Implementing 
Regulation 607/2012 and Commission Delegated Regulation 363/2012) 

Pre 
2004 

2004 

2005 

2006 

2007 

2008 

2009 

2010 

2011 

2012 

2013 

2014 

2015 

FLEGT Regulation (Council Regulation 2173/2005; Commission Regulation 
1024/2008) 

 

 

A blueprint for the EU Forest-based Industries (woodworking, furniture, pulp & 
paper manufacturing and converting, printing) (SWD/2013/343)  

Innovative and sustainable forest-based industries in the EU - A contribution to 
the EU's growth and jobs strategy (COM/2008/113)  

 

 

 

 

◦ 

 Adoption  Transposition or enforcement by competent authorities;  Repealed or amended;  Assessed qualitatively;  Published and/or forwarded to the Parliament and/or Council. 

70 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4.5.2  Type of cost linked with the legislative package 

Monetary obligations 

The EUTR is not expected to generate any significant monetary obligations, as the associated costs are 
primarily associated with substantive and administrative burden, as will be outlined below. However, 
if a company has decided to outsource its due-diligence system, there may be fees and charges linked 
to the monitoring organisation in charge. Examples include using a system provided by a monitoring 
organisation and/or chain-of-custody certification schemes (e.g. PEFC Chain of Custody certification) 
to assist with compliance of EUTR requirements along the supply chain and as a tool to carry out risk 
assessment  and  risk  mitigation  in  a  due  diligence  system.  However,  it  should  be  noted  that 
outsourcing  the  DDS  by  buying  such  certified  products  does  not  mean  outsourcing  the  liability  for  a 
firm to be in compliance with the DDS aspects of the EUTR. In this context, certification is only one 
tool to help address risk mitigation within a firm’s overall due diligence approach. 

FLEGT  may  include  cover  charges  and  fees  associated  with  obtaining  a  validated  FLEGT  licence  as 
part of the cost of certification for companies of the forest-based sectors. 

Substantive obligations 

Companies  may  have  invested  in  new  equipment  and  procedures,  ranging  from  the  procurement  of 
new  computers  and  software  to  developing  new  capacities  for  proper  system  implementation  of  the 
EUTR. This would for example concern capabilities to access information about the materials and/or 
assess and/or mitigate the risks associated with placing materials on the market as part of complying 
with EUTR requirements for a Due Diligence System (DDS).  

While the FLEGT licensing system is set up in the producing country outside the EU, similar types of 
investments may be applicable to the FLEGT Regulations as part of developing due care procedures or 
wood  legality  assurance  systems.  Companies  may  invest  in  equipment  or  procedures  aimed  at 
eliminating illegally harvested wood from their supply chains.  

Substantive  costs  may  also  include  costs  for  maintaining  these  procedures  and  equipment  acquired 
due to the EUTR and FLEGT.  

Administrative burden 

The  most  important  impact  from  the  EUTR  is  that  it  requires  a  proof  of  legality.  That  means  the 
companies cannot do business-as-usual, where they just buy the products and expect them to be legal. 
Now they have to follow through and get verification of legality. Administrative burden are associated 
with  personnel  costs  in  connection  with  the  operation  of  DDS  systems  or  when  assessing  the  risk  of 
illegality of harvested wood and wood-based products.22  

The  FLEGT  Action  Plan  includes  a  number  of  measures  to  ensure  that  wood  and  wood  products 
imported into the EU have been legally harvested or manufactured from legally harvested  wood. One 
of the key measures is a licensing scheme for the prevention of illegal logging and related trade coming 
into  the  European  Union  (EU).  The  licensing  scheme  is  part  of  the  VPAs  that  are  negotiated  with  a 
number of countries. Administrative burdens are in this case associated with the personnel in charge 
of certification, practical strategies, tools and mechanisms to reduce the risk of importing illegal  wood 
from the exporting country. 

4.6 

 Package 5: Employment legislation  

4.6.1  Overview of the legislative package 

The  EU  complements  policy  initiatives  taken  by  individual  EU  Member  States  by  setting  minimum 
standards  in  employment  law.  For  forest-based  industries,  employment  is  as  such  influenced  by 

22 Since printed products are not covered by the EUTR, non-EU producers putting printed products on the EU market do not 
have to carry the costs associated with compliance with the EUTR, which is to the disadvantage of EU producers. 

71 

 
 
 
                                                             
several  EU  policies  and  measures.  Amongst  these  is  the  Working  Time  Directive  (Directive, 
2003/88/EC) that aims at  protecting  workers’ health and safety by establishing  minimum standards 
applicable throughout the EU concerning working hours, including limits to weekly working hours and 
minimum daily rest periods. The Commission is currently reviewing the Working Time Directive and 
is  carrying  out  an  impact  assessment,  which  builds  on  a  previous  consultation,  studies  and  further 
analysis  of  possible  options  (European  Commission,  2010),  which  may  have  implications  for  the 
future.  For  instance,  basic  rules  governing  the  48  hour  limit  on  average  weekly  working  hours,  “on-
call” rules, rights to daily rest breaks and paid annual leave, may bear costs for the industry. 

Furthermore,  there  is  a  legal  framework  as  regards  to  health  and  safety  at  work  (Directive, 
89/391/EEC), including the European Community Strategy for Health and Safety at Work for the 2007 
to  2012  period  (European  Commission,  2007).    This  Strategy  includes  in  particular  Directive 
2004/37/EC23, Article 4(1) of which invokes the obligation on an employer to substitute a carcinogenic 
or  mutagenic  substance/mixture/process  by  a  less  hazardous  one,  insofar  as  it  is  technically 
possible,  regardless of whether or not there is an OEL established in Annex III to that Directive. (This 
concerns  substances/mixtures  meeting  the  criteria  for  classification  as  a  category  1A  or  1B 
carcinogen/germ  cell  mutagen  category  1A  or  1B  according  to  the  CLP  Regulation,  regardless  of 
whether  or  not  there  is  a  harmonised  classification  agreed  at  EU  level,  and  also  for  so-called 
carcinogenic/mutagenic process-generated substances listed in Annex I to the Directive). 

Directive  2004/37/EC  also  imposes  an  obligation  on  an  employer  to  perform  a  risk  assessment  -  of 
which  a  hazard  assessment  is  a  pre-condition  (Article  3),  as  well  as  to  provide  workers'  training 
(Article 11), including updates to take account of new or changed risks. 

The  Strategy  has  recently  been  updated  by  the  adoption  of  the  Strategic  Framework  on  Health  and 
Safety at Work 2014-2020 (European Commission, 2014a). In line with the Europe 2020 Strategy, the 
new  framework  identifies  key  challenges  and  strategic  objectives  for  health  and  safety  at  work  (e.g. 
prevention  of  work-related  diseases),  presents  key  actions  (e.g.  consolidating  national  health  and 
safety  strategies)  and  identifies  instruments  to  address  these  (e.g.  European  Social  Fund).  The  basis 
for the directive and subsequent strategies are to prevent risks,  promote safer and healthier working 
conditions,  with  an  emphasis  on  the  well-being  and  health  of  workers.  It  also  aims  to  improve 
company productivity and competitiveness.  

Most of the arguments for worker health and safety are based on benefits; though it is stressed that the 
benefits  of  this  legislation  in  providing  protection  are  not  covered  by  this  CCA.  However,  it  is 
important to remember that poor workplace safety and health costs money. What’s more, case studies 
show that good OSH management in a business is linked to improved performance and profitability. 
For information on benefits, the reader may refer to the dedicated section of the EU OSHA web site on 
Good  OSH  is  good  for  business  (https://osha.europa.eu/en/themes/good-osh-is-good-for-business);  
Examples of the implementation, such as having to invest in occupational safety and health measures 
(e.g. training of personnel  and having to buy  new safety equipment).  This is  particularly relevant for 
some  sub-sectors  of  the  forest-based  industries  that  are  more  labour-intensive  and  that  may  have 
riskier working environments than others. Examples concern carrying and handling heavy loads, the 
Classification,  Labelling  and  Packaging  (CLP)  regulation  and  other  types  of  exposure  to  chemicals, 
risks from loud noise and vibrations. 

Three  lists  of  indicative  occupational  exposure  limits  have  been  published  since  the  year  2000 
(Directive  2000/39/EC,  2006/15/EC,  2009/161/EC)  as  implementation  of  Directive  98/24/EC 
concerning risks related to chemical agents at work. Necessary preventive measures have to be taken 
and risks have to be reduced or eliminated in case chemical agents are present in a workplace. This can 
of course create costs both in terms of training on how to deal with chemicals as well as investments in 
equipment to prevent accidents.  

23 Directive 2004/37/EC of the European Parliament and of the Council of 29 April 2004 on the protection of workers from the 
risks related to exposure to carcinogens or mutagens at work (Sixth individual Directive within the meaning of Article 16(1) of 
Council Directive 89/391/EEC). 

72 

 
 
 
                                                             
Table 15 Overview of Employment legislation 

Package 5: Employment legislation 

Group 1. Health and Safety at Work 

Working Time Directive (Directive 2003/88/EC) 

Health and safety at work (Directive 89/391/EEC amended by 2007/30/EC) 

Pre 
2004 

 

 

2004 

2005 

2006 

2007 

2008 

2009 

2010 

2011 

2012 

2013 

2014 

2015 

First list of indicative occupational exposure limit values (Directive 2000/39/EC)   

Second list of indicative occupational exposure limit values (Directive 
2006/15/EC) 

 

 

Third list of indicative occupational exposure limit values (Directive 2009/161/EC) 

 

 

 Adoption  Transposition or enforcement by competent authorities;  Repealed or amended;  Assessed qualitatively;  Published and/or forwarded to the Parliament and/or Council. 

73 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4.6.2  Type of cost linked with the legislative package 

Monetary obligations 

No  specific  monetary  obligations  have  been  identified  for  this  package.  However,  depending  on 
national  legislation  (e.g.  social  security  systems),  there  may  be  fees,  taxes  or  costs  associated  with 
ensuring health and safety in the workplace. 

Substantive obligations 

In order to comply with the health and safety standards and reduce risk,  companies need to invest in 
safety equipment, including procedures to ensure the safety of the work equipment made available to 
workers,  buying  new  personal  protective  equipment,  or  equipment  to  limit  exposure  to  hazardous 
substances.  Obligations  include  the  provision  of  adequate,  comprehensible  information  (e.g.  written 
instructions) on the work equipment. There are also additional personnel and other operating costs for 
the  maintenance  and  adaptation  of  equipment  to  meet  changes  in  legislation  or  other  systems  to 
protect  the  health  and  safety  of  workers  (e.g.  risks  related  to  chemical  agents).  Training  is  as  such  a 
recurring cost associated with health and safety standards.  

Substantive costs associated with the Working Time  Directive include procedures and equipment for 
extra  protection  for  night  work,  systems  put  in  place  to  monitor  working  hours,  or  protection  and 
prevention facilities. 

Generally  speaking,  requirements  for  health  and  safety  are  however  most  often  part  of  a  company’s 
standard  day-to-day  practice  and  do  not  signify  additional  cost.  Indicative  examples  are  the 
requirement  for  good  technical  maintenance  of  the  workplace,  adequate  hygiene  conditions  or  good 
maintenance  of  equipment.  In  all  these  cases,  this  cost  is  regarded  as  “business  as  usual”  and  is 
excluded from the calculations. 

Administrative burden 

Administrative  burdens  associated  with  health  and  safety  standards  includes  personnel  costs  for  the 
preparation  of  audits  and  carrying  out  regular  health  checks,  as  well  as  for  personnel  in  charge  of 
assessing  whether  protective  equipment  satisfies  all  requirements,  or  developing  new  measures  for 
handling  hazardous  substances,  such  as  training  on  equipment  having  specified  risks  or  on  how  to 
handle chemical agents. 

The Working Time Directive generates an administrative burden associated with obligations to inform 
the  authorities  responsible  for  health  and  safety  matters  if  the  company  is  using  night-time  workers 
frequently, as well as personnel in charge of monitoring of working hours. Forest-based companies are 
also affected by obligations to ensure that they do not exceed the legal limit,  rules governing “on-call” 
time (when the worker is on call) and the opt-out (the right of workers to opt out of the maximum 48-
hour working week) from the Directive.  

4.7 

 Package 6: Products legislation  

4.7.1  Overview of the legislative package 

There are several significant regulations that have a direct impact on how products can be developed 
and produced by forest-based companies. Amongst others, these include voluntary instruments, such 
as  the  EU  Eco-labels  (Regulation  880/92,  1980/2000,  66/2010)  for  tissue  paper,  converted  paper 
products,  newsprint  paper,  printed  paper,  copying  and  graphic  paper  and  for  wooden  furniture  and 
wooden floor coverings. Fees apply for the Eco-labelling process, however, since labelling is voluntary, 
companies may choose not to get a license.  

In  order  to  improve  consumer  product  safety,  the  EU  has  applied  a  General  Products  and  Safety 
Directive  (2001/95/EC).  The  main  requirement  of  the  Directive  is  that  companies  must  ensure  that 
items on sale are safe for consumers and to take corrective action and inform consumers of the risks 

74 

 
 
 
associated  with  the  products  they  supply  when  that  is  found  not  to  be  the  case.  They  must  take 
appropriate measures to reduce such risks and be able to trace dangerous products. Standards under 
this directive have been developed to further insure consumers’ safety.  

EU regulations have also been adopted as regards food packaging and food safety. Among these, two 
are  particularly  relevant  for  the  forest-based  industries  producing  products  and  materials  that  come 
into  contact  with  food.  Regulation  (1935/2004)  provides  for  a  harmonised  EU  legal  framework  by 
laying  down  common  rules  for  packaging  materials  and  articles  intended  to  come  into  contact  with 
food. This is to avoid that food be contaminated, since that can be harmful to human health, and also 
that  the  food  composition,  taste  and  odour  are  not  changed  in  unacceptable  ways.  17  groups  of 
materials and articles (including cork) were identified by this regulation where specific measures have 
to  be  adopted.  Furthermore,  the  Good  Manufacturing  Practice  (Directive  2003/94/EC)  for  materials 
and  articles  intended  to  come  in  contact  with  food  (Regulation  2023/2006)  provides  for  a  well-
controlled  manufacturing  process  in  conformity  with  regulation  1935/2004  through  all  stages  of  the 
manufacturing chain as related to food contact materials.  

The  Tobacco  Products  Directive  (2001/37/EC;  2014/40/EU)  was  included  as  part  of  the  legislation 
concerned with packaging, as it sets in place more stringent rules  specifically for tobacco and related 
products, such as  pack design, including shape, size and materials.  The directive lays down rules  for 
the  manufacture,  presentation  and  sale  of  tobacco  and  related  products.  For  instance,  producing 
companies are obliged to hand in detailed reports on ingredients used in their tobacco products.  

Other  cornerstones  for  product-related  policies  are  measures  that  relate  to  human  health.  EU 
chemicals  legislation  applies  to  all  sectors  including  the  forest-based  industries  and  deals  with 
chemicals  along  e  entire  supply  chains.  Most  important  amongst  these  may  be  the  Registration, 
Evaluation,  Authorisation  and  Restriction  of  Chemicals  (REACH)  (Regulation  1907/2006; 
2013/505/EU), which provides a comprehensive legislative framework for chemicals manufacture and 
use  in  Europe.  It  introduced  an  integrated  system  of  registration  and  authorisation  for  all  chemical 
substances and products containing chemical substances produced or supplied in the EU. In addition, 
previous  legislation  regulating  restricted  chemicals  was  introduced  in  REACH.  It  has  shifted  the 
responsibility for ensuring  that chemicals produced,  imported into, sold and used in the  EU are safe 
from public authorities to the industry.  

REACH  has  assigned  technical,  scientific  and  administrative  aspects  of  the  implementation  of  the 
regulation  to  a  EU  agency,  the  European  Chemicals  Agency  (ECHA).  Companies  manufacturing  or 
importing chemicals in quantities of one tonne or more per year must register in a central database . 
To obtain the right to market, companies should provide information on the properties of substances 
as well as the management measures for a proper use and handling. This information varies according 
to  the  tonnages  in  which  the  specific  substances  are  manufactured  or  imported.  Firms  are  also 
requested to identify and manage hazards linked to substances manufactured or marketed in the EU. 
Companies  must  identify  and  manage  any  hazards  linked  to  the  substances  they  manufacture  and 
market  in  the  EU  and  the  associated  risks.  They  must  demonstrate  how  to  use  their  products  safely 
and inform users of any risk management measures they should take to ensure safe use throughout the 
supply chain. 

The  Biocidal  Product  Regulation  (ECHA  Regulation  528/2012)  concerns  the  placing  on  the  market 
and use of biocidal products. All those products require authorisation before they can be placed on the 
EU  market.  A  dedicated  register  is  used  for  submitting  applications  and  to  exchange  data  and 
information between companies, ECHA and Member States. 

The  Classification,  Labelling  and  Packaging  (CLP:  Regulation  1272/2008)  entered  into  force  in 
January  2009.  It  has  progressively  replaced  previous  legislation  on  dangerous  substances  (amended 
twice, in 2010 and 2015) and became fully effective in 2015. It ensures that hazards linked to chemicals 
are clearly communicated to EU workers and consumers. The CLP classification and labelling method 
is based on the United Nations’ Globally Harmonised System. Any supplier of chemicals must classify, 
label and package substances and mixtures according to the CLP Regulation. Obligations apply along 

75 

 
 
 
the  whole  supply  chain  and  each  operator  (such  as  manufacturers,  distributors,  transporters, 
manufacturers of mixtures) must abide  by these rules. When a hazardous substance is placed on the 
market,  ECHA  must  be  notified  of  its  classification  and  labelling  within  one  month  of  placing  the 
substance on the market for the first time. The classification of substances and preparations placed on 
the market depends on the toxicology and the hazard of the substance. The classification of substances 
can be reviewed on a voluntary basis  (self-classification)  or at the demand of  national  authorities, in 
some cases, the decision on the classification of substances is even taken at Community level. Directive 
2014/27/EU  amended  legislation  referring  to  a  previous  classification  and  labelling  system  in 
accordance with the CLP Regulation. 

Directive 2004/18/EC laid down the rules for an open market regarding public procurement and the 
application of rules for the award of public works, supplies and services contracts. Under it, thresholds 
for public procurement contracts were calculated anew every two years and the process of bidding for 
public  contracts  was  improved  and  made  less  costly  and  bureaucratic,  thus  enabling  companies  to 
compete more effectively. It has since been repealed and replaced by Directive 2014/24/EU on public 
procurement, which came into effect in April 2016. 

information  on 

In 2013, the Commission launched a new initiative on a Single Market for Green Products Facilitating 
better 
the  environmental  performance  of  products  and  organisations 
(COM/2013/196).  The  initiative  addresses  barriers  faced  by  companies  that  want  to  market  green 
products  in  different  countries  since  they  would  need  to  comply  with  different  schemes  that  are  in 
place.  A  three-year  testing  period  to  develop  product-  and  sector-specific  rules  was  launched  to 
overcome these problems. A Commission recommendation regarding the use of common methods to 
measure  and  communicate  the  life-cycle  environmental  performance  of  products  and  organisations 
accompanies that communication.  

The  legal  framework  guiding  construction  products  is  the  Construction  Products  Regulation 
(305/2011), which repealed Council Directive 89/106/EEC. This regulation sets out the conditions for 
marketing  construction  products  and  the  related  use  of  CE  marking.  Furthermore,  criteria  for 
assessing  construction  products’  performance  are  outlined.  Certain  obligations  are  also  put  on 
operators.  For  example,  manufacturers  must  provide  a  performance  declaration  and  technical 
documentation, and affix the CE marking to the product. Importers and distributers must both check 
that  the  product  is  accompanied  by  technical  documentation  and  that  it  bears  the  CE  marking.  This 
regulation is also accompanied by a Strategy for the Sustainable Competitiveness of the Construction 
Sector (European Commission 2012), so as to support the construction sector in meeting its challenges 
as part of the Europe 2020 initiative, as  well as to further strengthen the construction sector and  so 
reduce distortions (e.g. lacking common objectives, data and the mutual recognition of approaches) in 
an effort to boost competitiveness and support sustainable growth in the sector.  

The  construction  sector  is  also  significantly  inter-linked  with  energy  policy,  such  as  the  Energy 
Efficiency Directive, given that buildings are responsible for 40% of energy consumption and 36% of 
CO2  emissions  in  the  EU.  Directive  2010/31/EU  on  the  energy  performance  of  buildings  (amending 
Directive 2002/91/EC) aims at improving the energy efficiency of buildings in the EU. Energy used for 
heating, hot water, cooling, ventilation and lighting is covered. For instance, EU countries are obliged 
to establish inspection schemes for heating and air-conditioning systems. 

76 

 
 
 
 
Pre 
2004 

 

Table 16 Overview of Products legislation 

Package 6: Products legislation 

Group 1. Production 

EU Eco-label (Regulation No 880/92; 1980/2000; 66/2010) 

Eco-label for converted paper products (Commission decision 2014/256/EU) 

Eco-label for wooden furniture (Commission decision 2009/894/EC) 

Eco-label for wooden floor coverings (Commission decision 2010/18/EC) 

Eco-label for newsprint paper (Commission decision 2012/448/EU) 

Eco-label for printed paper (Commission decision 2012/481/EU) 

Eco-label for copying and graphic paper (Commission decision 
2011/333/EU) 

Commission Recommendation on the use of common methods to measure and 
communicate the life cycle environmental performance of products and 
organisations (2013/179/EU) 

Group 2. Protection of human health 

General product safety (Directive 2001/95/EC; Commission communication 
2014/C 220/02; Directive 87/357/EEC) 

 

2004 

2005 

2006 

2007 

2008 

2009 

2010 

2011 

2012 

2013 

2014 

2015 

   

 

 

 

 

 

 

 

77 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Package 6: Products legislation 

Pre 
2004 

2004 

2005 

2006 

2007 

2008 

2009 

2010 

2011 

2012 

2013 

2014 

2015 

Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) 
(Regulation 1907/2006; Commission Implementing Decision 2013/505/EU) 

 

Biocidal Product Regulation (ECHA) (Regulation 528/2012) 

 

 

 

Regulation on classification, labelling and packaging of substances and mixtures 
(CLP Regulation) (Regulation 1272/2008)  

 

 

 

Group 3. Packaging 

Regulation on materials and articles intended to come into contact with food 
(Regulation 1935/2004) 

 

Good Manufacturing Practice for materials and articles intended to come in 
contact with food (Commission Regulation 2023/2006) 

Tobacco Products Directive (Directive 2001/37/EC; 2014/40/EU) 

Group 4. Construction 

Construction Products Regulation (CPR) (Regulation 305/2011; 89/106/EEC) 

 

 

Energy performance of buildings (Commission Delegated Regulation 244/2012; 
Directive 2010/31/EU; 2002/91/EC) 

 

Strategy for the sustainable competitiveness of the construction sector and its 
enterprises (COM/2012/433)  

 

 

 

 

 

 

 

 

 

78 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Package 6: Products legislation 

Pre 
2004 

2004 

2005 

2006 

2007 

2008 

2009 

2010 

2011 

2012 

2013 

2014 

2015 

Resource efficiency opportunities in the building sector (COM/2014/445)  

Group 5. Other measures 

Public works contracts, public supply contracts and public service contracts 
(Directive 2004/18/EC) 

 

 

Building the Single Market for Green Products Facilitating better information on 
the environmental performance of products and organisations (COM/2013/196) 
 

 

 

 

 Adoption  Transposition or enforcement by competent authorities;  Repealed or amended;  Assessed qualitatively;  Published and/or forwarded to the Parliament and/or Council. 

79 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
4.7.2  Type of cost linked with the legislative package 

Monetary obligations 

Monetary  obligations  are  mainly  related  to  the  registration  and/or  certification  cost  associated  with 
some  products.  These  can  include  fees  associated  with  attaining  an  Energy  Performance  Certificates 
under  the  Directive  on  Energy  Performance  of  Buildings  and  fees  associated  with  applications  for 
authorisation  of  a  new  substance  to  come  into  contact  with  food  or  an  annual  license  fee  associated 
with labelling products under the EU Eco-label.  

According  to  the  requirements  of  REACH,  CLP  and  Biocidal  Products,  all  substances  registered  by 
ECHA  are  subject  to  a  fee.  The  registration  fees  vary,  depending  on  the  volume  of  substances  —  the 
higher the volume the higher the fees — and the size of companies — so that small and medium sized 
companies pay less than large companies24. Fees are determined based on four categories of tonnage, 
namely 1-10 tonnes/year, 10-100 tonnes/year, 100-1000 tonnes/year, and over 1000 tonnes/year. 

Net  registration  fees  paid  to  register  chemical  substances  also  includes  dossier  costs  (cost  of  the 
dossier information) sometimes paid through a letter of Access agreement (LOA). 

The CLP Regulation foresees that fees are set for requests to use an alternative chemical name and for 
requests for harmonisation of classification and labelling of substances in the EU. For both fees, small 
and medium sized reductions are foreseen for each company size category (medium, small and micro 
sized). 

Substantive obligations 

Changes  in  the  standards  for  products  and  substitution  of  materials  often  requires  changes  in  the 
production  methods,  testing  and  the  design  of  products,  generating  additional  capital  expenditures, 
employment costs and operating costs at company level.  

REACH, CLP regulation – as did their precursory regulations - typically generate capital expenditures 
and  operating  costs  related  to  testing,  investments  in  laboratory  equipment,  employment,  labelling 
equipment, databases, printing, staff training etc. It may also require changes in the companies using 
or  manufacturing  the  chemicals  as  new  risk  management  measures  may  be  required  (e.g.  personal 
protective equipment). 

Eco-label regulations, being entirely voluntary, do not impose any specific obligation on operators and 
they  do  not  have  any  immediate  impact  on  the  forest-based  industries.  However,  being  aimed  at 
orienting  consumers’  preferences,  they  may  nonetheless  exert  a  significant  influence.  This  is 
particularly the case when eco-labels and are used in public procurement, which for certain products 
accounts  for  a  large  share  of  their  final  consumption.  Substantive  costs  associated  with    eco-labels 
include  costs  from  life-cycle  assessment,  training  of  personnel  to  fulfil  eco-design  requirements, 
obligations  connected  to  distribution  and  labelling,  or  providing  information  about  product  supply 
chains. 

Substantive costs associated with the regulation on construction products and energy performance of 
buildings  include  investments  in  systems  for  the  Assessment  and  Verification  of  Constancy  of 
Performance (AVCP – under Regulation (EU) No 305/2011) or upgrading technical building systems 
to comply with energy performance requirements. This would include personnel costs associated with 
maintaining the AVCP system and regular inspections of heating and air-conditioning systems. 

The  Food  Contact  Directive  may  include  investment  in  procedures  and  equipment  that  allow 
companies  to  trace  and  label  food-contact  materials  or  specific  measures  adopted  for  controlled 
materials  and  articles,  or  establishing  a  quality-assurance  system  and  a  quality-control  system.  It 

24 It should be noted that, as regards all types of cost arising from REACH, costs for SMEs may be under-
estimated, as indicated in the study: “Monitoring the impacts of REACH on innovation, competitiveness and 
SMEs” (see http://ec.europa.eu/growth/sectors/chemicals/reach/studies/index_en.htm). 

80 

 
 
 
                                                             
would also include costs for maintaining any  quality-assurance system and  quality-control system  in 
place. Related external laboratory cost may also arise, since limit values and related testing methods 
are not harmonised and companies operating  in the Single Market may have to multiply compliance 
testing for countries they sell into. 

Administrative burden 

Information obligations are an important aspect of the cost generated by the legislation in this group. 
The most common requirement across the various pieces of legislation is the issue of a declaration, or 
the  application  for  a  certificate  of  compliance  with  the  standardised  specifications  defined  in  the 
regulation. The declaration or the application should be accompanied by the necessary documentation, 
creating costs across the whole supply chain, as all firms contributing to the production of the product 
should provide the necessary documentation and should be properly certified for their  products. For 
some  products,  the  information  requirements  are  quite  demanding,  as  the  preparation  of  a  product 
safety report is required.  

During the pre-registration phase of REACH, the cost is mainly related to the time spent by personnel 
in familiarising themselves with the requirements and the registration process, and to gather and fill in 
the information using the online system. During the registration phase, the cost increases involve the 
preparation  of  dossiers  providing  extensive  amount  of  information  that  include:  substance  identity, 
physicochemical  properties,  mammalian  toxicity,  eco-toxicity,  and  environmental  fate  (including 
abiotic  and  biotic  degradation),  information  on  manufacture  and  uses,  and  risk  management 
measures.  To  avoid  overspending  and  duplication  of  costs,  REACH  imposes  that  manufacturers  and 
importers  of  substances  share  available  data.  Each  registrant  who  manufactures  or  imports  a 
substance must sell the available data it owns, or purchase data owned by others, by participating in a 
Substance Information Exchange Forum (SIEF). 

The  various  types  of  administrative  cost  are:  personnel  cost  associated  with  the  representation  at  a 
SIEF;  supply  chain  communication  to  identify  exposure  scenarios,  data  gathering  and  elaboration; 
preparation  of  the  chemical  safety  report  or  contributing  to  the  costs  of  preparing  the  shared 
components of a registration dossier; production of extended safety data sheets, and supply of revised 
safety  data  sheets  to  downstream  customers25.  It  also  includes  costs  associated  with  the  purchase  of 
data  from  other  members  of  the  SIEF,  using  consultants  to  prepare  registration  dossiers,  and 
contracting with companies, and the preparation and submission of complex dossiers, which requires 
certified laboratories for testing. 

Authorisation of Substances of Very High Concern (SVHC), as foreseen in REACH legislation, requires 
the action of competent authorities’, ECHA and the European Commission. These include: response to 
Candidate  List  consultations,  preparation  of  chemical  safety  assessments  and  justifications  for 
authorisation, and opinions of the ECHA  Committees. The authorisation to use a SVHC for a certain 
period is granted by the European Commission. 

Companies  also  have  information  obligations  under  the  legislation  regulating  the  classification, 
labelling  and  packaging  of  substances  and  mixtures  (CLP).  Their  obligations  might  include  the 
preparation  of  harmonised  classification  dossiers;  notification  to  the  C&L  inventory;  informing 
consumers and downstream users; proposing new harmonised hazard classification. 

Administrative  burdens  associated  with  the  regulation  on  construction  products  and  energy 
performance  of  buildings  include:  personnel  for  the  AVCP  and  issuance  of  the  declarations  of 
performance  or  personnel  needed  to  calculate  the  energy  performance  of  buildings.  It  could  also 
include costs associated with documenting the performance of products, training staff to do an AVCP 
or on the methodology for calculating the energy performance of buildings. 

25  It  should  be  stressed  that  the  amount  of  information  depends  on  the  tonnage  band.  Higher  volumes 
require more information. 

81 

 
 
 
                                                             
The  Food  Contact  Directive  may  include  personnel  to  check  compliance,  ensure  traceability  and 
labelling of active and intelligent materials and articles, or managing any quality assurance system in 
place.  It  could  also  include  costs  associated  with  maintaining  documentation  regarding  the 
specifications, manufacturing formulae and product processing, as well as the training of personnel to 
manage the quality-assurance system and a quality-control system. 

4.8 

 Package 7: Transport legislation  

4.8.1  Overview of the legislative package 

Transport policies have been noted as a significant (direct and indirect) cost for forest-based industries 
as well as being interlinked with other policy areas, such as climate and energy. Amongst the policies 
included  in  this  legislative  package  is  the  legislation  for  regulating  sulphur  content  of  marine  fuels 
(Directive  2012/33/EU),  waste  shipment  (Regulation  1013/2006)  and  road  safety  for  national  and 
international journeys (Directive 2015/719, 2002/7/EC; 96/53/EC, Regulation 661/2009; 1230/2012) 

The  Directive  regulating  the  sulphur  content  of  marine  fuels  imposes  indirect  costs  for  some  sub-
sectors in the forest-based industries as investments costs are passed on. In this case, Member States 
have to ensure that ships in the Baltic, the North Sea and the English Channel are using fuels with a 
sulphur content of no  more than 0,1% since the  beginning of  2015. Higher sulphur contents are still 
possible,  but  only  if  the  appropriate  exhaust  cleaning  systems  are  in  place.  As  with  many  other 
directives in this assessment, the argumentation for the sulphur directive is in terms of public health 
benefits, however, these types of opportunity costs are not reflected.  

There  is  furthermore  the  Waste  Shipment  Regulation  (Regulation,  1013/2006),  which  covers 
procedures  for  trans-boundary  shipments.  This  regulation  implements  the  provisions  of  the  Basel 
Convention  and  includes  a  ban  on  the  export  of  hazardous  wastes  to  non-OECD  countries  and  the 
export  of  waste  for  disposal.  Different  regimes  apply  to  shipments  of  wastes  for  disposal  and  for 
recovery,  as  well  as  to  hazardous  and  “green-listed”  (non-hazardous)  wastes.  The  regulation  was 
amended  in  2014  (Regulation,  660/2014)  and  aims  at  strengthening,  simplifying  and  specifying  the 
procedures for controlling waste shipments to improve environmental protection. It sets out a system 
of control for the movement of waste. The Regulation specifies the documentation to be provided and 
the  security  measures  to  be  taken  during  transportation.  The  system  must  take  into  account  the 
principles of self-sufficiency, proximity of waste for disposal  and prior informed consent. This should 
reduce the risk of waste shipments not being controlled. The Regulation concerns almost all types of 
waste  shipped,  including  national  and  transit  transports,  except  radioactive  waste  and  a  few  other 
types of waste.  

The transport package is also concerned with road-haulage specifications, which affect for example the 
dimensions and maximum weights authorised for transport (Directive 2002/7/EC appealing directive 
96/53/EC),  common  rules  for  certain  types  of  carriage  of  goods,  speed  limitations  and  testing  of 
exhaust  emissions,  etc.  (e.g.,  Directive,  2006/94/EC,  and  2006/38/EC).  There  is  currently  an  on-
going review of the road haulage directive and a report was released in 2015 concerning the proposal 
for  a  new  directive  (Parliament,  2015),  which  may  have  some  implications  when  considering  future 
developments.  

82 

 
 
 
 
 
 
 
Table 17 Overview of Transport legislation 

Package 7: Transport legislation 

Sulphur content of marine fuels (Directive 2012/33/EU; Directive 2005/33/EC; 
Directive 1999/32/EC) 

Waste Shipment (Regulation 1013/2006) 

Pre 
2004 

 

Road safety: dimensions and maximum weights authorised for both national and 
international journeys (Directive 2015/719, 2002/7/EC; 96/53/EC, Regulation 
661/2009; 1230/2012) 

 

2004 

2005 

2006 

2007 

2008 

2009 

2010 

2011 

2012 

2013 

2014 

2015 

 

 

 

 

 

 Adoption  Transposition or enforcement by competent authorities;  Repealed or amended;  Assessed qualitatively;  Published and/or forwarded to the Parliament and/or Council. 

83 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4.8.2  Type of cost linked with the legislative package 

Monetary obligations 

Monetary  obligations  are  mainly  associated  with  the  “sulphur  tax”  and  other  related  fees,  such  as 
charges for determining notifications under the Waste Shipment Regulation. 

Substantive burden 

The ”Sulphur Directive” has raised some concern among shipping lines, as they fear that the reduction 
of  the  sulphur  content  in  marine  fuels  to  0.1%  by  2015  might  lead  to  a  serious  disruption  of  the 
commercial dynamics of shipping in the Emission Control Areas (ECAs) and a considerable increase in 
vessel operating costs, as well as a lower competitiveness compared to other modes. This could mean a 
modal shift from sea to road, which would contradict the EC objective of promoting the use of sea and 
short sea transport. The types of substantive costs that can be found include investments in emission-
abatement  technologies,  exhaust-gas  cleaning  systems,  or  other  types  of  filtering  equipment.  It  can 
also cover the maintenance of any filtering equipment that has been installed. 

The  Waste  Shipment  Regulation  requires  a  financial  guarantee  or  insurance  and  may  include 
investments  in  infrastructure  as  all  companies  have  a  duty  to  manage  the  process  in  a  way  that 
protects the environment and human health. This would include the temporary storage, or recovery or 
disposal  operations  included  in  transporting  waste,  as  well  as  systems  to  track  and  monitor  the 
movement  of  non-hazardous  or  “green  list”  wastes.  There  are  furthermore  requirements  to  send 
notification (generating a notification cost) to obtain consent from the environmental regulator for the 
country from which the waste is being sent and the environmental regulator for the country where the 
waste is being received. 

Road haulage rules, as regards the dimensions and maximum weights authorised for both national and 
international  journeys,  include  investments  related  to  requirements  in  dimensions  and  weights  of 
vehicles, or proof of fulfilment by having two number plates for each vehicle. 

Administrative burden 

The directive on sulphur content of marine fuels generate costs concerned with the inspections on the 
sulphur content of marine fuel or the personnel in charge of filtering equipment. 

The  Waste  Shipment  Regulation  generates  an  administrative  burden  in  connection  with  registering 
shipment  data  after  consent  has  been  given  and  any  training  of  personnel  to  manage,  track  and/or 
monitor the movement of wastes. Administrative burdens for road haulage rules also include training 
of personnel or on new vehicles. 

4.9 

 Package 8: Trade legislation 

4.9.1  Overview of the legislative package 

In  accordance  with  the  World  Trade  Organization,  the  EU  applies  trade  defence  instruments  that 
affect the operations of any enterprise, including those in the forest-based industries. The Commission 
monitors the application of trade defence instruments and follows up on the enforcement of measures. 
This  includes  anti-dumping  and  anti-subsidy  measures  (Regulation,  1225/2009,  Regulation, 
597/2009) to re-establish a competitive environment for the EU industry when harmed by dumped or 
subsided imports. A general concern for the EU forest-based industries is that competition with third 
countries  is  negatively  affected  by  unfair  trading  practices  that  make  other  country  products  more 
competitive. Moreover, as noted in a comparative analysis26, the EU's "lesser-duty rule", which limits 
the effects of the anti-dumping duty to the level of domestic injury caused by dumped imports, results 
in a lower average duty level in EU cases. When compared to the United States of America in terms of 

26 Rovegno, L. and H. Vandenbussche. 2011. A comparative analysis of EU Antidumping rules and application, Discussion Paper 
2011-23, IRES, Université Catholique de Louvain. 

84 

 
 
 
                                                             
the  "Sunset  Clause",  which  limits  the  duration  of  protection  to  five  years,  the  EU  presents  a  lower 
share of measures lasting beyond this limit as compared to other users of anti-dumping.  

Irrespective  of  its  trade  defence  instruments,  the  EU  has  common  tariffs  for  all  forest  products 
(Regulation 2658/87, 2015/1754). For most forest products, the tariff level is zero, with the exception 
of  some  manufactured  wooden  and  furniture  goods.  However,  this  also  relates  to  tariff  barriers  and 
duties that applies to exports and protectionist subsidies for rival goods from the non-EU forest-based 
industries, e.g. export duties on roundwood were raised from 2.5 to 10 € per cubic meter from 2005 to 
2010.  This  may  create  an  uneven  playing  field  that  restricts  forest  products  trade,  and  decrease  the 
forest-based sectors competitiveness. For example, some sub-sectors face both duties on imported raw 
materials and semi-finished products as fixed by the EU, and tariffs on exports of finished products as 
fixed by foreign countries (European Commission, 2013a). 

It  should  be  noted  that  the  trade  legislative  package  was  only  prioritised  by  the  pulp,  paper  and 
paperboard sector. 

85 

 
 
 
  
Table 18 Overview of Trade legislation 

Package 8: Trade legislation 

Trade Defence Instruments  

Anti-dumping (Regulation 1225/2009)  

Anti-subsidy (Regulation 597/2009)  

Safeguards (against WTO members) (Regulation 260/2009)  

Safeguards (against non-WTO members) (Regulation 625/2009)  

Tariffs related to F-BI material, semi-products and final products 
(Regulation 2658/87, 2015/1754, SWD/2013/343)* 

 

Pre 
2004 

2004 

2005 

2006 

2007 

2008 

2009 

2010 

2011 

2012 

2013 

2014 

2015 

 

 

 

 

 

 

 

 

 

 Adoption  Transposition or enforcement by competent authorities;  Repealed or amended;  Assessed qualitatively;  Published and/or forwarded to the Parliament and/or Council. 

* For more information please see the Commission Implementing Regulation on the tariff and statistical nomenclature and on the Common Customs Tariff (2015/1754) and the Market 
Access Database (http://madb.europa.eu/madb/euTariffs.htm). 

86 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4.9.2  Type of cost linked with the legislative package 

Monetary obligations 

Tariffs related to F-BI materials, semi-finished products and final products (SWD/2013/343) concern 
producers  that  face  both  duties  on  imported  materials  and  tariffs  in  countries  to  which  they  export 
finished products. 

The Trade Defence Instruments were only assessed qualitatively in this assessment. 

Administrative burden 

In this case, it was found that the trade legislative package did not generate any substantive obligations 
for  pulp,  paper  and  paperboard  companies  but  that  there  is  a  marginal  administrative  burden 
associated  with  the  package.  Administrative  costs  are  interlinked  with  costs  associated  with  export 
procedure for goods leaving the EC customs territory. It can also be associated with tariffs related to F-
BI material where, for example, lengthy administrative checks, may contribute to an increase in cost of 
trade in goods as well as creating an administrative burden for companies that are engaged in activities 
covered  by  EU  customs  legislation.  These  administrative  costs  are  as  such  not  generated  by  EU 
legislation  but  rather  by  the  need  to  comply  with  import  regulations  in  countries  outside  the  EU. 

87 

 
 
 
5  Results of the cumulative cost assessment of the EU F-BI 

This chapter provides an overview of the cumulative cost borne by the selected woodworking and pulp, 
paper and paperboard sub-sectors due to EU legislation. The costs have been estimated based on the 
methodology presented in Chapter 3 for each of the legislative packages outlined in Chapter 4.  

5.1  Cumulative cost assessment for the overall woodworking sector  

5.1.1 

Scope 

The  section  on  the  cumulative  cost  assessment  for  the  overall  woodworking  sector  provides  an 
aggregated picture of EU regulatory costs (by a weighted sum of the values from each sub-sector, using 
turnover share as a weight) over the period 2005-2014 for the following sub-sectors: 

 

 

 

 

16.1 Manufacture of sawmilling and planning of wood; 

16.21 Manufacture of veneer sheets and wood-based panels; 

16.23 Manufacture of other builders' carpentry and joinery; 

16.24 Manufacture of wooden pallets and other wooden packaging. 

The next sections will further cover each of these sub-sectors independently.  

For the woodworking sector and its sub-sectors (as mentioned above), the following sections provide 
an evolution of the share of regulatory cost as a percentage of added value over the time period (2005-
2014).  It is important to note that, while it certainly illustrates the evolution of regulatory costs over 
ten  years,  the  trend  will  also  be  impacted  by  the  evolution  of  the  ratio’s  denominator,  i.e.  the  added 
value of the sector. As a matter of fact, recurrent peaks of regulatory costs as percentage of added value 
in  2009  may  hence  reflect  the  drop  in  added  value  due  to  the  financial  crisis  and  its  subsequent 
difficult business environment. Nevertheless, although conclusions cannot be drawn on whether there 
has  been  a  peak  in  regulatory  costs  per  se  for  such  a  year,  it  is  correct  to  mention  that  the  share  of 
regulatory  costs  (reflecting  the  regulatory  burden)  on  added  value  has  increased.  The  evolution  of 
added value (denominator of all cost ratio), from 2005 to 2014, is as follows:  

Figure 22 Evolution of added value for the woodworking sector (NACE code 16), in millions EUR 

Source: Eurostat, Structural Business Statistics, last available data  

88 

 
 
 
5.1.2  Direct regulatory costs for the overall woodworking sector 

The following six legislative packages were prioritised for the overall woodworking sector: climate and 
energy,  environment,  forest-related,  employment,  products  and  transport.  Results  highlighted  two 
main legislative packages, namely, environment (mostly OPEX) and climate and energy (consisting of 
significant  monetary  obligations,  CAPEX  and  OPEX)  as  the  most  important  in  terms  of  generating 
costs. 

Regulatory costs for the sub-sector reach 1.25% of turnover, 4.72% of added value and 13.71% of gross 
operating  surplus  of  companies,  which  can  be  broken  down  between  legislative  packages  and  cost 
categories as follows: 

Table 19 Costs for the overall woodworking sector by package and comparison with main financial indicators – 
annual average for 2005-2014 

% Turnover 

% AV 

% GOS 

Share of total 
regulatory costs 

Climate & Energy 
Environment 
Forest 
Employment 
Product 
Transport 
Total 

0.45% 
0.52% 
0.01% 
0.08% 
0.12% 
0.07% 
1.25% 

1.71% 
1.96% 
0.05% 
0.29% 
0.46% 
0.25% 
4.72% 

4.97% 
5.68% 
0.16% 
0.84% 
1.34% 
0.72% 
13.71% 

36.3% 
41.4% 
1.2% 
6.2% 
9.7% 
5.2% 
100.0% 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators 
(turnover, AV and GOS) from Eurostat, Structural Business Statistics. 

Table  20  Costs  for  the  overall  woodworking  sector  by  cost  category  and  comparison  with  main  financial 
indicators – annual average for 2005-2014 

Monetary obligations 
CAPEX 

OPEX 
Administrative burden 

Total 

% of turnover 
0.4% 
0.2% 

0.5% 
0.2% 

1.3% 

% of AV 
1.7% 
0.7% 

1.7% 
0.6% 

4.7% 

% of GOS 
4.8% 
2.1% 

5.0% 
1.8% 

13.7% 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators 
(turnover, AV and GOS) from Eurostat, Structural Business Statistics. 

89 

 
 
 
 
 
 
 
 
 
 
 
 
 
Costs  from  EU  regulation  can  be  split  by  package  and  by  cost  categories.  The  following  paragraphs 
elaborate on the pieces of legislation and related cost categories driving the regulatory costs. 

Figure 23 Regulatory costs for the overall woodworking sector as % of added value, by legislative package and 
cost category – annual average 2005-2014 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators 
(turnover, VA and GOS) from Eurostat, Structural Business Statistics. 

The environment legislative package is the most important package, accounting for 41.4% of total 
regulatory costs for the overall woodworking sector (1.96% of added value). This large share of costs is 
attributable to large amounts of operating costs which are related to efforts in reducing volatile organic 
compound (VOC) emissions. For instance, oriented strand boards (OSB) are built of layers of strands 
bonded with a resin. These types of panels are primarily used in construction, roofing or as packaging 
material.  The  prevailing  technology  used  to  manufacture  these  panels  causes  the  emission  of  VOCs 
during the production process as well as during the panels lifecycle. Costs are generated for companies 
when they invest in more environmentally-friendly production processes that decrease VOC emissions 
from resins. Operating costs also arise in relation to the EU environmental legislation because of the 
sub-sectors exposure to the Industrial Emissions Directive. 

The  climate  and  energy  package  accounts  for  36.3%  of  total  regulatory  costs  for  the  overall 
woodworking  sector  (1.71%  of  added  value).  This  large  share  of  costs  is  attributable  to  high  rate  of 
monetary  obligations,  mostly  driven  by  the  Renewable  Energy  Directive  and  the  Energy  Taxation 
Directive (ETD). Since the woodworking industry is quite energy-intensive, larger fees associated with 
the  ETD  apply  directly  to  this  sub-sector.  The  ETD  covers  sectors  not  covered  under  Emissions 
Trading  System  (ETS),  such  as  e.g.  the  wood-based  panels  companies,  by  imposing  a  minimum  tax 
rate based on the CO2 and the energy content of the energy consumed. These taxes are accompanied 
by  a  small  amount  of  administrative  burden.  Larger  companies  are  also  effected  by  the  Energy 
Efficiency  Directive  that  oblige  companies  to  conduct  independent  energy  audits  every  four  years, 
generating administrative burden starting from 2014. 

The product legislative package represents 9.7% of total regulatory costs of the legislation (0.46% 
of  added  value)  and  relate  to,  inter  alia,  the  Construction  Products  Regulation  and  Registration, 
Evaluation,  Authorisation  and  Restriction  of  Chemicals  (REACH).  Significant  administrative  burden 
can be generated by these regulations in some cases, that are associated with information obligations, 
such  as  requirements  for  a  declaration,  or  the  application  for  a  certificate,  of  compliance  with  the 
standardised specifications defined in the regulations. These declarations or the applications need to 
be accompanied with the necessary documentation (creating costs across the whole supply chain) as all 

90 

 
 
 
companies contributing to the production of the product need to provide the necessary documentation 
and should properly certify their products. This creates the notably high administrative burden for the 
carpentry and joinery sub-sector. 

Other packages including employment, transport and forest-related legislation have less impact 
on  the  overall  woodworking  sector.  It  should  be  noted  that  for  the  forest-related  legislation,  in 
particular  the  application  of  the  EU  Timber  Regulation,  sawmill  companies  expressed  that  is  was 
difficult to estimate the impact of the regulation in terms of costs. In line with previous findings, it has 
furthermore been noted that large companies may have found it easier to adopt new requirements (e.g. 
establishing  a  due  diligence  system)  in  contrast  to  small  and  medium-sized  companies  that  have 
comparatively lower turnover to cover additional costs (European Commission (2016e).  

Figure  24  presents  a  visualisation  of  the  evolution  of  costs  as  a  share  of  turnover  over  time  (period 
2005-2014) based on data from the panel of companies. The thickness of a layer is proportional to the 
share  of  the  corresponding  package  in  the  total  costs  of  the  sector.  The  figure  should  be  interpreted 
with caution, as this is an estimate of the trend based on a subset of companies and their recollections 
of  past  costs.  While  the  thickness  of  layers  is  obtained  based  on  primary  data  from  the  in-depth 
interviews  (companies’  books)  and  adjusted  with  the  online  survey,  the  evolution  of  costs  over  time 
only results from the in-depth survey (companies’ books). Economic indicators of turnover and added 
value were sourced from Eurostat, Structural Business Statistics. Furthermore, investment costs were 
annualised using straight-line depreciation. Hence, it provides an idea of how costs have evolved over 
time  for  the  different  legislative  packages  and  should  be  interpreted  only  for  identifying  years  or 
periods over which larger costs are observed.  

Figure 24 Evolution of costs for the overall woodworking sector as % of added value for the period 2005-2014 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators 
(turnover, VA and GOS) from Eurostat, Structural Business Statistics. 

The analysis of cost trends between 2005 and 2014 demonstrate that costs relating to the climate and 
energy legislative package have dropped in 2007, rising again in 2008 and 2009 and again dropping 
slightly until 2012 with a new cost peak in 2013, which may be due to the evolution of the denominator 
of  added  value.  Beyond  the  evolution  of  the  added  value  of  denominator,  factors  that  may  affect  the 
evolution  of  regulatory  costs  relate  to  the  European  Union  establishing,  in  2008,  a  series  of  climate 
and energy targets, better known as the "20-20-20" targets, to be met by 2020 in its pathway towards 
a low-carbon economy. This led to the formulation of additional levies and fees included in energy bills 
to promote the production and use of renewable energy. Costs ratios associated with the climate and 

91 

 
 
energy package have been stable over time, with a modest increase in 2013. This increase may be due 
to the revision of the Renewable Energy Directive in 2009, reflecting increasing raw material costs. 

The increase in cost ratios for the environmental package are linked to the adoption of the integrated 
pollution prevention and control directive (IPPC) in 2008, followed by the transposition of the IED in 
2013  (it  was  adopted  in  2010).  Another  explanation  for  the  increase  of  share  of  costs  between  2007 
and 2009 is the revision of the Waste Framework Directive. This directive repealed the earlier one on 
waste  as  well  as  the  Hazardous  Waste  Directive  and  the  Waste  Oils  Directive,  providing  a  general 
framework of waste management requirements and basic waste management definitions for the EU as 
well as introducing the waste hierarchy, polluter pays principle and extended producer responsibility 
(EPR).  New  targets  under  the  directive  for  reuse  and  recycling,  and  the  requirements  for  Member 
States to prepare waste prevention programmes, may be underlying the increase in costs for this sub-
sector.  

The  product  package  appears  to  have  a  more  significant  cost  impact  starting  from  2011.  This  can  be 
explained  by  the  fact  that  the  EU  Ecolabels  directive  has  been  revised  in  2009  and  came  into  effect 
2010.  Standard  application  and  renewal  fees  are  dependent  on  the  annual  turnover.    Moreover,  the 
increase of costs in 2011 may be due to early investments made in relation to the revised Construction 
Products  Regulation  (CPR)  which  was  published  in  2011  and  came  fully  into  force  in  2013.  For 
instance,  from  2013,  the  CPR  made  it  mandatory  for  manufacturers  to  apply  CE  marking  to  any  of 
their  products  covered  by  a  harmonised  European  standard  or  a  European  Technical  Assessment. 
Wood-based  panels  used  in  construction  and  the  Construction  Products  Regulation  requires 
manufactures to provide a performance declaration, technical documentation and affix a CE marking. 
REACH  (Registration,  Evaluation,  Authorisation  and  Restriction  of  Chemicals)  entered  into  force  in 
2007. It affects the production as it, for example, encompasses rules and standards for formaldehyde 
which is widely used in composite wood products.  

The  following  table  provides  results  for  the  first  (2005)  and  last  (2014)  years  over  the  period,  along 
with ranges of direct regulatory costs over the period (2005-2014): 

Table 21 Direct regulatory costs for the woodworking sector - First year, last year, ranges min-max 

First year 
(2005) 

Last year 
(2014) 

Min 

Year 

Max 

Year 

Climate 
Energy 

& 

Environment 

Forest 

Employment 

Product 

1.5% 

1.6% 

0.0% 

0.1% 

0.3% 

Transport 

0.2% 
Source: Authors’ elaboration 

2.1% 

2.4% 

0.2% 

0.5% 

0.8% 

0.3% 

1.31% 

1.44% 

0.01% 

0.12% 

0.24% 

0.179% 

2007 

2007 

2007 

2007 

2007 

2005 

2.08% 

2.41% 

0.15% 

0.55% 

0.84% 

0.33% 

2014 

2014 

2014 

2014 

2014 

2014 

5.1.3 

Indirect regulatory costs for the overall woodworking sector 

Woodworking  companies  did  not  report  any  significant  burden  occurring  from  ETS  indirect  costs. 
Only one company has reported that suppliers passed-on the costs of ETS, but without more detailed 
information.  However, indirect costs related to the price of raw materials were reported as significant 
to woodworking companies and are addressed in this section. Given the rather scattered information 
provided by companies in the in-depth interviews, only a qualitative analysis of indirect costs for the 
woodworking product groups was possible for panels producers (NACE code 16.21), under the climate 
and energy policy package.  

92 

 
 
 
 
Companies in the panel sector consistently reported to be affected by indirect costs to be attributed to 
climate  and  energy  policies,  and  more  specifically  to  the  Renewable  Energy  Directive  (Directive 
2009/28/EC).  Companies  reported  that  the  directive  has  contributed  to  increasing  the  raw  material 
costs  (mainly  wood),  and  led  to  the  substitution  of  wood-based  panels  by  less  expensive  materials 
when possible.  

The  incentives to burn wood for fuel use, linked to the Renewable Energy  Directive, are supposed to 
have triggered a mechanism causing relative  competition for wood, its scarcity in some localities and 
creating  upward  pressures  on  its  price  generally.  More  specifically,  the  National  Renewable  Energy 
Action Plans (NREAPS) include incentives to burn  wood; the effect of the latter on wood availability 
and prices is widely debated27. Wood has always been used as a source of energy; wood fuels have been 
traditionally used in CHP plants especially in countries like Finland, Sweden, France, Austria, Portugal 
and Denmark. Wood is also an important component for biomass fuels for energy generation28.  

In  this  panorama,  a  strong  competition  for  companies  producing  wood  for  commercial  use  can  be 
established  against  wood-based  fuels  for  bioenergy,  including  with  producers  of  wood  chips,  other 
wood-processing  residues  and  pellet  producers.  The  competition  is  particularly  strong  for  panel 
producers,  since  they  compete  with  wood-based  fuels  for  bioenergy  for  wood  (pulpwood,  logs  and 
forest  residues),  industrial  residues  (chips  and  sawdust)  and  recycled  material  (recovered  wood)29. 
Pellets are the most economical way of transporting wood fuels and the EU28 is currently the largest 
global producer of wood pellets (the production amounted to 13.1 million tonnes in 2014; risen of 97% 
between  2009  and  2014)30.  The  increase  of  wood  for  raw  material  use  in  the  EU27  bioenergy  sector 
between 2000 and 2011 (ca. +82 million m3 RWE) is noticeably higher than the increase of wood raw 
materials in the woodworking sector as a whole31.  

In  the  last  years,  relatively  high  oil  and  gas  prices  have  led  to  a  reassessment  of  the  use  of  wood  for 
bioenergy  use.  The  European  Commission  estimates  that  biomass  used  for  heating,  cooling,  and 
electricity  will  constitute  42%  of  the  20%  renewable  energy  target  for  202032,  and  that  the  total 
consumption of renewable energies (i.e. including wood, solar, hydro power, etc.) has doubled between 
2004  and  201333.  If  from  one  side  the  20%  target  for  renewable  energies  aims  at  securing  energy 
supply  in  the  EU  and  reduces  dependency  on  imports  from  abroad,  from  the  other,  the  amount  of 
wood for fuel use, due to the increase in the total wood consumption volume34, would be equivalent to 
today’s total wood harvest in the EU35. As a consequence, Europe is likely to face a conflict of interest 
due  to  the  lack  of  sufficient  raw  material  supply  to  be  used  for  both  forest-based  industries  and 
renewable  energy  use.  The  European  Innovation  Partnership  on  Raw  Materials  calls  for  a  new 
comprehensive  approach  to  mobilise  the  existing  forest  resources  widely:  “there  will  be  a  conflict  of 
interest for  Europe due to  the lack of sufficient raw  material supply to  be used for both  forest-based 

27  http://www.technologist.eu/build-or-burn-competition-for-wood-on-the-rise/,  and  Indufor  (2013), Study  on  the  Wood  Raw 
Material Supply and Demand for the EU Wood-processing Industries 

28 Indufor (2013), Study on the Wood Raw Material Supply and Demand for the EU Wood-processing Industries, Final report to 
DG GROW, p.134. For Indfuor the share is 55% of total renewable energy sources in EU27, page 180. 

29  Indufor  (2013),  Op.  Cit.  page  216.  The  table  reported  by  Indufor  also  shows  how  other  sectors  compete  with  bioenergy  in 
fewer varieties of wood type. 

30 http://ec.europa.eu/eurostat/statistics-explained/index.php/Forestry_statistics_in_detail#Wood_as_a_source_of_energy 

31 Indufor (2013), Ibidem. 

32 Indufor (2013), Ibidem. 

33 http://ec.europa.eu/eurostat/statistics-explained/index.php/Forestry_statistics_in_detail#Wood_as_a_source_of_energy 

34  However  it  must  be  noticed  that,  comparing  the  renewable  energy  gross  inland  consumption  for  EU28  in  2004,  wood 
decreased its share in the total renewable energies mix, passing from 55% in 2004 to 46% in 2013. Conversely, wind, solar, and 
other biomass from municipal waste have increased their relative shares compared to 2004. The use of wood in the mix varies 
intensively also by country, reaching almost three quarters for Estonia, Lithuania, Finland, Poland and Latvia, while being low in 
Malta  and  Cyprus,  for  example  (See  http://ec.europa.eu/eurostat/statistics-explained/index.php/Energy_from_renewable_ 
sources). 

35https://ec.europa.eu/growth/tools-databases/eip-raw-materials/en/content/enhancing-cascade-use-wood-integrating-
intensified-mobilisation-forest-resources . Cascade use of wood implies using first wood as primary product, then re-use and/or 
recycling and eventually use wood as energy source.  

93 

 
 
                                                             
industries and renewable energy use. A new comprehensive and well-balanced approach is needed, e.g. 
the  raw  materials  for  wood  pellets  are  various  by-products  of  sawmill  and  wood  working  industries. 
Consequently, mobilizing the existing forest resources widely will enhance the cascade [use of wood] 
concept”36. 

Ultimately, the above-mentioned incentives for renewable energies have de facto created an otherwise 
inexistent  demand  for  renewable  energies.  Two  mechanisms  by  which  these  incentives  work  are  the 
feed-in tariff and the feed-in premium that applies to electricity generation: the feed-in tariff is a long-
term minimum price to generate renewable energies, especially electricity, while the feed-in tariff is a 
premium  added  on  the  top  of  the  market  price  to  consumers.  Only  recently  (2012-2013)  these 
premiums  have  been  reduced  by  Member  States  due  to  the  economic  downturn.  As  Indufor  (2013) 
reports,  climate  policies  such  as  the  ETS  are  another  driver  of  the  use  of  biomass  for  energy 
production37.  

Nonetheless,  as  most  companies  declared  during  in-depth  interviews,  a  quantitative  estimate  of  the 
effect  of  the  competition  with  bioenergy  is  hardly  possible.  The  calculation  would  require  an 
estimation  of  the  equivalent  price  of  the  market  distortion  caused  by  the  subsidies  in  the  EU28 
countries  under  analysis,  which  is  outside  of  the  scope  of  this  report.  As  a  consequence,  it  is  not 
possible  to  provide  a  quantification  of  the  total  burden  (direct  and  indirect  costs  burden)  of  the 
Renewable Energy Directive in this report.  

Company case study – indirect costs due to raw material wood price variations  

One  of  the  companies  interviewed  provided  a  detailed  analysis  of  the  wood  cost  variations  in  the 
period  2005-2014  as  supporting  documentation  on  the  indirect  costs  due  to  climate  and  energy 
policies.  

The company argued that the competition with bioenergy and pellets is the most important source of 
indirect costs for panel producers. The company, which operates in more than one country, mentioned 
that,  in  order  to  analyse  the  evolution  of  wood  cost  mixes  it  is  important  to  capture  the  country-by-
country differences, and to observe the timing of the implementation of support for national policies 
for bioenergy. They also pointed out that the measures were first and more strongly implemented in 
Germany38,  that  the  crisis  held  back  the  implementation  of  renewable  energy  policies  in  Spain  and, 
that in Portugal, the sawmill industry in particular saw a strong business opportunity to use the pro-
bioenergy measures in other Member States to export pellets, rather than using the wood for domestic 
combustion39.  The  figure  below  synthesises  the  wood  mix  cost  variation  (in  €/m3)  paid  by  the 
company in three European locations, from 2005 to 2014. Each wood mix refers to a production line 
input;  in  the  case  of  Germany  two  MDF  input  mixes  are  presented,  corresponding  to  two  different 
German regions. As it is possible to see, the trend reflects the explanation provided by the company.  

36https://ec.europa.eu/growth/tools-databases/eip-raw-materials/en/content/enhancing-cascade-use-wood-integrating-
intensified-mobilisation-forest-resources. Cascade use of wood implies using first wood as primary product, then re-use and/or 
recycling and eventually use wood as energy source.  

37 Indufor (2013), Op. Cit. page 182 

38 Federal Ministry of Food, Agriculture, and Consumer protection (2009), National Biomass Action. National Biomass Action 
Plan 
from 
http://www.bmel.de/SharedDocs/Downloads/EN/Publications/BiomassActionPlan.pdf?__blob=publicationFile 

Germany. 

Retrieved 

for 

39 Nunes, L.J.R., Matias J.C.O. and Catalão, J.P.S., Wood Pellets as a Sustainable Energy 1 Alternative in Portugal. . Retrieved 
from http://webx.ubi.pt/~catalao/RENE-D-14-02100R2F_Paper_Clean.pdf 

94 

 
 
 
                                                             
Figure 25 Wood mix cost variation, panel producer, Spain, Germany and Portugal plants, in €/m3 

200%

180%

160%

140%

120%

100%

80%

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Spain - PB input mix
Spain - MDF input mix
Portugal - MDF input mix

Germany - PB input mix
Germany - MDF input mix 1
Germany - OSB input mix

Portugal - PB input mix
Germany - MDF input mix 2

Source: authors’ elaboration made on company raw data, panel producer company 

It  is  important  to  mention  that  it  is  not  possible  to  drive  generalised  conclusions  on  the  effect  or 
magnitude of bioenergy support policies on wood cost increases for the panel industry, based on one 
company  report.  The  evolution  of  wood  costs  reported  by  the  company  aims  at  showing  that 
companies  in  the  panel  sector  have  expressed  concerns  about  indirect  costs  that  materialised  in  an 
increase  in  the  wood  raw  material  costs.  However,  there  is  no  robust,  general  evidence  that 
competition with bioenergy and different timing in the implementation of policy support to bioenergy 
are  the  (only)  driving  causes  of  the  increase  in  wood  costs.  The  latter  can  have  also  been  driven  by 
other factors such as energy prices, the degree of labour market and wage rigidity and more generally 
global wood-market trends.  

5.2  Cumulative cost assessment for sawmilling and planing of wood (16.1) 

Eurostat definition of sawmilling and planing of wood 

NACE Rev.2: C161 
NACE Rev. 1.1: C201 

This sub-sector includes sawing, planing and machining of wood, slicing, peeling or chipping logs, 
the manufacture of wooden railway sleepers,  the manufacture of unassembled wooden flooring, 
the  manufacture  of  wood  wool,  wood  flour,  chips,  particles,  the  drying  of  wood,  and  the 
impregnation  or  chemical  treatment  of  wood  with  preservatives  or  other  materials.  Eurostat, 
2016. 

The  following  six  legislative  packages  were  prioritised  for  the  sawnwood  sub-sector:  climate  and 
energy,  environment,  forest-related,  employment,  products  and  transport.  The  company  survey 
confirmed  the  prioritisation  and  particularly  highlighted  three  legislative  packages,  namely,  climate 
and  energy  (consisting  of  significant  monetary  obligations,  CAPEX  and  OPEX),  transport  (mostly 
consisting of monetary obligations and CAPEX) and environment (mostly consisting of administrative 
burdens) as the most important for cost generation.  

95 

 
 
 
 
 
 
 
Regulatory  costs  for  the  sub-sector  reach  0.6%  of  turnover,  2.6%  of  added  value  and  6.9%  of  gross 
operating  surplus  of  companies,  which  can  be  broken  down  between  legislative  packages  and  cost 
categories  as  reported  in  Table  22.  It  should  however  be  noted  that  there  may  be  a  risk  of 
underestimating the cost figures for the sawnwood sub-sector based on the interview data only. 

Table 22 Costs for sawmilling and planing of wood by package and comparison with main financial indicators 
– annual average for 2005-2014 

% Turnover 

% AV 

% GOS 

Climate & Energy 
Environment 
Forest 
Employment 
Product 
Transport 
Total 

0.3% 
0.1% 
0.0% 
0.0% 
0.1% 
0.1% 
0.6% 

1.1% 
0.5% 
0.1% 
0.1% 
0.2% 
0.6% 
2.6% 

3.0% 
1.5% 
0.3% 
0.1% 
0.4% 
1.6% 
6.9% 

Share of total 
regulatory costs 
43.1% 
21.1% 
4.3% 
2.4% 
6.3% 
22.8% 
100.0% 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators 
(turnover, VA and GOS) from Eurostat, Structural Business Statistics. 

Table  23  Costs  for  sawmilling  and  planing  of  wood  by  cost  category  and  comparison  with  main  financial 
indicators – annual average for 2005-2014 

Monetary obligations 

CAPEX 
OPEX 
Administrative burden 

Total 

% Turnover 

0.1% 

0.2% 
0.1% 
0.2% 

0.6% 

% VA 

0.6% 

0.7% 
0.6% 
0.7% 

2.6% 

% GOS 

1.7% 

2.0% 
1.4% 
1.8% 

6.9% 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators 
(turnover, VA and GOS) from Eurostat, Structural Business Statistics. 

Costs  from  EU  regulation  can  be  split  by  package  and  by  cost  categories.  The  following  paragraphs 
elaborate on the pieces of legislation and related cost categories driving the regulatory costs. 

96 

 
 
 
 
 
Figure 26 Regulatory costs for sawmilling and planing of wood as % of added value, by legislative package and 
cost category – annual average 2005-2014 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators 
(turnover, AV and GOS) from Eurostat, Structural Business Statistics. 

Figure  27  Share  of  categories  of  costs  for  sawmilling  and  planing  of  wood  by  package  –  annual  average  for 
2005-2014 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators 
(turnover, AV and GOS) from Eurostat, Structural Business Statistics. 

The  climate  and  energy  legislative  package  accounts  for  43%  of  total  regulatory  costs  of 
legislation  (1.1%  of  added  value).  The  large  share  of  costs  is  attributable  to  the  Renewable  Energy 
Directive, the Energy Taxation Directive, and the Energy Efficiency Directive, especially yearly fees for 
certification  under  the  RED  and  EED.  Substantive  obligations  refer  inter  alia  to  investments  in  new 
management  systems  under  RED  and  EED,  along  with  their  subsequent  personnel  and  consultant 

97 

 
 
 
costs to implement them.  The ETS is not applicable as part of the climate and energy package in this 
case.  

The climate and energy package, as a whole, generate monetary obligations (a third of the climate 
and energy package’s regulatory costs) and operating costs (29% of this package’s regulatory costs) for 
the  sawnwood  sector  because  of  the  directives  on  renewable  energy,  energy  taxation  and  energy 
efficiency.  

Sawnwood  is  shipped  and  transported  across  the  globe  and  within  Europe  and  therefore  road 
regulation  plays  an  important  role  as  such,  with  a  transport  legislative  package  accounting  for 
23% of total regulatory costs for this sub-sector (0.6% of added value). The dimensions and maximum 
weights  authorised  for  both  national  and  international  lorry  journeys  are  regulated  by  the  directives 
concerned with road regulation40, generating investment costs (46% of the legislative package) for new 
equipment  to  comply  with  EU  legislation  as  well  as  additional  personnel  (12%  of  the  legislative 
package) since companies need to adapt their volumes of transport. For instance, the recent Directive 
2015/719  (which  amends  Directive  96/53/EC)  grants  derogations  on  the  maximal  lengths  to  make 
heavy  goods  vehicles  greener  by  improving  their  aerodynamic  performance.  Although  the  transport 
legislation cost is high when it is compared with other packages, it is very low when it is compared with 
added value (0.6% of added value). There are also costs associated with the Sulphur Directive, which 
may concern investments and maintenance of emission abatement technologies, exhaust gas cleaning 
systems, or other types of filtering equipment.  

The  environment  legislative  package  is  the  third  most  important  package,  representing  21%  of 
total costs (0.51% of added value). The Industrial Emissions Directive (IED), which came into force in 
2013, as well as the IPPC Directive that has been in place since 2008, create administrative burden for 
sawnwood companies (59% of the legislative package). IED costs relate to registration, notification or 
permitting of certain activities or costs sustained for the supply of data or information for monitoring. 
The IPPC Directive impacts on firms’ costs via permits that take into account the whole environmental 
performance  of  the  plant  based  on  Best  Available  Techniques  Reference  Documents  (BREFs). 
Furthermore, an administrative burden for phytosanitary certificates and inspections arises for those 
companies that import from, or export to, non-EU countries. 

The forest-related legislative package accounts for 4.3% of total regulatory costs (0.1% of added 
value) and mostly consists in administrative burden (100% of the legislative package) associated with 
the import in roundwood and sawnwood to and within trade Europe under the EUTR. 

40  Directive  2002/7/EC  of  the  European  Parliament  and  of  the  Council  of  18  February  2002  amending  Council  Directive 
96/53/EC  laying  down  for  certain  road  vehicles  circulating  within  the  Community  the  maximum  authorised  dimensions  in 
national and international traffic and the maximum authorised weights in international traffic. 

98 

 
 
                                                             
Figure 28 Evolution of costs for sawmilling and planing of wood as % of added value for the period 2005-2014 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators 
(turnover, AV and GOS) from Eurostat, Structural Business Statistics. 

The analysis of cost trends between 2005 and 2014 demonstrate that the share of costs on added value 
relating to the climate and energy legislative package has dropped in 2007, rising again in 2008 
and  2009  and  again  dropping  slightly  until  2012,  which  may  be  due  to  the  evolution  of  the 
denominator of added value with the financial crisis. We also see a new cost peak in 2013. Beyond the 
evolution of the added value of denominator, factors that may affect the evolution of regulatory costs 
relate to the EU establishing, in 2008, a series of climate and energy targets, better known as the "20-
20-20"  targets,  to  be  met  by  2020  in  its  pathway  towards  a  low-carbon  economy.  This  led  to  the 
formulation of additional levies and fees included in energy bills to promote the production and use of 
renewable energy. This may have generated the increase in costs that can be observed for 2009. 

Voluntary  Partnership  Agreements  from  the  forest-related  legislative  package  would  normally 
incur costs, by putting an administrative burden on the producer country as well as the companies that 
are  trading  in  wood  products  to  be  exported  to  the  EU  (e.g.  establishing  a  wood  legality  assurance 
system). However, since FLEGT licensing has not yet occurred, such costs have been delayed. (In any 
case,  in  practice  its  effect  is  as  one  variant  of  compliance  with  the  EUTR,  so  that  costs  from  FLEGT 
licensing  and  the  EUTR  are  not  cumulative.  Nevertheless,  with  the  adoption  of  the  EUTR  in  2010, 
companies would have started to prepare for its transposition into member –state law and application 
from 03/03/2013. 

The  product  legislative  package  shows  a  significant  cost  impact  starting  from  2011.  This  can  be 
explained  by  the  fact  that  the  EU  Ecolabel  Directive  has  been  revised  in  2009  and  came  into  effect 
2010.  Standard  application  and  renewal  fees  are  dependent  on  the  annual  turnover.  Administrative 
burden  related  to  product  certification  (tests,  expertise  and/or  inspection)  are  not  included  in  those 
standard fees but rise additionally.  

99 

 
 
 
 
 
5.3  Cumulative cost assessment for manufacture of veneer sheets and wood-based panels 

(16.21) 

Eurostat definition of manufacture of veneer sheets and wood-based panels 
NACE Rev.2: C1621 
NACE Rev. 1.1: C202 

This sub-sector includes the manufacture of veneer sheets thin enough (e.g. 0.6 to 2.5 mm) to be used 
for  veneering,  making  plywood  or  other  purposes  (whether  smoothed,  dyed,  coated,  impregnated, 
reinforced with paper or fabric backing, or made in the form of motifs), the manufacture of plywood, 
veneer  panels  and  similar  laminated  wood  boards  and  sheets,  the  manufacture  of  oriented  strand 
board (OSB) and other particleboard, the manufacture of medium density fibreboard (MDF) and other 
fibreboard,  the  manufacture  of  densified  wood  and  the  manufacture  of  glued-laminated  wood, 
laminated veneer wood. Eurostat, 2016 

The following four legislative packages were prioritised for the wood-based panels sub-sector: climate 
and  energy,  environment,  employment,  and  product  legislative  packages.  The  company  survey 
confirmed  the  policy  prioritisation  and  particularly  highlights  two  legislative  packages,  namely,  the 
climate  and  energy  (mostly  fees)  and  the  environment  (fees,  CAPEX,  OPEX)  legislative  packages. 
Other legislative packages are not significant in terms of generating costs. 

Regulatory costs for the sub-sector reach 2.3% of turnover, 10.8% of  added value and 28.3% of gross 
operating  surplus  of  companies,  which  can  be  broken  down  between  legislative  package  and  cost 
categories as follows: 

Table  24:  Regulatory  costs  for  manufacture  of  veneer  sheets  and  wood-based  panels  by  package  and 
comparison with main financial indicators – annual average for 2005-2014 

% turnover 

% AV 

% GOS 

Climate & Energy 
Environment 
Employment 
Product 
Total 

7.3% 
2.7% 
0.5% 
0.3% 
10.8% 
Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators 
(turnover, VA and GOS) from Eurostat, Structural Business Statistics. 

19.1% 
7.0% 
1.3% 
0.9% 
28.3% 

1.5% 
0.6% 
0.1% 
0.1% 
2.3% 

Share of total 
regulatory costs 
67.5% 
24.8% 
4.5% 
3.2% 
100.0% 

100 

 
 
 
 
 
 
 
 
 
 
 
 
 
Table  25  Regulatory  costs  for  manufacture  of  veneer  sheets  and  wood-based  panels  by  cost  category  and 
comparison with main financial indicators – annual average 2005-2014 

Monetary obligations 
CAPEX 
OPEX 
Administrative burden 
Total 

% turnover 

1.5% 
0.4% 
0.4% 
0.0% 
2.3% 

% AV 

6.9% 
1.8% 
2.0% 
0.1% 
10.8% 

% GOS 

18.1% 
4.6% 
5.2% 
0.4% 
28.3% 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators 
(turnover, AV and GOS) from Eurostat, Structural Business Statistics. 

Costs  from  EU  regulation  can  be  split  by  package  and  by  cost  categories.  The  following  paragraphs 
elaborate on the pieces of legislation and related cost categories driving the regulatory costs. 

Figure  29  Regulatory  costs  for  manufacture  of  veneer  sheets  and  wood-based  panels  as  %  of  added  value,  by 
legislative package and cost category – annual average 2005-2014 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators 
(turnover, VA and GOS) from Eurostat, Structural Business Statistics. 

101 

 
 
 
 
 
  
Figure 30 Share of categories of costs for manufacture of veneer  sheets and wood-based panels by package  – 
annual average for 2005-2014 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators 
(turnover, AV and GOS) from Eurostat, Structural Business Statistics. 

The climate and energy legislative package is the most important package in terms of regulatory 
costs,  accounting  for  67.5%  of  total  regulatory  costs  (7.3%  of  added  value).  The  EU  ETS  was  not 
prioritised  for  the  wood-based  panels  sub-sector,  even  though  manufacturers  of  veneer  wood  panels 
and  sawmill  operators  had  fallen  off  the  2015-2019  carbon  leakage  list.  This  large  share  of  costs  is 
attributable  to  high  rate  of  monetary  obligations  (80.7%  of  the  package),  mostly  driven  by  the 
Renewable  Energy  Directive  and  the  Energy  Taxation  Directive.  Fees,  levies  and  charges,  mainly 
included in the energy bill, are added to each unit of gas or electricity purchased. Similar to sawnwood, 
it is rather the Renewable Energy Directive that has had a considerably impact on regulatory charges. 
Since the wood-based panels industry is energy intensive, larger fees apply directly to this sub-sector. 
The Energy Taxation Directive covers sectors not covered under ETS, such as the wood-based panels 
companies, by imposing a minimum tax rate based on the CO2 and the energy content of the energy 
consumed.  These  are  accompanied  by  a  notable  administrative  burden.  Larger  companies  are  also 
affected  by  the  Energy  Efficiency  Directive  that  oblige  companies  to  conduct  independent  energy 
audits every fourth year, generating administrative burden starting from 2014.  

The  environmental  legislative  package  is  the  second  most  important  legislative  package, 
representing  24.8%  of  total  regulatory  costs  (2.7%  of  added  value).  Environmental  legislation 
principally generates CAPEX (34.5% of the package), fees (33.7%) and OPEX costs (30.6%) for wood-
based panels production. These relate to industrial emissions and air pollution. For instance, the IPPC 
Directive  was  in  force  until  6  January  2014  and  is  not  directly  applicable  to  wood-based  panel 
production,  however,  it  regulates  manufacturers  that  operate  large  combustion  plants  (>50MWth). 
Therefore,  fees  for  permits  as  well  as  investments  in  new  technologies  to  comply  with  the  required 
standards  generate  higher  operating  costs.  Monitoring  and  administrative  burden  are  also  linked  to 
the issuing of permits. With the new Industrial Emissions Directive (2010/75/EU) in place since 2010, 
the impact of the BREFs is expected to increase.  

The  Waste  Incineration  Directive  covers  incineration  and  co-incineration  plants,  including  those 
applied to wood waste that might contain halogenated organic compounds or heavy metals as a result 
of  treatment  with  wood-preservatives  or  coatings.  These  do  not  necessarily  originate  from  the 
manufacturing process as they might already be included in the raw materials coming on-site (DEFRA 
2008,  18-19),  which  creates  additional  costs  as  regards  to  the  disposal  of  waste.  This  also  concern 
CAPEX and OPEX costs as related to efforts in reducing volatile organic compound (VOC) emissions. 
For instance, oriented strand boards (OSB) are bonded with a resin. The traditional technology used to 
manufacture these panels causes the emission of VOCs during the production process as well as during 

102 

 
 
the  panels  life  cycle.  Costs  are  therefore  generated  for  companies  when  they  invest  in  non-standard 
production processes to reduce VOC emissions. 

Figure 31 Evolution of costs for manufacture of veneer sheets and wood-based panels as % of  added value for 
the period 2005-2014 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators 
(turnover, VA and GOS) from Eurostat, Structural Business Statistics. 

The  analysis  of  cost  trends  (time  frame  2005-2014)  demonstrate  that  shares  of  costs  relating  to  the 
climate  and  energy  legislative  package  dropped  in  2007,  after  which  it  reached  a  peak  in  2009  and 
have  since  then  decreased  slightly,  which  may  be  due  to  the  evolution  of  the  denominator  of  added 
value. In contrast, other legislative packages have developed continuously without showing increasing 
costs, aside from the product legislative package that started to impact the sub-sector in 2011. 

Beyond the evolution of the added value denominator, the increase in regulatory costs in climate and 
energy in 2008 can be related to the EU series of climate and energy targets  in 2008, in its pathway 
towards  a  low-carbon  competitive  economy,  which  has  contributed  to  a  reinforcement  of  the 
Renewable  Energy  Directive.  With  the  new  target  set  for  renewables  set  at  27%  for  2030,  it  is  likely 
that associated costs will continue to increase, largely from increasing pressure on wood raw-material 
supplies and hence their prices. 

The legislative package on products started to impact the wood-based panel industry beginning in 2011 
and may be due to early investments made in relation to the revised Construction Products Regulation 
(CPR). For instance, from 2013, the CPR made it mandatory for manufacturers to apply CE marking to 
any  of  their  products  covered  by  a  harmonised  European  standard  or  a  European  Technical 
Assessment.  Wood-based  panels  used  in  construction  and  the  Construction  Products  Regulation 
require manufacturers to provide a performance declaration, technical documentation and affix a CE 
marking. REACH (Registration, Evaluation, Authorisation and Restriction of Chemicals) entered into 
force in 2007. Some annexes have been revised since then. This process has brought associated costs 
that may continue to increase in the future.  

103 

 
 
 
5.4  Cumulative cost assessment of manufacture of other builders' carpentry and joinery 

(16.23) 

Eurostat definition of manufacture of other builders' carpentry and joinery  
NACE Rev.2: C1623 
NACE Rev. 1.1: C203 

This  sub-sector  includes  the  manufacture  of  wooden  goods  intended  to  be  used  primarily  in  the 
construction industry (beams, rafters, roof struts, glued-laminated and metal connected, prefabricated 
wooden  roof  trusses,  doors,  windows,  shutters  and  their  frames,  whether  or  not  containing  metal 
fittings,  such  as  hinges,  locks  etc.,  stairs,  railings,  wooden  beadings  and  mouldings,  shingles  and 
shakes, the manufacture of prefabricated buildings, or elements thereof, predominantly of wood, e.g. 
saunas,  the  manufacture  of  mobile  homes  and  the  manufacture  of  wood  partitions  (except  free 
standing). Eurostat, 2016 

The following six legislative packages were prioritised for the carpentry and joinery sub-sector: climate 
and  energy,  environment,  forest-related,  employment,  products  and  transport  legislative  packages. 
Among these, product policy (generating almost only administrative burden) was noted as the costliest 
package, followed by the transport (principally fees), environment (OPEX), climate and energy policy 
(fees, OPEX and administrative burden) and the employment (OPEX) packages. 

Regulatory  costs  for  the  sub-sector  reach  0.4%  of  turnover,  1.3%  of  added  value  and  4.1%  of  gross 
operating  surplus  of  companies,  which  can  be  broken  down  between  legislative  package  and  cost 
categories as follows: 

Table 26: Costs for manufacture of other builders' carpentry and joinery by package and comparison with main 
financial indicators – annual average for 2005-2014 

% turnover 

% AV 

% GOS 

Climate & Energy 
Environment 
Forest 
Employment 
Product 
Transport 
Total 

0.07% 
0.08% 
0.00% 
0.04% 
0.17% 
0.06% 
0.42% 

0.2% 
0.3% 
0.0% 
0.1% 
0.5% 
0.2% 
1.3% 

0.7% 
0.8% 
0.0% 
0.4% 
1.6% 
0.6% 
4.1% 

Share of total regulatory 
costs 
16.4% 
18.6% 
0.3% 
9.9% 
39.5% 
15.3% 
100.0% 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators 
(turnover, VA and GOS) from Eurostat, Structural Business Statistics. 

104 

 
 
 
 
 
 
 
 
 
 
 
Table 27 Costs for manufacture of other builders' carpentry and joinery by package and comparison with main 
financial indicators – annual average for 2005-2014 

Monetary obligations 

CAPEX 

OPEX 

Administrative burden 

Total 

% turnover 

0.1% 

0.0% 

0.1% 

0.2% 

0.4% 

% AV 

0.3% 

0.1% 

0.3% 

0.6% 

1.3% 

% GOS 

1.0% 

0.2% 

0.9% 

2.0% 

4.1% 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators 
(turnover, VA and GOS) from Eurostat, Structural Business Statistics. 

Costs  from  EU  regulation  can  be  split  by  package  and  by  cost  categories.  The  following  paragraphs 
elaborate on the pieces of legislation and related cost categories driving the regulatory costs. 

Figure  32  Regulatory  costs  for  manufacture  of  other  builders'  carpentry  and  joinery  as  %  of  added  value,  by 
legislative package and cost category – annual average 2005-2014 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators 
(turnover, AV and GOS) from Eurostat, Structural Business Statistics. 

105 

 
 
 
 
 
Figure  33  Share  of  categories  of  costs  for  manufacture  of  other  builders'  carpentry  and  joinery  by  package  – 
annual average for 2005-2014 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators 
(turnover, AV and GOS) from Eurostat, Structural Business Statistics. 

This sub-sector principally prioritised the product legislative package, representing 39.5% of total 
regulatory  costs  (0.5%  of  added  value),  related  to  the  Construction  Products  Regulation  and  the 
Registration,  Evaluation,  Authorisation  and  Restriction  of  Chemicals  (REACH)  Regulation.  It  is 
interesting  in  this  case  to  note  the  significant  administrative  burden  (94.8%  of  the  package)  these 
regulations  generate  for  the  carpentry  and  joinery  sub-sector.  These  are  associated  with  information 
obligations, such as requirements for a declaration, or the application  for a certificate, of compliance 
with the standardised specifications defined in the regulations. These declarations or the applications 
need  to  be  accompanied  by  the  necessary  documentation  (creating  costs  across  the  whole  supply 
chain)  as  all  companies  contributing  to  the  production  of  the  product  need  to  provide  the  necessary 
documentation and should properly certify their products. This creates the notably high administrative 
burden  for  the  carpentry  and  joinery  sub-sector.  Substantive  obligations  and  administrative  burden 
associated  with  the  regulation  on  construction  products  (e.g.  CE  marking)  include  investments  in 
systems  for  the  Assessment  and  Verification  of  Constancy  of  Performance  (AVCP).  This  creates 
personnel  costs  connected  with  maintaining  the  AVCP  system,  it  would  also  create  costs  in  terms  of 
documenting the performance of products and the training staff to do an AVCP. 

The environment legislative package accounts for 18.6% of total regulatory costs (0.3% of added 
value).  Operating  costs  (40.8%  of  the  package)  arise,  inter  alia,  in  relation  to  the  EU  environmental 
legislation  because  of  the  sub-sectors  exposure  to  the  Industrial  Emissions  Directive.  The  Industrial 
Emissions  Directive  (IED),  as  well  as  the  IPPC  Directive  that  has  been  in  place  from  2008  to  2013, 
create  an  administrative  burden  (24.9%  of  the  package)  for  carpentry  and  joinery  companies.  IED 
costs  relate  to  registration,  notification  or  permitting  of  certain  activities  or  costs  sustained  for  the 
supply  of  data  or  information  for  monitoring.  The  IPPC  Directive  impacts  on  costs  via  permits  that 
take  into  account  the  environmental  performance  of  the  companies  based  on  Best  Available 
Techniques (BATs). 

The  climate  and  energy  package,  representing  16.4%  of  total  regulatory  costs  (0.2%  of  added 
value),  generate  monetary  obligations  (40.4%  of  the  package)  and  operating  costs  (29.2%  of  the 
package)  for  carpentry  and  joinery  companies  because  of  the  directives  on  renewable  energy  and 
emissions trading. Fees, taxes and levies included in the energy bill because of the Renewable Energy 
Directive,  revised,  and  back  in  effect  in  2010,  correspond  to  a  significant  part  of  the  costs.  The 

106 

 
 
 
purchase of CO2 allowances under the ETS system is also an important cost for this sub-sector. This 
would include administrative  burdens (overall,  27.4% of the  package), e.g. related to greenhouse gas 
emission  permits  or  accounting,  at  the  company  level.  Substantive  obligations  resulting  from  ETS 
include investments for emission abatement equipment, energy and process efficiency beyond the so-
called business as usual. Investment costs are also linked to rising energy costs (as in indirect effect), 
which  is  often  attributed  to  the  directive  on  renewable  energy  and  the  increasing  demand  placed  on 
raw materials. 

The  transport  legislative  package  accounts  for  15.3%  of  total  regulatory  costs  (0.2%  of  added 
value). Carpentry and joinery companies are often dependent on road transport to move materials to 
construction  site.  Vehicle  dimensions  and  maximum  weights  for  national  and  international  journeys 
are  regulated  by  the  EU  Directive  on  Road  Transport,  to  harmonise  provisions  in  force  in  the  EU 
member states. As such this has an impact on costs for companies since limits have been set as to how 
much (weight) and in what form (dimensions) products can be transported by road. 

EU policy on occupational health and safety makes an important contribution to preventing accidents 
at  work  and  ensuring  safe  occupational  conditions  for  workers.  Therefore,  the  employment 
legislative package accounts for 9.9% of total regulatory costs (0.1% of  added value). For instance, 
the woodworking industry (as a whole) has one of the highest accident rates in manufacturing, most of 
which are caused by contact with moving machinery. Workers in the carpentry and joinery sub-sector 
may also, amongst other risks, be exposed to hazardous chemicals, solvents and other materials. This 
requires a company to invest in best practice control measures for safety, improved protective gear and 
new  equipment  methods.  Operating  costs  (95.1%  of  the  package)  include  the  maintenance  of 
equipment to ensure a safe and health working environment.  

Figure 34 Evolution of costs for manufacture of other builders' carpentry and joinery as % of  added value for 
the period 2005-2014 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators 
(turnover, AV and GOS) from Eurostat, Structural Business Statistics. 

The  analysis  of  cost  trends  (time  frame  2005-2014)  shows  that  costs  ratios  relating  to  the 
environmental  legislative  package  dropped  in  2006  and  2007  but  have  since  then  increased 
continuously  until  2013.  The  costs  ratios  from  the  product  legislative  package  has  reached  a  peak  in 
2009  and  has  remained  steady  since  then.  The  other  legislative  packages  have  stayed  more  or  less 
stable  in  terms  of  generating  costs  for  the  sub-sector.  We  observe  an  overall  decrease  in  regulatory 

107 

 
 
 
costs ratios between 2004 and 2007, followed by a steady increase thereafter, until 2009, which may 
be due to the evolution of the denominator of added value.  

Beyond  the  evolution  of  added  value,  factors  that  may  affect  the  evolution  of  regulatory  costs  may 
relate to the increasing costs for the environmental package due to the Industrial Emissions Directive 
(IED).  The  cost  increases  are  linked  to  the  impact  of  the  IPPC,  followed  by  that  of  the  IED  in  2013, 
which  have  triggered  the  noted  changes  in  costs  over  time  for  the  carpentry  and  joinery  subsector. 
Costs  associated  with  the  climate  and  energy  package  have  been  stable  over  time,  with  a  modest 
increase in 2013. This increase may be due to the impact of the Renewable Energy Directive, reflecting 
increasing  raw  material  costs.  It  may  also  reflect  the  purchase  of  CO2  allowances  under  the  ETS 
system, in particular as the third trading period began in 2013.  

5.5  Cumulative cost assessment of manufacture of wooden pallets and other wooden 

packaging (16.24) 

Eurostat definition of manufacture of wooden pallets and other wooden packaging 
NACE Rev.2: C1624 
NACE Rev. 1.1: C204 

This  sub-sector  includes  the  manufacture  of  packing  cases,  boxes,  crates,  drums  and  similar 
packings  of  wood,  the  manufacture  of  pallets,  box  pallets  and  other  load  boards  of  wood,  the 
manufacture  of  barrels,  vats,  tubs  and  other  coopers'  products  of  wood  and the manufacture  of 
wooden cable-drums. Eurostat, 2016 

The  following  five  legislative  packages  were  prioritised  for  the  wooden  pallets  and  other  wooden 
packaging  sub-sector:  climate  and  energy,  environment,  forest-related,  employment  and  products 
legislative packages. The company survey confirmed  this policy  prioritisation  but highlights that it is 
especially the environment (OPEX) legislative package that has generated costs. The other legislative 
packages are in fact not significant in terms of generating a large amount of costs for the sub-sector. 

Regulatory costs for the sub-sector reach 4.4% of turnover, 16.4% of added value and 50.7% of gross 
operating  surplus  of  companies,  which  can  be  broken  down  between  legislative  packages  and  cost 
categories as follows: 

Table  28:  Costs  for  manufacture  of  wooden  pallets  and  other  wooden  packaging  by  package  and  comparison 
with main financial indicators – annual average for 2005-2014 

% turnover 

% AV 

% GOS 

Climate & Energy 
Environment 
Forest 
Employment 
Product 

Total 

0.24% 
3.44% 
0.07% 
0.36% 
0.32% 
4.43% 

0.9% 
12.8% 
0.2% 
1.3% 
1.2% 
16.4% 

2.8% 
39.4% 
0.8% 
4.2% 
3.7% 
50.7% 

Share of total 
regulatory costs 
5.5% 
77.6% 
1.5% 
8.2% 
7.2% 
100.0% 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators 
(turnover, AV and GOS) from Eurostat, Structural Business Statistics. 

108 

 
 
 
 
 
 
 
 
Table  29  Costs  for  manufacture  of  wooden  pallets  and  other  wooden  packaging  by  cost  category  and 
comparison with main financial indicators – annual average for 2005-2014 

Monetary obligations 
CAPEX 
OPEX 
Administrative burden 
Total 

% turnover 

0.5% 
0.5% 
3.1% 
0.3% 
4.4% 

% AV 

1.8% 
2.0% 
11.4% 
1.2% 
16.4% 

% GOS 

5.7% 
6.0% 
35.3% 
3.7% 
50.7% 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators 
(turnover, AV and GOS) from Eurostat, Structural Business Statistics. 

Costs  from  EU  regulation  can  be  split  by  package  and  by  cost  categories.  The  following  paragraphs 
elaborate on the pieces of legislation and related cost categories driving the regulatory costs. 

Figure  35  Regulatory  costs  for  manufacture  of  wooden  pallets  and  other  wooden  packaging  as  %  of  added 
value, by legislative package and cost category – annual average 2005-2014 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators 
(turnover, AV and GOS) from Eurostat, Structural Business Statistics. 

109 

0.0%2.0%4.0%6.0%8.0%10.0%12.0%14.0%Climate & EnergyEnvironment (inc. phytosanitary leg.)ForestEmploymentProductMonetary obligationsCAPEXOPEXAdministrative burden 
 
 
 
 
 
 
Figure  36  Share  of  categories  of  costs  for  manufacture  of  wooden  pallets  and  other  wooden  packaging  by 
package – annual average for 2005-2014 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators 
(turnover, AV and GOS) from Eurostat, Structural Business Statistics. 

The environment legislative package accounts for 77.6% of total regulatory costs (12.8% of added 
value).  Key  legislation  from  this  package  relate  to  waste  (Waste  Framework  Directive)  as  well  as  the 
Packaging  and  Packaging  Waste  Directive.  It  also  relates  to  relevant  parts  of  the  phytosanitary 
regulations  (e.g.  rules  on  wooden  packaging  which  incorporate  the  ISPM  15  standard  for  treatment 
and  marking,  which,  although  it  is  a  standard  developed  by  the  International  Plant  Protection 
Convention from the U.N.’s Food and Agriculture Organization, it has been incorporated into the EU 
phytosanitary  legislation)  to  prevent  the  introduction  of  harmful,  plant-borne  alien  organisms. 
Significant  investments  have  been  necessary  for  companies  to  collect  and  process  returned  products 
and  wastes  in  accordance  with  the  principle  of  extended  producer  responsibility  (e.g.  costs  of  waste 
management are to be carried partly or wholly by the producer). Personnel costs and other operating 
and maintenance costs are also associated with these obligations.  

There  are  in  addition  administrative  burdens  (e.g.  control,  inspection  and  testing)  associated  with 
obtaining  certificates  for  those  companies  that  import  products  as  well  as  export  them  to  non-EU 
countries. For instance, the applied treatment must be marked on the product (e.g. showing details of 
the  processing  agents  that  have  been  used)  to  certify  that  the  wood  packaging  material  has  been 
subjected  to  an  approved  measure.  It  should  be  noted  that  the  marking  proves  compliance  with  the 
requirements  of  all  phytosanitary  regulations  in  place,  including  the  provision  specified  by  the 
standard  ISPM  15,  as  companies  have  passed  the  examinations  for  obtaining  a  license  to  use  the 
marking. 

The employment legislative package is the second most important package, representing 8.2% of 
total  regulatory  costs  (1.3%  of  added  value).  EU  policy  on  occupational  health  and  safety  makes  an 
important contribution to preventing accidents at work and ensuring safe occupational conditions for 
workers. For instance, workers in the wooden pallets and other wooden packaging sub-sector may be 
exposed to high physical demands as part of the woodworking process (e.g. handling of pallets). This 
can  in  turn  present  both  health  and  safety  hazards,  such  as  representing  a  major  risk  for 
musculoskeletal  disorders.  In  other  parts  of  the  woodworking  sub-sector,  such  as  sawmills,  planing 
mills or panel mills, wood dust may be a problem. Such issues require a company to invest in measures 
to  solve  these  types  of  problems,  which  may  include  a  risk  assessment  and  improved  (or  modified) 
machinery and methods as part of the manufacturing process. Related operating costs (47.1% of  this 

110 

59.8%6.1%30.2%19.8%16.4%24.2%8.6%9.2%17.5%31.9%9.6%81.0%40.0%47.1%22.4%6.4%4.3%20.5%15.6%29.2%0%10%20%30%40%50%60%70%80%90%100%Climate & EnergyEnvironment (inc. phytosanitary leg.)ForestEmploymentProductMonetary obligationsCAPEXOPEXAdministrative burden 
 
 
legislative  package)  include  the  maintenance  of  equipment  to  ensure  a  safe  and  health  working 
environment. 

Accounting  for  7.2%  of  total  regulatory  costs  (1.2%  of  added  value),  this  sub-sector  principally 
prioritised  the  product  legislative  package  related  to  materials  and  articles  intended  as  finished 
products (cases, boxes, crates, pallets, etc.) to come into direct or indirect contact with foodstuffs, as 
well  as  common  methods  to  measure  and  communicate  the  life-cycle  environmental  performance  of 
products  and  organisations.  However,  it  should  be  noted  that  this  legislation  does  not  affect  all  the 
product groups within the sub-sector as a whole.  It is interesting in this case to note that the overall 
costs for the products package is comparatively nominal. These include fees and charges (overall 16.4% 
of the package) associated with applications for authorisation of a new substance to come into contact 
with  food  are  nominal.  It  is,  to  some  extent,  certain  conditions  on  the  manufacturing  process  (e.g. 
ensuring  that  production  is  in  line  with  good  manufacturing  practices)  that  generate  OPEX  costs 
(22.4% of the package), while the reporting obligations (as linked to inspections and audits as well as 
regulatory compliance as regards permits, labelling, safety and provisions for ensuring traceability and 
the authorisation of substances) create the administrative burden (29.2% of the package) for the sub-
sector.  

The climate and energy package only accounts for 5.5% of package (0.9% of added value), mostly 
driven by monetary obligations included in the energy bill because of the Renewable Energy Directive. 
Other types of costs include maintenance costs (9.6% of the package) due to investments in state-of-
the-art production capacity to reduce emissions of greenhouse gases and to improve energy efficiency.  

Figure 37 Evolution of costs for manufacture of wooden pallets and other wooden packaging as % of added 
value for the period 2004-2015 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators 
(turnover, AV and GOS) from Eurostat, Structural Business Statistics. 

111 

0%5%10%15%20%25%2005200620072008200920102011201220132014Climate & EnergyEnvironment (inc. phytosanitary leg.)ForestEmploymentProduct 
 
 
 
The  analysis  of  cost  trends  (time  frame  2005-2014)  demonstrate  that  share  of  regulatory  costs  on 
added value relating to the environment legislative package have dropped in 2007 and 2011 and have 
remained stable since 2012. As with the previous sub-sectors, we can observe a slight general decrease 
of costs ratios in 2007 (reaching a peak in 2009) and again decreasing thereafter. This is, as with the 
other subsectors, presumed to relate to the financial crises having an impact on producers of  wooden 
pallets and other  wooden  packaging in 2008/2009,  prior to  which the high levels of business  – “the 
calm before the storm”, as reflected in turnover and  added value were reflected in relatively reduced 
costs. 

The overall most significant cost for producers of wooden pallets and other wooden packaging, by far, 
is  the  environmental  legislative  package.  In  this  instance,  the  increase  of  costs  ratios  between  2007 
and  2009  may  be  explained  by  the  revision  of  the  Waste  Framework  Directive.  The  directive 
introduced new targets for reuse and recycling, and requirements for Member States to prepare waste 
prevention programmes, which may be underlying the increase in costs ratios for this sub-sector. The 
increase  in  costs  ratios  between  2007  and  2009  are  also  for  a  considerable  part  generated  by  the 
implementation  of  phytosanitary  regulations,  in  particular  those  incorporating  ISPM  15  -  which  was 
itself  reviewed  in  this  period,  with  investments  in  heat  treat  capacity  and  costs  for  reorganising  the 
premises  and  controlling  and  licensing  schemes.  This  required  companies  to  investment  in  heat 
treatment capacity and to make adjustments to the control and marking scheme. 

The  remaining  legislative  packages  have  negligible  costs  for  the  sub-sector  in  comparison. 
Interestingly, we do however see an increase in employment costs ratios around 2007, which would be 
linked  to  the  introduction  of  the  second  (in  2007)  and  third  (in  2010)  list  of  indicative  occupational 
exposure limit values.  

5.6  Cumulative cost assessment for the overall pulp, paper and paperboard sector  

5.6.1 

Scope 

The section on cumulative cost assessment for the overall pulp, paper and paperboard sector provides 
an aggregated picture of  EU regulatory costs (by a weighted sum of the values from each sub-sector, 
using turnover share as a weight) over the period 2004-2015 for the following sub-sectors: 

 

 

17.11 Manufacture of pulp; 

17.12 Manufacture of paper and paperboard 

The subsequent sections will further cover each of these sub-sectors independently.  

For  the  pulp,  paper  and  paperboard  sector  and  its  sub-sectors  (as  mentioned  above),  the  following 
sections provide an evolution of the share of regulatory cost as a percentage of  added  value over the 
time  period  (2005-2014).  It  is  important  to  note  that,  while  it  certainly  illustrates  the  evolution  of 
regulatory costs over ten years, the trend is also impacted by the evolution of the ratio’s denominator, 
i.e. the added value of the sector. As a matter of fact, recurrent peaks of regulatory costs as percentage 
of  added  value  in  2009  may  hence  reflect  the  drop  in  added  value  due  to  the  financial  crisis  and  its 
subsequently difficult business environment. Nevertheless, although conclusions cannot be drawn on 
whether there has been a peak in regulatory costs per se for such a year, it is correct to mention that 
the  share  of  regulatory  costs  (reflecting  the  regulatory  burden)  on  added  value  has  increased.  The 
evolution of added value (denominator of all cost ratio), from 2005 to 2014, is as follows:  

112 

 
 
Figure 38 Evolution of added value for the pulp, paper and paperboard sector (NACE code 171) 

Source: Eurostat, Structural Business Statistics, last available data  

5.6.2  Direct regulatory costs for the overall pulp, paper and paperboard sector 

The  following  seven  legislative  packages  were  prioritised  for  the  pulp,  paper  and  paperboard  sub-
sectors:  competition,  climate  and  energy,  environment,  forest-related,  employment,  products, 
transport and trade legislative packages. The results indicate that it is especially the climate and energy 
(monetary obligations, CAPEX) as well as the environment (CAPEX, OPEX) legislative packages that 
generated  significant  direct  costs  for  manufactures  of  pulp,  paper  and  paper  products.  Legislative 
packages concerned with employment, product and transport remained on a similar level as regards to 
generating costs. Nearly no direct costs have been reported for this subsector for the legislation forest-
related and trade packages, for which the quantification exercise appeared to be difficult.  

It can be noted that the manufacture of pulp, paper and paperboard sub-sectors demonstrate similar 
direct costs as the pulp sub-sector. It is therefore assumed that the prioritised legislation has a similar 
impact on the industry, with some exceptions.  

Direct regulatory costs for the sub-sector reach 0.9% of turnover, 4.29% of added value and 10.76% of 
gross  operating  surplus  of  companies  as  an  average  for  the  period  2005-2014,  which  can  be  broken 
down between cost categories as follows in the table below. Other comparators are presented as well, 
i.e. regulatory costs as share of EBITDA, of EBIT and regulatory costs per tonne. 

113 

80001000012000140001600018000200002005200620072008200920102011201220132014 
 
 
 
 
 
 
 
 
 
 
 
Table 30 Direct Costs for the overall pulp, paper and paperboard sector by package and comparison with main 
financial indicators – annual average for 2005-2014 

% 
turnover 

% AV 

% GOS 

% 
EBITDA 

% EBIT 

Share of 
total 
costs 

Climate & Energy 

0.37% 

1.78% 

4.46% 

3.2% 

9.1% 

41.5% 

Environment 

Forest 

Employment 

Product 

Transport 

Trade 
Total 

0.29% 

0.02% 

0.08% 

0.08% 

0.05% 

0.01% 
0.90% 

1.37% 

0.11% 

0.37% 

0.38% 

0.21% 

0.07% 
4.29% 

3.45% 

0.27% 

0.94% 

0.94% 

0.53% 

0.17% 
10.76% 

2.4% 

0.2% 

0.6% 

0.7% 

0.4% 

0.1% 
7.6% 

7.0% 

0.6% 

1.9% 

1.9% 

1.1% 

32.0% 

2.5% 

8.7% 

8.8% 

4.9% 

0.3% 
21.9% 

1.6% 
100.0% 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators  of 
turnover, AV and GOS from Eurostat, Structural Business Statistics and EBIT, EBITDA and production quantities 
from CEPI, RISI database 

Table 31 Direct Costs for the overall pulp, paper and paperboard sector by cost category and comparison with 
main financial indicators – annual average for 2005-2014 

% turnover 

% AV 

% GOS 

% EBITDA  % EBIT 

Monetary obligations 
CAPEX 
OPEX 
Administrative burden 
Total 

0.3% 
0.3% 
0.2% 
0.1% 
0.9% 

1.5% 
1.4% 
1.1% 
0.3% 
4.3% 

3.7% 
3.5% 
2.7% 
0.9% 
10.8% 

2.6% 
2.5% 
1.9% 
0.6% 
7.6% 

7.4% 
7.2% 
5.5% 
1.8% 
21.9% 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators  of 
turnover, AV and GOS from Eurostat, Structural Business Statistics and EBIT, EBITDA and production quantities 
from CEPI, RISI database 

114 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs  from  EU  regulation  can  be  split  by  package  and  by  cost  categories.  The  following  paragraphs 
elaborate on the pieces of legislation and related cost categories driving the regulatory costs. 

Figure  39  Direct  Regulatory  costs  for  the  overall  pulp,  paper  and  paperboard  sector  as  %  of  added  value,  by 
legislative package and cost category – annual average 2005-2014  

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators  of 
turnover, AV and GOS from Eurostat, Structural Business Statistics and EBIT, EBITDA and production quantities 
from CEPI, RISI database 

The key legislative package impacting the manufacture of pulp, paper and paperboard is  the climate 
and  energy  package,  accounting  for  41.5%  of  total  regulatory  costs  (1.78%  of  added  value).  The 
purchase  of  CO2  allowances  under  the  ETS  system  is  an  important  cost  for  this  legislative  package. 
Substantive  obligations  are  also  a  significant  cost  item  for  the  climate  and  energy  package,  in 
particular as regards to the ETS, including investments in emission abatement equipment, energy and 
process  efficiency  that  is  beyond  business-as-usual  expenditures.  Investments  to  increase  energy 
independence  and  to  reduce  emissions  amongst  pulp,  paper  and  paperboard  producers  have  been 
made,  in  some  cases  this  means  that  mills  are,  in  part,  operated  with  an  autonomous  power  supply 
that generates energy for its own use (e.g. integrated pulp, paper and paperboard mills), which in turn 
improve energy efficiency.  

In addition to investments costs (e.g. investments in equipment or new systems of procedures needed 
to comply with the provision for a 20% reduction in greenhouse gas emission), the Energy Efficiency 
Directive  foresees  independent  energy  audits  for  large  companies.  Energy  audits  do  also  imply  fees 
and regulatory charges, which brings additional administrative burden for pulp companies. 

The  environmental  legislative  package  accounts  for  32%  of  total  direct  regulatory  costs  for  the 
sector  (1.37%  of  added  value).  Key  cost  items  for  these  pieces  of  legislation  are  investment  in  new 
installations  as  well  as  maintenance  costs  for  equipment  and  supplies  for  IED  permit  are  obliged  to 
invest in Best Available Technologies (BATs). For instance, costs for permits for waste (as well as waste 
water) treatment are significant costs that arise for pulp producers. Several large companies will have 
their own landfills  where operating costs for the maintenance of its  equipment and supplies are also 
generated.  

The forest-related legislative package accounts for 2.5% of total regulatory costs (0,11% of added 
value).  Direct  costs  started  to  become  more  significant  when  the  EUTR  regulation  was  concluded  in 

115 

 
 
2010  and  when  it  came  into  force  in  2013.  However,  compared  to  costs  arising  from  the 
implementation of other legislation it appears to be of lower magnitude. 

The employment legislative package accounts for 8.7% of total regulatory costs (0,37% of  added 
value). Main cost items are operating costs and capital expenditures. With respect to these substantive 
obligations  (CAPEX  and  OPEX)  pulp,  paper  and  paperboard  companies  invest  in  health  and  safety 
standards, buy personal safety equipment as well as equipment to limit exposure substances including 
hazardous ones in accordance with the EU regulation (as  well as invest  in training). Investment and 
operating costs also arise from the monitoring procedures and protective equipment for work at night 
that have to be established because of the Working Time Directive. Additional costs may  furthermore 
arise due to on-call and standby time in the Working Time Directive. 

The product legislative package is the third most important package, accounting for 8.8% of total 
regulatory  costs  (0.38%  of  added  value),  among  which  a  large  part  refers  to  operating  costs.  Such 
substantive costs are mainly associated with the eco-label and include costs from lifecycle assessment, 
training  of  personnel  to  fulfil  eco-design  requirements,  obligations  connected  to  distribution  and 
labelling, or providing information about product supply chains. 

The transport legislative package represents 4.9% of total regulatory costs (0.2% of added value). 
This sub-sector uses all modes of transport to get its raw materials and its products delivered. Road is 
however  predominant.  Monetary  obligations  are  principally  associated  with  the  additional  cost  of 
switching to low-sulphur fuel (marine gas oils - MGO). It has been suggested that this represents a cost 
increase of 13 to 25% of the overall costs in the SECA area41. As stated earlier, the EU Directive on road 
transport42,  by  regulating  vehicle  dimensions  and  maximum  weights  for  national  and  international 
journeys, affects the  pulp,  paper and  paperboard and paper  board producing companies  in the same 
way it does affect woodworking companies. This may require investments related to the dimension and 
weight of vehicles or proof of fulfilment by providing a manufacturer’s number plate with an additional 
plate showing dimensions or registration documents. 

The  trade  legislative  package  accounts  for  1.6%  of  total  regulatory  costs  (0.07%  of  added  value). 
Due  to  some  specificities,  such  as  the  ‘lesser  duty  rule’  and  the  ‘community  interest’,  it  has  been 
suggested  that  the  anti-dumping  measures  adopted  by  the  EU  are  often  of  lower  magnitude  than  in 
other  countries.  These  trade  defence  measures  thus  do  not  restore  a  true  level  playing  field  for  the 
European  pulp,  paper  and  paperboard  industry  when  harmed  by  dumped  or  subsided  imports.  This 
puts the European industry at a disadvantage and creates trade diversion, to the advantage of non-EU 
countries.  

41 CE DELFT Study 
(http://www.cedelft.eu/publicatie/seca_assessment%3A_impacts_of_2015_seca_marine_fuel_sulphur_limits/1780), 

And EU Parliament study on Shippers 
(http://www.europarl.europa.eu/RegData/etudes/STUD/2015/540338/IPOL_STU%282015%29540338_EN.pdf) 

42  Directive  2002/7/EC  of  the  European  Parliament  and  of  the  Council  of  18  February  2002  amending  Council  Directive 
96/53/EC  laying  down  for  certain  road  vehicles  circulating  within  the  Community  the  maximum  authorised  dimensions  in 
national and international traffic and the maximum authorised weights in international traffic. 

116 

 
 
 
                                                             
Figure 40 Evolution of direct regulatory costs for the overall pulp, paper and paperboard sector as % of added 
value for the period 2005-2014 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators  of 
turnover, AV and GOS from Eurostat, Structural Business Statistics and EBIT, EBITDA and production quantities 
from CEPI, RISI database 

The analysis of cost trends (time frame 2005-2014) demonstrate that direct costs ratios nearly tripled 
over  the  time  period.  Direct  costs  ratios  relating  to  the  climate  and  energy  legislative  package  have 
increased  significantly  between  2006  and  2007,  and  have  then  remained  stable  until  2012  when  we 
start seeing another increase in costs. 

In  contrast  to  other  industries,  the  pulp,  paper  and  paperboard  industry  cannot  easily  reduce  its 
production since operating costs are high. It is as such presumed that the significant increase in costs 
for  the  pulp,  paper  and  paperboard  producing  sub-sector  in  2006-2007  is  interlinked  with 
investments  to  meet  forthcoming  legal  obligations.  This  would  be  connected  to  the  revision  of  the 
Renewable  Energy  Directive  and  the  launch  of  the  third  phase  of  the  ETS.  For  instance,  pulp,  paper 
and paperboard was covered by the ETS since its start in 2005. The second increase in 2012/2013 may 
also be linked to the ETS, e.g. from 2013 the ETS requires a reduction of -21% compared to 2005. The 
Energy  Efficiency  Directive  also  came  into  force  during  this  period  and  it  would  also  have  been 
preceded by investments to meet new legal requirements.  

The  following  table  provides  results  for  the  first  (2005)  and  last  (2014)  years  over  the  period,  along 
with ranges of direct regulatory costs over the period (2005-2014): 

117 

 
 
 
 
 
 
 
 
Table 32 Direct regulatory costs for the pulp, paper and paperboard sector - First year, last year, ranges min-
max 

First year 
(2005) 

Last year 
(2014) 

Min 

Year 

Max 

Year 

Climate 
Energy 

& 

Environment 

Forest 

Employment 

Product 

Transport 

Trade 

0.706% 

2.646% 

0.706% 

0.739% 

0.024% 

0.189% 

0.169% 

0.166% 

0.058% 

1.709% 

0.220% 

0.392% 

0.416% 

0.280% 

0.072% 

0.739% 

0.024% 

0.183% 

0.169% 

0.165% 

0.058% 

Source: Authors’ elaboration 

2005 

2005 

2005 

2006 

2005 

2006 

2005 

2.646% 

1.730% 

0.244% 

0.634% 

0.517% 

0.280% 

0.072% 

2014 

2009 

2013 

2013 

2013 

2014 

2014 

Results presented above apply to firms of the pulp, paper and paperboard industries where pulp mills 
sell their market pulp to third parties.  As most mills included in our sample of companies are 
integrated companies, results are presented below for an average integrated company of pulp, 
paper and paperboard.  

Table  33  Direct  regulatory  costs  for  the  overall  pulp,  paper  and  paperboard  sector  by  package  and 
comparison with main financial indicators for an average integrated company – annual average for 2005-
2014 

Climate & Energy 
Environment 
Forest 

Employment 
Product 
Transport 
Trade 
Total 

% turnover 
0.42% 
0.32% 
0.02% 

EUR/tonne 
3.18 € 
2.46 € 
0.19 € 

0.09% 
0.09% 
0.05% 
0.01% 
1.00% 

0.67 € 
0.68 € 
0.38 € 
0.12 € 
7.68 € 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators  of 
turnover, AV and GOS from Eurostat, Structural Business Statistics and EBIT, EBITDA and production quantities 
from CEPI, RISI database 

5.6.3 

Indirect regulatory costs for the overall pulp, paper and paperboard sector 

Companies  undergoing  the  interview  process  as  well  as  stakeholders  taking  the  online  survey  have 
systematically  reported  the  significant  impact  of  ETS  indirect  costs  of  regulation,  that  occur  when 
utility  companies  pass-on  some  of  their  ETS-related  costs  on  the  industry.  Such  indirect  costs  from 
electricity  providers  become  particularly  substantial  as  pulp,  paper  and  paperboard  are  energy-
intensive sectors. 

The methodology followed to produce results on ETS indirect costs can be consulted as part of chapter 
3. In order to provide a fair overview of its impact, we propose the following scenarios: 

  Pass-on rates: i) 0.5 and ii) 1; based on an extensive analysis of all available literature. 

118 

 
 
 
 
 
 
 
  For the evolution of indirect costs per year, two alternative carbon prices for 2007 have been 
used:  i)  0.74  €/tonne  CO2  (spot  price  of  2007)  and  ii)  19.56  €/tonne  CO2  (average  of  daily 
future prices of the next year) 

Table 34 Indirect costs of ETS (million EUR) for the overall pulp, paper and paperboard sector 

Indirect costs from ETS (in million EUR) 

Scenario 1 

Scenario 2 

Scenario 3 

Scenario 4 

Hypothesis 1 
Pass-on 
Hypothesis 2 
Carbon price 
2007 
2005 
2006 
2007 
2008 
2009 
2010 
2011 
2012 
2013 
2014 

0.5 

0.74 

524.27 
481.03 
18.57 
535.11 
275.12 
321.90 
289.24 
154.92 
89.49 
118.04 

Source: Authors’ elaboration 

0.5 

19.56 

524.27 
481.03 
490.91 
535.11 
275.12 
321.90 
289.24 
154.92 
89.49 
118.04 

1 

0.74 

1,048.54 
962.07 
37.14 
1,070.21 
550.24 
643.80 
578.48 
309.84 
178.98 
236.09 

1 

19.56 

1,048.54 
962.07 
981.82 
1,070.21 
550.24 
643.80 
578.48 
309.84 
178.98 
236.09 

5.6.4  Direct and indirect regulatory costs for the overall Pulp, Paper and Paperboard sector 

The following charts gathers the overall direct regulatory costs and indirect costs from ETS, as a share 
of added value and as an annual average for 2005-2014, with a pass-on rate of 0.5. Indirect costs from 
ETS are close to twice as much as direct costs from the climate and energy package, which contains, 
inter alia, direct costs from ETS. 

119 

 
 
 
 
 
 
Figure  41  Overall  direct  regulatory  costs  and  ETS  indirect  regulatory  costs  for  the  overall  pulp,  paper  and 
paperboard sector - annual average 2005-2014, pass-on of 0.5 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators  of 
turnover, AV and GOS from Eurostat, Structural Business Statistics and EBIT, EBITDA and production quantities 
from CEPI, RISI database 

Figure 42 Evolution of direct regulatory costs and ETS indirect costs for the overall pulp, paper and paperboard 
sector - annual average 2005-2014 with pass-on 0.5 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators  of 
turnover, AV and GOS from Eurostat, Structural Business Statistics and EBIT, EBITDA and production quantities 
from CEPI, RISI database 

The following chart gathers the overall direct regulatory costs and indirect costs from ETS, as a share 
of added value and as an annual average for 2005-2014, with a pass-on rate of 1. Indirect costs from 
ETS  are  close  to  four  times  as  much  as  direct  costs  from  the  climate  and  energy  package,  which 
contains, inter alia, direct costs from the ETS. 

120 

 
 
 
Figure  43  Overall  direct  regulatory  costs  and  ETS  indirect  regulatory  costs  for  the  overall  pulp,  paper  and 
paperboard sector - annual average 2005-2014, pass-on of 1 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators  of 
turnover, AV and GOS from Eurostat, Structural Business Statistics and EBIT, EBITDA and production quantities 
from CEPI, RISI database 

Figure 44 Evolution of direct regulatory costs and ETS indirect costs for the overall pulp, paper and paperboard 
sector - annual average 2005-2014 with pass-on 1 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators  of 
turnover, AV and GOS from Eurostat, Structural Business Statistics and EBIT, EBITDA and production quantities 
from CEPI, RISI database 

121 

 
 
 
 
Finally,  as  mentioned  in  section  5.1.3,  companies  in  the  panel  sector  systematically  reported  to  be 
impacted  by  indirect  costs  due  to  climate  and  energy  policies,  particularly  by  the  Renewable  Energy 
Directive (Directive 2009/28/EC). Companies reported that the directive has contributed to increasing 
the  raw  material  costs  (mainly  wood),  and  led  to  the  substitution  of  wood-based  panels  by  less 
expensive materials when  possible.  By extension, this is likely to also be an  issue for the pulp,  paper 
and paperboard sub-sector, since they use the same types of fresh wood as part of their raw material 
intake.  

5.7  Cumulative cost assessment of manufacture of pulp (17.11) 

Eurostat definition of manufacture of pulp  
NACE Rev.2: C1711 
NACE Rev. 1.1: C2111 

This  sub-sector  includes  the  manufacture  of  bleached,  semi-bleached  or  unbleached  paper  pulp  by 
mechanical,  chemical  (dissolving  or  non-dissolving)  or  semi-chemical  processes,  the  manufacture  of 
cotton-linters pulp and the removal of ink and manufacture of pulp from waste paper. Eurostat, 2016 

All  eight  legislative  packages  were  prioritised  for  the  pulp-producing  sub-sector:  competition,  climate 
and  energy,  environment,  forest-related,  employment,  products,  transport  and  trade  legislative 
packages. The company survey did however only assess the direct regulatory costs for seven packages as 
the competition package was addressed qualitatively. The results indicate that it is especially the climate 
and  energy  (CAPEX,  fees)  as  well  as  the  environment  (OPEX,  CAPEX,  fees)  legislative  packages  that 
generated  significant  costs  for  pulp  producers.  Legislative  packages  concerned  with  employment, 
product (OPEX) and transport (fees) remained on a similar level as regards to generating costs. Nearly 
no  costs  have  been  reported  by  companies  of  this  sub-sector  for  forest-related  and  trade  legislative 
packages, for which the quantification exercise appeared to be difficult. 

Direct regulatory costs for the sub-sector reach 1.2% of turnover, 4.9% of added value and 9% of gross 
operating  surplus  of  companies  as  an  average  for  the  whole  time  period  (2005-2014),  which  can  be 
broken down between cost categories as follows in Table 35. Other comparators are presented as well, 
e.g. regulatory costs as share of EBITDA, of EBIT and regulatory costs per tonne. 

122 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table  35:  Direct  regulatory  costs  for  manufacture  of  pulp  by  package  and  comparison  with  main  financial 
indicators – annual average for 2005-2014 

% 
turnover 

% AV 

% 
GOS 

% 
EBITDA 

% 
EBIT 

Climate & Energy 
Environment 
Forest 
Employment 
Product 
Transport 
Trade 

0.40% 
0.37% 
0.02% 
0.15% 
0.14% 
0.07% 
0.01% 

1.7% 
1.6% 
0.1% 
0.7% 
0.6% 
0.3% 
0.04% 

3.1% 
2.9% 
0.2% 
1.2% 
1.1% 
0.5% 
0.1% 

3.4% 
3.1% 
0.2% 
1.3% 
1.1% 
0.6% 
0.1% 

9.7% 
8.9% 
0.5% 
3.8% 
3.3% 
1.6% 
0.2% 

EUR/ 

tonne 

0.87 € 
0.79 € 
0.04 € 
0.34 € 
0.29 € 
0.15 € 
0.02 € 

Share of 
total 
regulator
y costs 

34.6% 
31.7% 
1.8% 
13.4% 
11.8% 
5.9% 
0.8% 

Total 

1.2% 

5.0% 

9.1% 

9.8% 

28% 

2.50 € 

100.0% 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators  of 
turnover, AV and GOS from Eurostat, Structural Business Statistics and EBIT, EBITDA and production quantities 
from CEPI, RISI database 

Table  36  Direct  regulatory  costs  for  manufacture  of  pulp  by  package  and  comparison  with  main  financial 
indicators – annual average for 2005-2014 

Monetary obligations 
CAPEX 
OPEX 
Administrative 
burden 

% AV 

% GOS 

% 
turnover 
0.3% 
0.4% 
0.4% 

1.3% 
1.6% 
1.5% 

0.1% 

0.6% 

% 
EBITDA 
2.6% 
3.2% 
2.9% 

% EBIT 

7.3% 
9.2% 
8.6% 

EUR/ 
Tonne 
0.66 € 
0.82 € 
0.76 € 

1.0% 

3% 

0.26 € 

2.4% 
3.0% 
2.8% 

0.9% 

Total 

1.2% 

5.0% 

9.1% 

9.8% 

28% 

2.5 € 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators  of 
turnover, AV and GOS from Eurostat, Structural Business Statistics and EBIT, EBITDA and production quantities 
from CEPI, RISI database 

Direct  costs  from  EU  regulation  can  be  split  by  package  and  by  cost  categories.    The  following 
paragraphs  elaborate  on  the  pieces  of  legislation  and  related  cost  categories  driving  the  direct 
regulatory costs. 

123 

 
 
 
 
 
 
Figure 45 Direct regulatory costs for manufacture of pulp as % of added value, by legislative package and cost 
category – annual average 2005-2014 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators  of 
turnover, AV and GOS from Eurostat, Structural Business Statistics and EBIT, EBITDA and production quantities 
from CEPI, RISI database 

Figure 46 Share of categories of direct regulatory costs for manufacture of pulp by package – annual average 
for 2005-2014 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators  of 
turnover, AV and GOS from Eurostat, Structural Business Statistics and EBIT, EBITDA and production quantities 
from CEPI, RISI database 

124 

 
 
 
 
The key legislative package impacting the manufacture of pulp is the climate and energy package, 
accounting  for  34.6%  of  total  direct  regulatory  costs  (1.7%  of  added  value).  The  purchase  of  CO2 
allowances under the ETS system is an important cost for the climate and energy package. Substantive 
obligations  is  the  most  significant  cost  item  for  this  package  (overall  53.2%  of  the  package),  in 
particular  as  regards  to  the  ETS  that  include  investments  in  emission  abatement  equipment,  energy 
and process efficiency that is beyond business-as-usual expenditures. Investments to increase energy 
independence  and  to  reduce  emissions  amongst  pulp  producers  have  been  made,  in  some  cases  this 
means that mills are, in part, operated with an autonomous power supply that generates energy for its 
own use (e.g. pulp, paper and paperboard mills), which in turn improve energy efficiency.  

The compliance of the industry with the ETS is however managed at the plant level, which also means 
that  the  administrative  burden  (e.g.  related  to  greenhouse  gas  emission  permits  or  accounting)  is 
carried by the companies. Overall, administrative burden represents 5.7% of this package. 

In addition to investments costs (e.g. investments in equipment or new systems of procedures needed 
to comply with the provision for a 20% reduction in greenhouse gas emission), the Energy Efficiency 
Directive  foresees  independent  energy  audits  for  large  companies.  Energy  audits  do  however  also 
imply fees and regulatory charges, which brings additional administrative burden for pulp companies. 
It should also be noted that benefits from increasing energy efficiency, such as heat recovery from the 
refiner steam, as part of reducing overall production costs are not accounted for in this assessment. 

Accounting for 31.7% of total regulatory costs, the environment legislative package is the second 
most  important  one  for  this  sub-sector  (1.6%  of  added  value).  Within  this  package,  monetary 
obligations  reach  34.4%  of  the  package,  which  are  inter  alia  related  to  reducing  industrial  emissions 
(as linked to the Industrial Emissions Directive and IPPC Directive)  –repealed by IED with effect on 
7th January 2014. Capital expenditures and operating costs amount to respectively 53.2% and 6.7% of 
the package. Key cost items for these are investment in new installations as well as maintenance costs 
for equipment and supplies for IED permit are obliged to invest in Best Available Technologies (BATs). 
For instance, costs for  permits for waste  (as well as waste water) treatment are significant costs that 
arise for  pulp  producers. Several large companies  will have their own landfills where operating costs 
for the maintenance of its equipment and supplies are also generated.  

The administrative  burden amounts to 5.7% of the package and relate to registration, notification or 
permitting of certain activities or costs sustained for the supply of data or information for monitoring 
according  to  the  Industrial  Emissions  Directive  (IED).  The  IPPC  Directive,  which  was  still  in  force 
during the study period, had an impact on costs in relation to permits that take into account the whole 
environmental performance of the  plant  based on  BATs. For waste management documentation and 
depending  on  the  product  type  (including  hazardous  waste)  and  waste  management  method  will  be 
required generating administrative burden for the pulp industry.  

National  Emission  Ceilings  for  certain  pollutants  (Directive  2001/81/EC)  sets  upper  limits  for  each 
Member  State  for  the  total  emissions  in  2010  of  the  four  pollutants  responsible  for  acidification, 
eutrophication  and  ground-level  ozone  pollution  (sulphur  dioxide,  nitrogen  oxides,  volatile  organic 
compounds and ammonia). Since member states had to limit their annual national emissions of those 
pollutants  by  2010  to  an  amount  not  exceeding  the  emission  ceilings,  this  directive  generates 
investment and administrative for the pulp sector. 

The  employment legislative package accounts for 13.4% of total  direct regulatory costs (0,7% of 
added value). Main cost items are operating costs and capital expenditures, respectively representing 
40.9%  and  26.3%  of  the  package.  With  respect  to  these  substantive  obligations  (CAPEX  and  OPEX) 
pulp  companies  do  need  to  invest  in  health  and  safety  standards,  buy  personal  safety  equipment  as 
well  as  equipment  to  limit  exposure  substances  including  hazardous  ones  according  to  the  EU 
regulation  (as  well  as  invest  in  training).  Investment  and  operating  costs  also  arise  from  the 
monitoring procedures and equipment protection for work at night that have to be established because 
of the Working Time Directive.  

125 

 
 
The administrative burden that are associated with this package (22.8% of the package) arise because 
of the preparation of audits, carrying out health and safety checks or developing new measures for the 
use  and  handling  of  hazardous  substances.  The  Working  Time  Directive  (2003/88/EC)  generates 
additional administrative  burden because of the  personnel in charge of  monitoring working hours of 
personnel as well as monitoring obligations in relation to night work. 

The  product  legislative  package  represents  11.8%  of  total  direct  regulatory  costs  (0.6%  of  added 
value).  Its  main  cost  relates  to  the  Registration,  Evaluation,  Authorisation  and  Restriction  of 
Chemicals (REACH) Regulation - as related to the costs for testing, investing in laboratory equipment, 
employment,  labelling  equipment  and  databases  for  chemicals  to  be  used  in  pulp  –  and  to  the  EU 
Ecolabel. 

Operating  costs  are  the  main  cost  item  for  this  package,  representing  71.4%  of  the  package.  Such 
substantive costs are associated with the eco-label and include costs from lifecycle assessment, training 
of  personnel  to  fulfil  ecodesign  requirements,  obligations  connected  to  distribution  and  labelling,  or 
providing  information  about  product  supply  chains.  Information  obligations  and  administrative 
burden,  the  second  most  important  cost  item  accounting  for  18.2%  of  total  package,  also  arise  in 
relation to REACH regulation, including costs for administrative personnel.  

Monetary  obligations  represent  5.2%  of  the  package,  as  all  substances  registered  to  the  European 
Chemicals Agency (ECHA) are also subject to a fee, but registration fees vary depending on the volume 
of  substances  and  size  of  companies  (smaller  ones  pay  less).  Furthermore,  fees  associated  with  the 
applications for authorisation of a new substance to come into contact with food or an annual license 
fee associated with labelling products under the EU Ecolabel Regulation produce additional monetary 
obligations on the pulp  industry. However, since the  EU Ecolabel  Regulation is  entirely  voluntary, it 
does not impose any specific obligation on the pulp industry by itself unless companies choose to use 
this label and meet the requirements and annual fees.  

The transport legislative package represents 5.9% of total direct regulatory costs (0.3% of  added 
value).  This  sub-sector  uses  shipping  as  well  as  road  and  rail  to  transport  raw  material  to  the  pulp 
producers and  its pulp customers. Monetary obligations amounting to 82.4% of  the package, are the 
main cost item of this package and are principally associated with any sulphur tax or other related fees, 
such  as  charges  for  determining  notifications  under  the  waste  shipment  regulation.  The  Waste 
Shipment  Regulation  requires  a  financial  guarantee  or  insurance  and  may  include  investments  in 
infrastructure  as  all  companies  have  a  duty  to  manage  the  process  in  a  way  that  protects  the 
environment  and  human  health.  Pulp  companies  may  have  to  pay  higher  fees  for  shipping  waste  as 
costs are passed on.  

The  EU  Directive  for  road  transport43  also  affects  pulp  producers  by  applying  rules  for  limits  on  the 
dimensions and maximum weights for national and international journeys that are common to all EU 
member  states.  Thereby,  pulp  producing  companies  are  limited  in  the  weight  and  the  dimension  of 
material  they  are  allowed  to  transport,  hence  leading  to  potential  investments  (capital  expenditures 
and  operating  expenditures)  in  order  to  provide  manufacturers’  plate  with  an  additional  plate, 
displaying the dimensions and registration documents, and charges on excess weight.  

43  Directive  2002/7/EC  of  the  European  Parliament  and  of  the  Council  of  18  February  2002  amending  Council  Directive 
96/53/EC  laying  down  for  certain  road  vehicles  circulating  within  the  Community  the  maximum  authorised  dimensions  in 
national and international traffic and the maximum authorised weights in international traffic. 

126 

 
 
                                                             
Figure 47 Evolution of direct regulatory costs for manufacture of pulp as % of added value for the period 2005-
2014 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators  of 
turnover, AV and GOS from Eurostat, Structural Business Statistics and EBIT, EBITDA and production quantities 
from CEPI, RISI database 

The  analysis  of  cost  ratios  trends  (time  frame  2005-2014)  demonstrate  that  direct  regulatory  costs 
ratios  nearly  tripled  over  the  time  period.  Direct  costs  relating  to  the  climate  and  energy  legislative 
package  have  increased  significantly  between  2006  and  2007,  and  have  then  remained  stable  until 
2012  when  we start seeing another  increase in costs.  Costs for the environmental legislative  package 
increased significantly in 2009. 

In 2008, the EU set a series of climate and energy targets to, amongst other things, meet its "20-20-
20"  targets.  However,  in  contrast  to  other  industries,  the  pulp  industry  cannot  easily  reduce  it 
production since operating costs are high. It is likely that the significant increase in costs for the pulp-
producing  sub-sector  in  2006-2007  is  interlinked  with  investments  to  meet  forthcoming  legal 
obligations. This was connected to the impact of the Renewable Energy Directive and the launch of the 
third phase of the ETS, both happening in 2009. For instance, pulp was covered by the ETS since its 
start in 2005. The second increase in 2012/2013 may also be linked to the ETS, e.g. from 2013 the ETS 
requires a reduction of -21% compared to 2005. The Energy Efficiency Directive also came into force 
during this period and it would have been preceded by investments to meet new legal requirements.  

The  environmental  package  is  also  characterised  by  high  costs  in  this  instance,  with  a  significant 
increase of costs in the 2008-2009 period. This is interlinked to a number of directives that came into 
force  during  this  period.  Most  notably  amongst  these  was  the  Waste  Framework,  as  well  as  the 
Directive  for  Ambient  Air  Quality  and  Cleaner  Air  (Directive  2008/50/EC).  Together  with  the  IED, 
this  legislation  has  generated  the  increasing  cost  figures  that  can  be  found  for  the  environmental 
package, and would have been preceded by significant investment costs as well as running operational 
and maintenance costs following on from the adoption.  

Costs  related  to  forest-related  policies  started  to  become  significant  after  the  EUTR  regulation  was 
concluded  in  2010  and  moreover  it  came  into  force  in  2013.  Compared  to  costs  arising  from  the 
implementation of other legislative package, it does however appear to be less substantial. 

127 

 
 
 
It  should  be  noted  that  indirect  regulatory  costs  are  described  for  the  whole  pulp,  paper  and 
paperboard sub-sector under chapter 5.6. and so are not included in the chapter for the  manufacture 
of pulp only. 

5.8  Cumulative cost assessment of manufacture of paper and paperboard (17.12) 

Eurostat definition of manufacture of paper and paperboard  
NACE Rev.2: C1712 
NACE Rev. 1.1: C2112 

This  sub-sector  includes  the  manufacture  of  paper  and  paperboard  intended  for  further  industrial 
processing,  the  further  processing  of  paper  and  paperboard  (coating,  covering  and  impregnation  of 
paper and paperboard, the manufacture of creped or crinkled paper and the manufacture of laminates 
and foils, of laminated paper or paperboard), the manufacture of handmade paper, the manufacture of 
newsprint  and  other  printing  or  writing  paper,  the  manufacture  of  cellulose  wadding  and  webs  of 
cellulose fibres and the manufacture of carbon paper or stencil paper in rolls or large sheets. Eurostat, 
2016 

The following eight legislative packages were prioritised for the manufacture of paper and  paperboard 
sub-sector:  competition,  climate  and  energy,  environment,  forest-related,  employment,  products, 
transport and trade legislative packages. The company survey did however only assess direct costs for 
seven packages as the competition package was addressed qualitatively. The results indicate that it is 
especially the climate and energy (fees, CAPEX) as well as the environment (CAPEX, OPEX) legislative 
packages  that  generated  significant  costs  for  manufactures  of  paper  and  paper  products.  Legislative 
packages  concerned  with  employment,  product  and  transport  remained  on  a  similar  and  lower  level 
over time as regards to generating costs. Nearly no costs have been reported by companies of this sub-
sector  for  the  forest-related  and  trade  legislative  packages,  for  which  the  quantification  exercise 
appeared to be difficult. Overall, it can  be noted that the manufacture of  paper  and  paperboard sub-
sector demonstrate similar costs as the pulp sub-sector.  

Direct  regulatory  costs  for  the  sub-sector  reach  0.9%  of  turnover,  4.1%  of  added  value  and  10.9%  of 
gross operating surplus of companies, which can be broken down between cost categories as follows in 
the table below. Other comparators are presented as well, e.g. regulatory costs as shares of EBITDA, of 
EBIT and regulatory costs per tonne of sold product. 

128 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table 37: Direct regulatory costs for manufacture of paper and paperboard by package and comparison with 
main financial indicators – annual average for 2005-2014 

% 
turnover 

% AV 

% 
GOS 

% 
EBITDA 

% 
EBIT 

EUR/ 
tonne 

Share of total 
regulatory 
costs 

Climate & 
Energy 
Environment 
Forest 
Employment 
Product 
Transport 
Trade 

0.37% 

1.8% 

4.7% 

3.1% 

9.0% 

2.82 € 

42.5% 

0.28% 
0.02% 
0.07% 
0.07% 
0.04% 
0.01% 

1.4% 
3.6% 
0.1%  0.3% 
0.3%  0.9% 
0.3%  0.9% 
0.2%  0.5% 
0.1%  0.2% 

2.4% 
0.2% 
0.6% 
0.6% 
0.4% 
0.1% 

6.8% 
0.5% 
1.7% 
1.8% 
1.0% 
0.3% 

2.13 € 
0.17 € 
0.53 € 
0.55 € 
0.32 € 
0.11 € 

32.1% 
2.6% 
8.0% 
8.3% 
4.8% 
1.7% 

Total 

0.9% 

4.2% 

11.1% 

7.4% 

21.1%  6.6 € 

100.0% 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators  of 
turnover, AV and GOS from Eurostat, Structural Business Statistics and EBIT, EBITDA and production quantities 
from CEPI, RISI database 

Table  38  Direct  regulatory  costs  for  manufacture  of  paper  and  paperboard  by  package  and  comparison  with 
main financial indicators – annual average for 2005-2014 

% 
turnover 

% AV 

% GOS 

% 
EBITDA 

% EBIT 

Monetary obligations 
CAPEX 
OPEX 
Administrative 
burden 

0.3% 
0.3% 
0.2% 

1.5% 
1.4% 
1.0% 

0.07% 

0.3% 

3.9% 
3.6% 
2.7% 

0.9% 

2.6% 
2.4% 
1.8% 

0.6% 

7.4% 
6.9% 
5.2% 

1.6% 

EUR/ 
Tonne 

2.33 € 
2.17 € 
1.63 € 

0.52 € 

Total 

0.9% 

4.2% 

11.1% 

7.4% 

21.1% 

6.6 € 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators  of 
turnover, AV and GOS from Eurostat, Structural Business Statistics and EBIT, EBITDA and production quantities 
from CEPI, RISI database 

Direct  costs  from  EU  regulation  can  be  split  by  package  and  by  cost  categories.  The  following 
paragraphs  elaborate  on  the  pieces  of  legislation  and  related  cost  categories  driving  the  direct 
regulatory costs. 

129 

 
 
 
 
 
 
 
Figure 48 Direct regulatory costs for manufacture of paper and paperboard as % of added value, by legislative 
package and cost category – annual average 2005-2014 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators  of 
turnover, AV and GOS from Eurostat, Structural Business Statistics and EBIT, EBITDA and production quantities 
from CEPI, RISI database 

Figure 49 Share of categories of direct regulatory costs for manufacture of paper and paperboard by package – 
annual average for 2005-2014 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators  of 
turnover, AV and GOS from Eurostat, Structural Business Statistics and EBIT, EBITDA and production quantities 
from CEPI, RISI database 

130 

 
 
 
The climate and energy legislative package is the most important package, representing 42.5% of 
total direct regulatory costs (1.8% of added value).  

The purchase of CO2 allowances under the ETS system represent a significant cost for manufactures of 
paper  and  paperboard.  The  compliance  of  the  industry  with  the  ETS  is  managed  at  the  plant  level, 
which  also  means  that  the  administrative  burden  (e.g.  related  to  greenhouse  gas  emission  permits 
and/or accounting) is carried by the companies. Overall, the main cost items are monetary obligations 
(58.2%  of  the  package)  and  capital  expenditures  (30.9%  of  the  package).  Substantive  obligations 
resulting  from  the  ETS  include  investments  for  emission  abatement  equipment,  energy  and  process 
efficiency.  Utility  companies  also  pass  on  some  of  their  ETS-  related  costs  to  the  paper  industry,  in 
particular as the manufacture of paper and paperboard is very energy intensive.  

Investments to reduce energy consumption (e.g. through improved process efficiency) and greenhouse 
gas  emissions  amongst  manufactures  of  paper  and  paperboard  have  been  made,  in  some  cases  this 
means  that  mills  have  their  own  power  supply  that  generates  energy  for  parts  of  its  factory`s  needs 
(e.g. in integrated pulp, paper and paperboard mills), which in turn improve energy efficiency.  

In  addition  to  investments  costs  (e.g.  equipment  or  new  systems  of  procedures  to  comply  with  the 
provision  for  a  20%  reduction  in  greenhouse  gas  emission),  the  Energy  Efficiency  Directive  foresees 
independent  energy  audits  for  large  companies.  Energy  audits  do  however  also  imply  fees  and 
regulatory  charges,  which  constitute  an  administrative  burden  for  manufactures  of  paper  and 
paperboard. It should also be noted that benefits (cost savings) from increasing energy efficiency, such 
as heat recovery from refiner steam, as part of reducing overall production costs are not accounted for 
in this assessment. 

The  environmental  legislative  package  is  the  second  most  important  package,  accounting  for 
32.1% of total direct regulatory costs (1.4% of added value). Manufactures of paper and paper products 
were required to reduce industrial emissions under the IPPC Directive for the period under review of 
this study (IPPC directive has been repealed by the IED starting from 7th January 2014). They are also 
required to have licences or emission permits and pay fees and charges associated with these. Permit 
conditions are constantly updated by the EU Member States.  

Capital  expenditures  and  operation  costs  are  a  key  cost  item  of  the  package,  representing  50.3%  of 
environmental costs. Investment in new installations  as well as maintenance costs for equipment and 
supplies are interlinked with these costs as the sub-sectors operating under IED permit are obliged to 
invest in Best Available Technologies (BATs). Also referring to investments concerned with air quality 
(Directive on Ambient Air Quality and Cleaner Air for Europe), air emissions and waste management 
(e.g.  Waste  Framework  Directive).  For  instance,  costs  for  permits  for  waste  (as  well  as  waste  water) 
treatment  are  significant  costs  that  arise  for  manufactures  of  paper  and  paperboard.  Several  large 
companies  have  their  own  landfills  where  operating  costs  for  the  maintenance  of  its  equipment  and 
supplies  are  also  generated.  CAPEX  and  OPEX-related  costs  are  for  this  reason  the  most  significant 
expenditure for this legislative package and allude to the types of investments that have been made to 
comply with the directives in question. 

Administrative  burden  is  associated  with  the  registration,  notification  or  permitting  of  certain 
activities or costs sustained for the supply of data or information for monitoring in accordance with the 
Industrial Emissions Directive. The IPPC directive and its successor IED have impacted on costs is in 
relation to permits that take into account the whole environmental performance of the plant based on 
BATs.  There  are  also  requirements  for  waste  management  documentation,  and  depending  on  the 
product type (including hazardous waste) and waste management method, these would also generate 
administrative burden for the manufactures of paper and paper products.  

National Emission Ceilings for certain pollutants (NEC Directive) sets upper limits for each Member 
State for the total emissions in 2010 of the four pollutants responsible for acidification, eutrophication 
and  ground-level  ozone  pollution  (sulphur  dioxide,  nitrogen  oxides,  volatile  organic  compounds  and 
ammonia).  Since  member  states  had  to  limit  their  annual  national  emissions  of  those  pollutants  by 

131 

 
 
2010  to  an  amount  not  exceeding  the  emission  ceilings,  this  Directive  generates  investment  and 
administrative burden for the manufactures of paper and paper products. 

The  product  legislative  package  represents  6.3%  of  total  direct  regulatory  costs  (0.3%  of  added 
value).  Operating  costs  are  the  key  cost  item  from  this  package  (60.3%  of  the  package)  and  mostly 
refer  to  the  eco-label,  from  life-cycle  assessment,  training  of  personnel  to  fulfil  eco-design 
requirements,  obligations  connected  to  distribution  and  labelling,  or  providing  information  about 
product supply chains.  

The  Registration,  Evaluation,  Authorisation  and  Restriction  of  Chemicals  (REACH)  Regulation  has 
been  noted  as  generating  significant  cost.  This  includes  activities  such  as  testing,  investing  in 
laboratory  equipment,  labelling  equipment  and  databases  for  chemicals  to  be  used  in  the  varied 
manufacturing processes associated with different paper and paper products.  

Monetary  obligations  represent  10.3%  of  the  package.  As  a  matter  of  fact,  all  substances  registered 
with ECHA are also subject to a fee. These registration fees do however vary depending on the volume 
of substances and size of companies (e.g. small companies pay less). Furthermore, fees are associated 
with  the  applications  for  authorisation  of  a  new  substance  to  come  into  contact  with  food  and/or 
annual licence fees connected with labelling products under the EU Eco-label. These regulations would 
in turn also produce monetary obligations for manufactures of paper and paper products. In the case 
of  the  Eco-label  Regulation,  these  are,  on  the  one  hand,  entirely  voluntary  and  do  not  impose  any 
specific  obligations  on  the  industry.  On  the  other  hand,  it  has  been  argued  that  green  public 
procurement requirements have provided an incentive for products to have an eco-label (i.e. the eco-
label is a way of proving compliance with specifications in public tenders). In either case, if a company 
choose to use the eco-label (and meet the requirements) an annual fee arise. 

Information  obligations  and  administrative  burden  arise  in  relation  to  REACH  regulation,  including 
costs for administrative personnel, and amount for 20% of the package. 

The employment legislative package represents 8% of total direct regulatory costs (0.3% of added 
value). Operation costs and capital expenditures respectively represent 53.2% and 25% of the package 
as manufacturers of  paper  and paper products do  need to invest in  health and safety standards,  buy 
personal safety equipment as well as equipment to limit exposure substances including hazardous ones 
according to the EU regulation (as well as invest in training). Investment and operating costs also arise 
from  the  monitoring  procedures  and  protective  equipment  for  work  at  night  that  have  to  be 
established because of the EU Working Time Directive.  

The administrative burden that are associated with this package (12.8% of the package) arise because 
of the preparation of audits, carrying out health and safety checks or developing new measures for the 
use  and  handling  of  hazardous  substances.  The  Working  Time  Directive  generate  additional 
administrative burden because of the administrative personnel in charge of monitoring working hours 
of personnel as well as monitoring obligations in relation to night work. 

With  respect  to  the  transport  legislative  package,  this  sub-sector  uses  shipping  as  well  as  road 
transport of raw material to the location where paper and  paperboard are manufactured, but also for 
the delivery of paper and paperboard to its customers. Monetary obligations are a key cost item (73.2% 
of the package) and are principally associated with taxation of sulphur emissions or other related fees, 
such as charges for determining notifications under the Waste Shipment Regulation.  

Similarly to the pulp sector, the harmonisation of dimensions and maximum weights for national and 
international  lorry  journeys  affects  the  manufacturers  of  paper  and  paper  products  in  limiting  the 
weight  and  size  of  transport,  which  possibly  leads  in  turn  to  investments  (capital  expenditures  and 
operating expenditures) related to the dimension and weight of haulage vehicles or proof of fulfilment 
by  providing  the  manufacturer’s  plate  with  an  additional  plate  showing  dimensions  or  registration 
documents, along with charges on excess weight. 

132 

 
 
The  Waste  Shipment  Regulation  requires  a  financial  guarantee  or  insurance  and  may  include 
investments  in  infrastructure  as  all  companies  have  a  duty  to  manage  the  process  in  a  way  that 
protects the environment and human health.  

Figure 50 Evolution of direct regulatory costs for manufacture of paper and paperboard as % of added value for 
the period 2005-2014 

Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators  of 
turnover, AV and GOS from Eurostat, Structural Business Statistics and EBIT, EBITDA and production quantities 
from CEPI, RISI database 

The  analysis  of  cost  ratios  trends  (time  frame  2005-2014)  demonstrate  that  direct  regulatory  costs 
nearly  tripled  over  the  time  period.  Direct  costs  ratios  relating  to  the  climate  and  energy  legislative 
package  have  increased  significantly  between  2006  and  2009,  and  have  then  remained  stable.  Costs 
for climate and energy increased significantly in 2006 and 2009, and have since then seen a slow but 
gradual  increase,  while  cost  for  the  environment  legislative  package  increased  significantly  in  2009, 
after which it has decreased slightly. 

With respect to the energy and climate package, these increases in costs for manufactures of paper 
and  paperboard  are  interlinked  with  investments  to  meet  forthcoming  legal  obligations.  This  was 
connected to the publishing of the Renewable Energy Directive and the launch of the second phase of 
the ETS, both happening in 2009. For instance, manufactures of paper have been covered by the ETS 
since its start in 2005 (some exclusions apply). The Energy Efficiency Directive has been followed by 
investments  to  meet  legal  requirements  such  as  investments  in  gauges,  frequency  variators  and 
converters, electrical motors, engine cogeneration, etc.  

The  environmental  package  is  also  characterised  by  high  costs.  In  this  case,  we  see  a  significant 
increase of costs in the 2008-2009 period. This is interlinked to a number of directives that came into 
force during this period. Most notably amongst these would be the Waste Framework Directive as well 
as  the  Ambient  Air  Quality  and  Cleaner  Air  for  Europe  Directive.  Together  with  the  IED,  these 
legislative  acts  have  generated  the  increasing  cost  figures  that  can  be  found  for  the  environmental 
package, caused by significant investment costs, as well as running operational and maintenance costs, 
following  on  from  their  implementation,  e.g.  for  additional  and  higher  steam  input  to  reduce  NOx 
emissions, adaptation of effluent for treatments of plants, etc. 

133 

 
 
 
 
Costs related to forest-related policies start to become more significant when the EUTR regulation 
was adopted in 2010 and when it was implemented in 2013. Overall it is however less significant than 
costs arising from the implementation of other legislation.  

Please note: Indirect regulatory costs are described for the whole pulp, paper and paperboard industry 
under  chapter  5.6.  and  are  thus  not  included  in  the  chapter  for  the  manufacture  of  paper  and 
paperboard only. 

5.9  Expected future costs for the period 2014-2030 

Following  the  assessment  of  the  present  effects  of  current  EU  legislation  on  the  forest-based 
industries,  this  section  elaborates  on  future  regulatory  costs  likely  to  impact  the  forest-based 
industries, either based on current legislation with future cost impacts or future legislation (i.e. drafted 
or  already  in  the  adoption  process  phase  as  of  the  end  of  2014).  The  original  objective  for  this  task 
required the elaboration of cost-related indicators covering 2014-20130 for energy and climate policies 
and 2014-2020 for other policies. However, some aspects from the regulatory implementation cannot 
be measured, e.g. its future regulatory cost impact, as important limitations in the availability of data 
prevent the elaboration of a proper cost assessment for future years. In this regard, the considerations 
presented in this section are based on desk research and the feed-back from the associations involved 
in  this  study,  enquired  about  possible  future  impacts  of  legislation,  policy  strategies  and  documents 
linked to the policy packages included in this study. 

Overall, in a Communication44 2013 related to the new EU Forest Strategy for forests and the forest-
based  sector,  the  European  Commission  re-iterated  its  position  to  further  support  and  develop  the 
sector  for  the  coming  years,  based  on  the  guiding  principles  of  sustainable  forest  management,  the 
multifunctional  role  of  forests,  its  resource  efficiency,  and  global  forest  responsibility.  EU  legislation 
and policy is thus considered as primordial  – through new developments and the revision of existing 
acts  –  in  order  to  ensure  forest  protection,  foster  growth  and  job  creation  and  guarantee  the 
sustainable  production  and  consumption  of  the  various  products  emanating  from  these  industries. 
However,  as  mentioned  in  an  Opinion  of  the  European  Economic  and  Social  Committee  (EESC)  on 
‘Opportunities  and  challenges  for  a  more  competitive  European  woodworking  and  furniture  sector’, 
from 2012, “unfortunately there are currently some key inconsistencies between certain parts of some 
EU  policies  and  initiatives  which  are  having  a  serious  impact  on  the  forest-based  industries' 
competitiveness and profitability45” 

Future costs for the EU forest-based industries as a whole: 

Climate and Energy legislation 

While non-legislative policy strategies do not present quantifiable direct or indirect costs for the forest-
based industries, they are good indications as to what policy-makers may decide in the future and what 
policy priorities may be made. The roadmap for moving to a competitive low-carbon economy in 2050, 
the  2030  climate  &  energy  framework  and  the  energy  roadmap  205046  all  share  the  idea  of 
reducing carbon emission and reducing energy consumption by making it more efficient. However, de-
carbonising energy generation will require substantial investments and may result in higher per-unit 
energy prices. 

It is also expected that the proposal under the  Clean Air Policy Package47 will replace the existing 
legislation (Directive 2001/81/EC no National Emission Ceilings Directive) to further reduce harmful 

44 Communication from the European Commission to the European Parliament, the Council, the European Economic and Social 
Committee  and  the  Committee  of  the  Regions,  on  “A  new  EU  Forest  Strategy:  for  forests  and  the  forest-based  sector”,  SWD 
(2013) 342 final 

45 Opinion of the European Economic and Social Committee on ‘Opportunities and challenges for a more competitive European 
woodworking and furniture sector’, 2012/C 24/04 

46 2050 Low Carbon Economy, http://ec.europa.eu/clima/policies/strategies/2050/index_en.htm 

47 Clean Air Policy Package, http://ec.europa.eu/environment/air/clean_air_policy.htm 

134 

 
 
                                                             
emissions  from  industry,  transport,  energy  plants  and  agriculture.  These  may  generate  additional 
compliance costs also for the forest-based industries to meet new objectives and standards.  

Regarding  the  third  energy  package,  energy-intensive  industries  are  of  course  most  indirectly 
affected  by  two  distinct  issues,  e.g.  liberalisation  of  energy  markets  and  potential  higher  prices.  The 
forest-based  industries,  while  potentially  benefiting  from  the  liberalisation  of  energy  markets,  may 
also  suffer  indirectly  from  higher  power  prices  because  of  EU  deregulation  measures.  Similarly,  the 
physical expansion of an  integrated  energy  market may be accompanied by decreasing energy prices 
since barriers between EU Member States will decrease. This would however be considered as a benefit 
and is not part of the assessment. 

A Sustainable Bioenergy Policy48 for the period after 2020, currently under preparation, is welcomed 
by the sawmilling sector as an instrument to address climate change, security of energy supply and to 
reach significant greenhouse gas savings by generating bio-energy from sustainable sources. While the 
requirements for sustainability schemes can be adopted by larger energy producers of 1 MW thermal 
or  1  MW  electrical  capacity  or  above,  they  could  lead  to  additional  administrative  burden  on  small-
scale producers. It is still not determined which, if any such binding criteria will be applicable and, if 
so, on which actors of the sector.  

Environmental legislation: 

The Circular  Economy Package49 promotes the  resource efficient of raw  materials,  both  primary and 
secondary  ones,  including  reuse  and  recycling.  In  particular,  the  so-called  “cascading  use”  of 
renewable resources envisages a virtuous hierarchy of use. The European Commission encourages the 
multiple  use  of  bio-based  materials,  such  as  wood.  To  develop  cascade  thinking  further,  the 
Commission  has  recently  carried  out  a  study  on  cascading,  primarily  focussed  on  wood. 
(https://bookshop.europa.eu/en/home/  )  Recognising  that  resource  and  market  conditions  vary 
between  and  within  member  states,  especially  as  regards  facilities  for  the  collection,  sorting  and  re-
distribution of secondary raw materials, particularly bulk ones such as wood, the Commission will not 
be legislating prescriptively on cascading. Guidance for cascading will be done by the EU Expert Group 
on Forest-based Industries and Sectorally Related Issues (Commission Decision 4321/2014). 

Forest-related legislation: 

Regarding  forest-related  legislation,  businesses  are  encouraging  further  and  more  consistent 
coordination  of  the  enforcement  of  the  EU  Timber  Regulation,  in  order  to  avoid  additional 
administrative burden emanating from the different interpretation due to national transposition of the 
regulation.  Such  administrative  burden  is  especially  affecting  companies  that  have  operations  across 
Member  States.  The  EUTR’s  stronger  enforcement  could  also  lead  to  additional  economic  and 
administrative  burden  on  the  various  operators  concerned  by  adding  additional 
labelling 
requirements.  

One  expert  expressed  concerns  about  possible  impacts  on  future  wood  costs  for  the  forest-based 
industries  of  the  forest  management  restrictions  which  the  Habitats  Directive  may  place  on  some 
forest owners if they are not fully compensated. Whilst some work has been carried out in Germany on 
this subject, it is too early to assess what the net effects might be. 

Employment legislation: 

A proposal for  better  workers’ protection against cancer causing  chemicals50 was  announced  in May 
2016  and  aims  to  amend  the  Carcinogens  and  Mutagens  Directive  which  limits  workers’  exposure 
to  chemical substances likely to cause cancer at the workplace by including new or amending existing 

48 
https://ec.europa.eu/energy/en/consultations/preparation-sustainable-bioenergy-policy-period-after-2020 

Preparation 

sustainable 

bioenergy 

period 

policy 

the 

for 

of 

a 

after 

2020, 

49 Towards a circular economy, https://ec.europa.eu/priorities/jobs-growth-and-investment/towards-circular-economy_en 

50Commission  proposes  better  workers’  protection  against  cancer-causing  chemicals  (Press  release,  May  2016), 
http://europa.eu/rapid/press-release_IP-16-1656_en.htm 

135 

 
 
                                                             
limit  values  for  13  substances  under  a  modified  version  of  the  Carcinogens  and  Mutagens  Directive. 
These  limit  values  set  a  maximum  concentration  for  the  presence  of  a  chemical  carcinogen  that  a 
worker  may  be  exposed  to.  Accordingly,  by  broadening  the  scope  of  the  Directive,  the  amendment 
could lead to indirect costs through substitution, in order to replace the considered chemical with less 
hazardous substances. 

Other concerns: 

Overall,  companies  are  concerned  with  the  degree  of  uncertainty  related  to  some  of  the  current 
pieces of legislation and their potential impacts in the future. For example, future cost impacts of the 
ETS  will  depend  highly  on  the  outcome  of  its  ongoing  revision,  currently  under  the  co-decision 
process.  In  particular,  it  is  not  yet  decided  which  if  any  of  the  different  sectors  will  receive  free 
allowances for their risk of carbon leakage.  

The energy audits that large companies are obliged to perform at least every four years incur personnel 
costs  for  the  organisation,  implementation  and  documentation  of  the  audit,  including  any  costs  for 
hiring external consultants. The first audits should however only be performed during 2015 and will as 
such only affect the cost during the future period in this assessment.  

Other specific future costs for woodworking sectors 

Climate and Energy legislation: 

Nonetheless, concern persists amongst some actors in the EU forest-based sector as a whole that  the 
cascading  principle  will  be  enshrined  in  detailed  legislation.  For  example,  the  sawmill  industry 
association,  as  well  as  a  number  of  companies  interviewed,  expressed  concerns  about  the 
consequences  regarding  the  promotion  of  the  cascading  use  of  wood,  as  all  their  by-products  are 
dedicated to specific secondary wood users, depending on specific market demands. Companies from 
the  sawmilling  sector  are  willing  to  sell  their  products  and  by-products  with  their  respective  best 
values, whether it is for materials or energy, to various customers across several sectors.  

Other  indirect  costs  may  occur  from  the  revision  of  the  Renewable  Energy  Directive,  leading  to 
increased  costs  for  wood,  their  main  raw  material.  Other  concerns  from  woodworking  industries  are 
due to uncertainty related to the new Renewable Energy Directive51, which increased renewable energy 
targets may affect wood availability and costs. 

The European Commission recently (July 2016) published a new legislative proposal52 for the LULUCF 
legislation that aims to achieve a reduction of at least 40% of emissions from sectors not covered by 
the EU ETS scheme, a level that is 30% below the level of 2005. This framework will now fall under the 
Effort  Sharing  Decision  (Decision  406/2009/EC),  that  sets  new  binding  targets  for  2013-2020  and 
relates mostly to waste, transport, buildings and agriculture. According to the new proposal submitted 
in  2016,  the  bulk  of  the  administrative  burden  should  not  rely  on  businesses  but  rather  on  Member 
States  in  charge  of  the  accounting  related  to  emissions  and  removals,  and  of  the  information  on 
measures  in  the  sector.  Effort  was  put  on  the  proposal  to  highlight  any  opportunity  of  flexibility  or 
synergies to implement the legislation in the most cost-effective way.  

Environmental legislation: 

Other potential regulations linked with the Circular Economy Package, such as the Eco-design and the 
Extended Producer Responsibility, could increase the direct production costs, according to sawmillers 
businesses.  On  the  other  hand,  revised  directives  related  to  waste  (Waste  Framework  Directive 

Preparation 

51 
https://ec.europa.eu/energy/en/consultations/preparation-new-renewable-energy-directive-period-after-2020 

Renewable 

Directive 

Energy 

period 

new 

the 

for 

of 

a 

after 

2020, 

52 Proposal for a Regulation Of The European Parliament And Of The Council on the inclusion of greenhouse gas emissions and 
removals from land use, land use change and forestry into the 2030 climate and energy framework and amending Regulation No 
525/2013 of the European Parliament and the Council on a mechanism for monitoring and reporting greenhouse gas emissions 
and other information relevant to climate change 

136 

 
 
                                                             
2008/98/EC,  the  Landfill  Directive  1999/31/EC  and  the  Packaging  and  Packaging  Waste  Directive 
94/62/EC) may improve wood availability and lead to cost reduction.  

Additional direct costs may impact the wood-based  panels sub-sector in order to comply with future 
requirements from the BREFs, to the extent they will require further reducing emission levels and, in 
turn, implying further investments.  

The Harmonised EU VOC-Classes, may bring new cost implication depending on the products that will 
be  covered  by  the  new  requirements  on  VOC  emissions  under  the  Declaration  of  Performance 
following CE marking. As a matter fact, after validation, construction product under its scope without 
a  statement  on  VOC  emissions  levels  will  be  commercialised  in  countries  that  have  applied  a 
legislation  at  national  level  that  would  regulate  the  emissions  into  indoor  air.  These  developments 
could  lead  to  additional  capital  expenditures  for  equipment,  for  operating  expenditures  of  labelling 
and administrative burden.  

Product-specific legislation: 

REACH, as it increases the costs for binder resins to meet REACH requirements, is also likely to add to 
administrative burden and operating costs of personnel.  

Other specific future costs for pulp, paper and paperboard sub-sector 

Climate and Energy legislation: 

The review of the ETS Directive is an essential element from the overall regulatory framework applying 
to  the  pulp,  paper  and  paperboard  industry,  and  European  institutions  must  ensure  its  long-term 
predictability.  However,  the  ETS  review  that  may  start  impacting  the  production  costs  from  2015 
onwards, as the stock of emission allowances granted has been used in the previous years. Moreover, 
data collection and verification are likely to bring further administrative burden to businesses from the 
sector.  Businesses  are  in  favour  of  the  implementation  of  a  mandatory  and  harmonised  EU 
compensation scheme, in order to tackle the issue of rising electricity costs among Member States. As a 
counter measure, it is important to note that, in order to support EU’s competitiveness, the European 
Commission has built a Carbon Leakage List53, that includes energy-intensive industries that could be 
exposed to a substantial risk of carbon leakage. Industries under the List receive a higher share of free 
allowances; pulp, paper and paperboard industries are included in the second List that covers the third 
phase of EU ETS, covering 2013-2020. It has been decided under the 2030 climate and energy policy 
framework that the free allocation of emission allowances would be pursued until 2030.  

Environmental legislation: 

The  main  future  costs  for  the  pulp,  paper  and  paperboard  sector  are  expected  to  emerge  from  the 
Industrial  Emissions  Directive,  as  the  agreed  BREFs  (pulp,  paper  and  paperboard,  large  combustion 
plants,  waste  incineration,  waste  treatment,  etc.)  that  will  require  capital  expenditures  for  new 
machines and equipment along with operating expenses of personnel, training and maintenance of the 
equipment in the coming years.  

Moreover,  it  can  be  mentioned  that  the  waste  directive  and  the  packaging  and  packaging  waste 
directive  are  currently  under  revision.  Businesses  are  supportive  of  the  European  Commission’s 
proposal  to  harmonise  the  methods  to  measure  recycling  rates  and  to  avoid  the  use  of  different 
methods  for  computing  the  national  recycling  rate.  On  the  other  hand,  administrative  burden  could 
emanate  from  the  different  definitions  for  recyclable  products,  from  the  various  methods  proposed 
and interpretation. Suggestions to break down some categories of  packaging materials brought some 

53 Commission Decision of 27 October 2014 determining, pursuant to Directive 2003/87/EC of the European Parliament and of 
the Council, a list of sectors and subsectors which are deemed to be exposed to a significant risk of carbon leakage, for the period 
2015 to 2019 7809) (2014/746/EU) 

137 

 
 
 
                                                             
concerns,  as  this  would  result  in  complex  monitoring,  data  collection  and  enforcement 54  (Europen, 
2013).  

Other  environmental  legislation  may  bring  additional  regulatory  costs:  the  Product  Environmental 
Footprint55,  if  operational,  is  expected  to  lead  to  additional  operating  costs  of  personnel  or  external 
consultants, in order to calculate footprints, while the Environmental Liability Directive may result in 
costs due to rehabilitation of polluted soil or costs to provide studies on the owner’s contribution to the 
pollution of “brownfield” land.  

54 EUROPEN Contributions to the Commission Consultation on the EU Waste Management Targets Review 

55 Developments on Product Environmental Footprint, http://ec.europa.eu/environment/eussd/smgp/policy_footprint.htm 

138 

 
 
 
 
                                                             
Summary table: 

Area 

Legislation 

Topic 

Cost category likely to be impacted 

of 

Type 
cost 
impact 

Climate and Energy legislation 

Roadmap 
towards 
economy,  

for  moving 
low-carbon 

a 

Capital expenditures (investments) – D 

Policy 
climate and energy 

framework 

for 

Higher energy prices - I 

 

The energy roadmap 2050 

Clear Air Policy Package 

Third Energy Package 

Compliance  costs  including  capital  expenditures 
for investments  

 

Trade-off  between  higher  power  prices  from 
deregulation  measures  and  decreasing  energy 
prices from integrated energy market 

 

Sustainable 
Policy 

Bioenergy 

Administrative burden for small-scale producers 

Cascading principle 

Indirect costs – loss of market share 

Woodworking 

Renewable 
Directive 

LULUCF 

ETS 

Energy 

Indirect costs – increase cost of raw materials 

Less  administrative  burden  for  businesses  – 
reporting fall under MS 

Pulp, paper and paperboard 

Administrative  burden  for  data  collection  and 
verification 

Capital expenditures for investments 

Decreasing  electricity  costs 
among MS 

if  harmonisation 

Environmental legislation 

Circular 
Package 

Eco-Design 

Economy 

EC to provide guidance for cascading 

Woodworking 

Increase in production costs 

Extended 

Producer 

Increase in production costs 

 

 

 

 

 

 

 

 

 

 

139 

 
 
 
 
 
 
Area 

Legislation 

Topic 

Responsibility 

Cost category likely to be impacted 

of 

Type 
cost 
impact 

Landfill Directive 

Improvement in wood availability 

Packaging  and  Packaging 
Waste 

Improvement in wood availability 

Waste 
Directive 

BREFs 

Harmonized 
VOC=Classes 

Framework 

Improvement in wood availability 

Capital expenditures for investments 

EU 

Capital expenditures for equipment 

Operating expenditures of labelling 

Administrative burden 

Industrial 
Directive and BREFs 

Emissions 

Pulp, paper and paperboard 

Capital expenditures for additional equipment 

Operating  expenses  of  personnel  for  training  and 
maintenance 

Packaging  and  Packaging 
Waste 

Administrative  burden  from  different  definitions 
the  national 
and  computation  methods 
recycling rate. 

for 

Potential  administrative  costs  due  to  detailed 
breakdown of categories of packaging material 

Product 
Footprint 

Environmental 

Operating 
footprints 

costs  of  personnel 

to 

calculate 

 

 

 

 

 

 

 

 

 

 

 

 

Environmental 
Directive 

Liability 

for 
Capital 
rehabilitation of polluted soil 

expenditure 

investments 

of 

 

Administrative burden for studies 

Forest-related legislation 

EU Timber Regulation 

Operating expenditures of labelling 

Administrative 
transposition 

burden 

from 

the  national 

Employment legislation 

 

 

 

for 

Proposal 
workers’ 
against 
chemicals 
Carcinogens 
Mutagens Directive 

better 
protection 
causing 
under 
and 

cancer 

Administrative  burden 
identification and risk assessment 

to  carry  out  hazard 

  

Operating costs of training to run new systems and 
procedures 

Indirect  costs  of  substitution  for  less  hazardous 

140 

 
 
 
 
Area 

Legislation 

Topic 

Cost category likely to be impacted 

of 

Type 
cost 
impact 

Product-specific legislation 

substances 

REACH 

Other concerns 

Uncertainty 

Woodoworking 

Administrative burden related to requirements for 
binder resins 

 

 

141 

 
 
 
 
6  International comparisons for USA, China and Brazil 

6.1  Approach to international comparisons  

The  main  objective  of  this  section  is  to  compare  production  cost  structures  of  forest-based 
industries  in  EU  with  those  from  selected  non-EU  countries,  and  to  provide  initial  insight  into  the 
regulatory costs they face, based on qualitative comparisons of key legislation, with references to some 
specific EU and non-EU legislative acts that influence the production costs of non-EU producers.  

The  geographical  focus  of  this  international  comparison  was  modified  through  the  project, 
following  discussions  with  the  Mirror  Group  after  the  study  was  narrowed  down  in  an  initial  phase, 
and now includes three countries relevant to the reviewed sub-sectors: The United States of America, 
China and Brazil.  

The sectoral focus is mainly on the woodworking and pulp, paper and paperboard sub-sectors, while 
including  indication  of  the  potential  effects  where  relevant  on  downstream  value  chains,  notably 
printing and furniture.  

Next  to  the  description  of  the  methodology  in  Section  6.1.1,  the  assessment  of  the  forest-based 
industries located in the selected non-EU countries includes the following items for each of the target 
countries in sections 6.2 to 6.4: 

   A brief background description of the forest-based sector in each of the competitor countries, 
   An  analysis  of  the  production  cost  structures  of  the  woodworking  and  pulp  &  paper  sub-

sectors in the EU and in the competitor countries, 

   A  brief  description  of  national  (and,  where  relevant,  EU)  policies  and  legislation  likely  to 

have a cost impact on the production costs, 

   A qualitative analysis of the likely cost impacts of national and EU legislation.  

The  analysis  at  country-level  is  then  followed  by  a  comparative  synthesis  of  the  competitors’ 
sectors, company and cost  structures and of likely cost impacts of the national and EU legislation  in 
Section 6.5.  

6.1.1  Methodology 

The international comparison of cost structures and the cost  impacts of regulation  has  been done  in 
the  following  steps.  First,  secondary  data  was  gathered  and  analysed  (Section  6.1.1.1).  Second,  these 
data  were  further  complemented  with  the  results  from  two  questionnaires:  1)  a  questionnaire  for 
relevant associations, federations and industry experts, followed up with telephone interviews; and 2) 
a  shorter  on-line  questionnaire  for  companies  in  the  target  countries  (Section  6.1.1.2).  Finally,  the 
generated data was compiled and synthesised in a systematic manner (Section 6.1.1.3). 

In the following, the methodological approach is explained in more detail. 

6.1.1.1  Review of sources for the international comparison of cost structures 

Scientific and other available literature and datasets on topics in the scope of the international 
comparison (e.g. sector and cost structure, national and EU legislative policies likely to have a cost 
impact, etc.) were reviewed, separately from the literature review performed for the first chapters 
which was focusing on the EU industry.  

143 

 
 
 
 
Table  39  provides  an  overview  of  the  key  data  sources  used  as  related  to  the  distinct  sections  of  the 
international comparisons, including the synthesis section 6.5.  

144 

 
 
 
 
Table  39  Data  sources  as  part  of  the  data  collection  (first  step)  used  for  each  section  of  the  international 
comparison part  

Report section 

Main Sources 

Type of input data 

Country descriptions, for each country 

Background description of the 
forest-based sector 

Description and analysis of the 
production cost structures of the 
woodworking and pulp & paper sub-
sectors 

Description of policies and 
legislation having cost impacts on 
the woodworking and pulp & paper 
sectors and their implications 

   Pulp, paper and 

paperboard/Woodworking: CCA 
forest-based industries inception 
report 

   Woodworking: Euromonitor 

International reports56 

   Pulp, paper and 

paperboard/Woodworking: 
FAOSTAT 

   Pulp, paper and 

paperboard/Woodworking: 
National statistical offices 

   Pulp, paper and paperboard sub-

sector: RISI database  

   Woodworking: BR, CN, US: 

Euromonitor International reports, 
EFORWOOD database57, 
questionnaires and interviews;   

   Pulp, paper and 

paperboard/Woodworking: other 
sources of national statistical offices 

   Pulp, paper and 

paperboard/Woodworking: 
Questionnaires and interviews from 
experts/associations 

   Pulp, paper and 

paperboard/Woodworking: 
Literature review 

   Sectoral structure: company size-

frequency 

   Sectoral output: quantity and value 

   Sectoral turnover 

Production costs by categories (%-based; 
related to total output; cost per output 
unit) 

   Key policy packages 

   Key domestic /EU legislation 

/regulation 

Synthesis: International comparative analysis of cost impacts from policy 

Comparative synthesis of the 
countries’ sectors, company and cost 
structures and of the qualitative 
analysis of the likely cost impacts 

Source: authors’ elaboration  

   Questionnaires and interviews from 

experts/associations 

   Literature review 

   Cost structure data for BR, CN, US, EU 

   Key policy packages and legislation 

In  addition,  a  systematic  review  of  relevant  scientific  literature  was  done  using  the  CAB  Abstracts58 
database  and  Google  Scholar59.  Publications  and  other  information  sources  from  international 
organisations  (UNECE,  FAO,  ILO,  the  Conference  Board),  national  statistical  bodies  (US  Census 

56 Euromonitor International is an international market research organisation. EuroMonitor publishes regularly updated reports 
on  the 
level  of  Divisions  of  the  ISIC  classification  system.  For  more  info  on  EuroMonitor  International,  visit 
http://www.euromonitor.com/ 

57 EFORWOOD data that was compiled for application in ToSIA (Tool for Sustainability Impact Assessment). ToSIA is a decision 
support  tool  for  the  forestry  sector,  which  analyses  environmental,  economic,  and  social  impacts  of  changes  in  forestry-wood 
production chains, using a consistent and harmonised framework from the forest to the end-of-life of final products. The 6FP 
EFORWOOD  project  compiled  process  data  to  describe  the  forest-based  value  chains  in  28  European.  For  more  info,  visit 
http://tosia.efi.int  

58 See: www.cabi.org – “CAB Abstracts gives researchers access to over 8.3 million from 1973-present. Its coverage of the applied 
life sciences includes forestry and forest products as well as agriculture, environment, veterinary sciences, applied economics, 
food science and nutrition.” 

59 http://scholar.google.com 

145 

 
 
 
                                                             
Bureau, US Bureau of Labor Statistics; Brazilian Institute of Geography and Statistics; China National 
Bureau of Statistics), national associations and organisations representing the woodworking and pulp, 
paper and paperboard sub-sectors, were also examined (see Appendix A for more details on key data 
sources per country).  

It  must  be  noted  that  the  international  comparison  refers  to  different  industry  classifications 
according to different sources: NACE60, ISIC61 and national classifications such as the North American 
Industry  Classification  System  (NAICS)  and  the  Brazilian  classification  of  economic  activity  (CNAE; 
Classificação Nacional deAtividades Econômicas). The Euromonitor International reports use the ISIC 
Rev.  3.1  classification.  A  correspondence  table  between  NACE  Rev.  2  Division  16  (Manufacture  of 
wood and of products of wood and cork, except furniture; manufacture of articles of straw and plaiting 
materials) and Division 17 (Manufacture of paper and paper products) and ISIC Rev. 3.1 Divisions 20 
and 21 is presented in Appendix F.  

60  NACE  stands  for  “Nomenclature  statistique  des  Activités  économiques  dans  la  Communauté  Européenne”  (in  English 
“Statistical Classification of Economic Activities in the European Community”) from Eurostat. For instance, C1621 refers to the 
manufacture of veneer sheets and wood-based panels  

61  ISIC  stands  for  “International  Standard  Industrial  Classification  of  All  Economic  Activities”,  a  classification  of  sectors  and 
industries from the United Nations Statistics Division. For instance, the ISIC code 20 refers to wood and wood products. 

146 

 
 
                                                             
Information  on  the  cost  structure  of  the  woodworking  sub-sector,  in  Brazil,  China  and  USA 
respectively,  is  based  on  specific  reports  by  Euromonitor  International62.  The  reports  contained 
market analysis data for the wood and wood products sector (ISIC 20)63 – more specifically, covering: 
sawmilling,  planing  and  treatment  of  wood,  veneer  sheets  and  plywood,  builders’  carpentry  and 
joinery, wooden containers, and other products of wood). 

For  the  data  on  the  European  cost  structure,  the  dataset  originally  developed  in  the  FP7  project 
EFORWOOD  for  application  in  the  Tool  for  Sustainability  Impact  Assessment  (ToSIA)  was  used. 
ToSIA is a free proprietary decision-support-tool for the forest-based sector and originally  developed 
for  "researchers"  looking  into  issues  concerning  the  sustainability  of  forest  wood  chains  in  order  to 
provide them with a set of value-chain process indicators. By using ToSIA, the forest-based industry, 
national  and  international  policy  makers,  and  researchers  can  analyse  the  sustainability  effects  of 
changes  due  to  deliberate  actions  (e.g.  policies  or  business  activities)  or  due  to  external  forces  (e.g. 
climate change, and the  global markets). As stated on the website64, “ToSIA analyses environmental, 
economic,  and  social  impacts  by  using  a  consistent  and  harmonised  framework  from  forestry  to  the 
end-of-life  of  final  products”.  The  dataset  includes  cost  data  for  the  sawmilling  sector  and  the  pulp, 
paper  and  paperboard  sector  for  23  European  countries  plus  Norway  and  Switzerland65.  The  cost 
information  is  available  for  the  following  categories,  by  average  cost  per  unit  of  production  (metric 
tonnes or cubic metres) and total production cost per country: 

   Raw materials from the forest-wood chain (FWC), 
   Raw materials from outside the FWC, 
   Labour costs, 
   Energy costs, 
   Other production costs, 
   Non-production costs: taxes, interest rates, other non-productive costs. 

In general, it should be noted that the EFORWOOD dataset considers mostly large companies, and the 
related cost structures may hence not be representative for SMEs. 

For the international comparison of the costs structures for the pulp, paper and paperboard 
sector,  the  following  product  groups  are  considered:  17.11  Manufacture  of  pulp;  and  17.12 
Manufacture  of  paper  and  paperboard,  e.g.  graphic  paper,  packaging  paper  and  paperboard, 
household and sanitary paper).  

The costs structure analysis for the pulp, paper and paperboard sector is mainly based on RISI data for 
201466. Europe  is defined as EU25 plus Norway and Switzerland, and the non-EU countries selected 
for the international comparison are: China, Brazil and the United States67. Costs taken into account 

63 ISIC is the International Standard Industrial Classification of All Economic Activities, as maintained by the United Nations. 
“Wood  and  Wood Products”  are  part of   ISIC  Revision  3.1  Division 20  which  spans  “Manufacture  of wood  and  of  products of 
wood and cork, except furniture; manufacture of articles of straw and plaiting materials”. For mor info on the ISIC classification 
visit: http://unstats.un.org/unsd/cr/registry/regct.asp. The ISIC Revision 3.1 Division 20 is congruent with the European Union 
NACE Revision 1.1 Division 20. For more info on correspondence between NACE and ISIC, see: 

 http://unstats.un.org/unsd/cr/registry/regso.asp?Ci=26&Lg=1&Co=&T=0&p=4  

64 More information on EFORWOOD and ToSIA is available from http://tosia.efi.int/. 

65  Countries  from  the  EFORWOOD  dataset  include:  Austria,  Belgium,  Czech  Republic,  Denmark,  Estonia,  Finland,  France, 
Germany,  Greece,  Hungary,  Ireland,  Italy,  Latvia,  Lithuania,  Luxembourg,  Netherlands,  Norway,  Poland,  Portugal,  Slovakia, 
Slovenia, Spain, Sweden, Switzerland, UK) 

66  RISI  –  an  information  provider  for  the  global forest product  industry,  Business  Impact  Assessment,  pulp  and  paper,  2014. 
Please note that some reference to previous RISI data (2005-2014) could also be made in this section.  

67 Additional non-EU countries in the RISI database are Canada, Indonesia, Japan and Russia.  

147 

 
 
 
 
                                                             
 
 
are direct manufacturing costs for the pulp, paper and paperboard sector, based on a number of 
consumables  used  in  the  production  process.  In  line  with  RISI  definitions,  costs  are  categorised  as 
follows in this report:  

   Raw materials: Wood, recovered paper, market pulp, chemicals;  
   Energy: Electricity and fuels; 
   Labour; 
   Other costs: Maintenance and capital costs.68  

As for energy costs, the cost of producing one tonne of product depends on the pulp type and on the 
paper grade produced. For example, the cheapest energy input is attained by market pulp, followed by 
containerboard (packaging paper). The highest  price for energy inputs are  paid for the production of 
tissues, coated mechanical and uncoated mechanical paper.69  

As for electricity, it must be noted that the price components of the final  bought-in electricity price 
vary  substantially  both  within  the  EU,  and  between  the  non-EU  countries.  The  extent  to  which  the 
electricity  price  is  reflected  in  the  final  product  price  depends  also  on  other  factors,  such  as  the 
materials used, the cost of capital, labour costs and pass-through capacity.  

Transport costs are not direct manufacturing costs, as such, and are not included as consumables by 
RISI;  it  is  hence  not  possible  to  display  these  costs  in  this  cost  structures  for  pulp,  paper  and 
paperboard.  However,  when  transport  costs  were  mentioned  in  the  literature  or  in  interviews 
regarding the impact of regulation, they were included in the report as additional insights. 

Table  40  shows  the  comparison  of  the  main  cost  categories  of  the  EFORWOOD,  RISI  and 
EuroMonitor  datasets.  For  further  detail,  see  also  section  6.1.1.3  Method  for  cost  structure  data 
compilation and synthesis. 

68 Wood is considered solid pulpwood excluding bark; recovered paper means recovered paper as raw material for pulping, 
market pulp includes chemical, mechanical, semi-chemical, deinked and other pulps, which are sold in open competition with 
that  of  other  producers,  fuels  are  either  purchased  bark/waste,  biofuels,  coal,  natural  gas  or  oil.  Labour  includes  the  work 
related  costs  of  operators,  maintenance,  exempt  and  non-exempt  personnel;  maintenance  includes  maintenance  materials, 
operating  supplies,  contract  maintenance  and  waste  disposal.  For  more  details,  please  refer  to  Chapter  2,  section  1.3.1  or  see 
RISI Methodology Business Impact Assessment Tool (2015).  

69 Own calculation based on RISI data, and Ecofys & Fraunhofer ISI (2015) Electricity costs in energy intensive industries.  

148 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                             
Table  40  Main  cost  categories,  of  the  EFORWOOD,  RISI  and  Euromonitor  datasets;  their  geographical  and 
sectoral application in this study. 

EFORWOOD 

RISI 

Euromonitor 

Geographic 
application: 

European countries 

European countries, 
BR, CN, US 

BR, CN, US 

Sectoral application: 

Woodworking, pulp, 
paper and paperboard 

Pulp, paper and 
paperboard 

Woodworking 

Raw materials costs: 

Raw materials [from 
the forest-wood chain 
(FWC) + from outside 
FWC] 

Raw materials: Wood, 
recovered paper, 
market pulp, 
chemicals 

Raw materials (and 
process materials) 
[raw materials + 
intermediate materials 
+ non-durable goods] 

Energy costs: 

Energy costs, 

Energy: Electricity 
and fuels 

Energy 

Labour costs: 

Labour 

Labour 

Labour 

Other costs 

Transportation costs 

Source: Authors’ elaboration 

[Other production 
costs] + [Non-
production costs: 
taxes, interest rates, 
other non-productive 
costs] 
Available in original 
dataset: 
Transportation costs 

Other costs: 
Maintenance and 
capital costs 

[Capital costs] + 
[Other costs 
(including services 
and taxes less 
subsidies)] 

Not available in 
dataset 

Transport and 
logistics 

6.1.1.2  Questionnaires and interview approach 

To supplement the findings from the literature review, two on-line questionnaires were used. Firstly, a 
questionnaire  was  designed  for  sourcing  further  information  from  relevant  federations, 
associations and sectoral experts in the non-EU countries. The questionnaire was put on line and 
contacts were further followed up by e-mail and telephone interviews. Upon the preference of Chinese 
respondents, the questionnaire was also translated into Mandarin Chinese (see Appendix G for more 
details on the list of contacted organisations (individual contact details are omitted) and Appendix H 
for the survey form).  

Secondly,  a  shorter  questionnaire  was  designed  to  collect  information  from  individual 
companies  in  Brazil,  China  and  the  United  States.  It  was  set-up  and  disseminated  through  a 
web-based survey platform. Company contacts were sourced from the ORBIS database70. Based on the 
availability of contact details, the selected pool of respondents was drawn from those companies listed 
in  the  ORBIS  database  under  the  NACE  Rev.  2  main  section  C  “Manufacturing”,  for  the  sector 
”manufacture of wood and products of wood, cork, and straw and plaiting materials” (NACE 16) and 
“manufacture of paper and paper products” (NACE 17)71 in the target countries. Contacted associations 

70 Orbis database: proprietary database of worldwide company information. http://www.bvdinfo.com  

71 Following Orbis - Bureau van Dijk’s classification into major sectors. 

149 

 
 
 
 
                                                             
and  federations  were  also  encouraged  to  share  the  questionnaires  with  their  members.  In  total,  the 
questionnaire  was  disseminated  directly  to  99  companies  in  Brazil,  413  companies  in  China  and  99 
companies in the United States.  The response rate was low. Five responses were received from each of 
the countries (Table 41). 

For  Brazil,  in  addition  to  the  companies  listed  in  ORBIS,  members  of  the  ABPMEX  (Association  of 
Brazilian  Wood  Exporters)  were  also  called.  Brazilian  and  Chinese  companies  willing  to  participate 
preferred  to  do  so  by  giving  a  written  contribution  (through  the  web-based  questionnaire  and/or 
through  the  questionnaire  as  a  Word  document).  Chinese  companies  were  sent  a  Mandarin  Chinese 
version  of  the  questionnaire.  Interviews  were  arranged  and  conducted  through  email  and  telephone 
with  representatives  of  two  US  companies.  Table  41  provides  summary  details  of  the  numbers  of 
associations, federations, industry experts, and companies contacted. 

Table 41  Summary of contacted associations, federations and industry experts, and companies. 

Invited participants 

Telephone calls 

Initial  indication  of 
willingness 
to 
respond 

Actual responses 

Associatio
ns/ 
Federation
s/ Experts 

Companies 

Associatio
ns/ 
Federation
s/ Experts 

Companies 

Associatio
ns/ 
Federation
s/ Experts 

Companies 

Associatio
ns/ 
Federation
s/ Experts 

Companies 

Brazil 

China 

United 
States 

23 

20 

14 

99 

413 

99 

3 

4 

3 

44 

227 

95 

5 

4 

3 

17 

25 

3 

2 

5 

3 

3 

0 

2 

Sources: authors’ elaboration 

Despite  substantial  efforts,  the  participation  in  the  surveys  was  very  low;  among  the  reasons 
mentioned  for  not  participating,  there  were  a  general  policy  not  to  participate  in  surveys,  and  the 
unwillingness  to  provide  information  related  to  cost  structures  and  competitiveness,  specifically  if 
used for a European research project. One Chinese expert expressed a strong concern over the risk of 
being  seen  as  performing  industrial  espionage  and  related  reputational  risks.  The  low  number  of 
responses  does  not  allow  to  point  out  any  significant  difference  in  response  rate  –or  the  reason 
therefore- between the three countries.    

6.1.1.3  Method for cost structure data compilation and synthesis  

The Euromonitor cost categories were restructured by aggregating some of the very detailed categories 
in order to be harmonised with the ones used in this study; an overview is shown in Table 42. 

150 

 
 
 
 
 
 
 
 
                                                                                                                                                                                              
 
 
 
Table  42  Structure  of  cost  items  into  cost  sub-categories  and  categories,  as  applied  in  the  presentation  of 
country data and in the international comparison  

New grouping for the 
CCA study 

Cost sub-category from the 
Euromonitor report 

Cost items from the Euromonitor report 

Forestry (wood mainly – materials produced within 
Division 2 ISIC Rev. 3.1: Forestry, logging and related 
service activities, including production of bamboo and 
rattans) 

Agriculture (materials produced within Division 1 ISIC 
Rev. 3.1: Agriculture, hunting and related service 
activities) 

Primary materials 
(broadly those materials 
produced within the primary 
sector: sections A, B and C of 
ISIC Rev. 3.1) 

Intermediate materials 

(broadly those materials 
produced within the 
manufacturing sector:   section 
D ISIC Rev. 3.1) 

Other primary materials 

Wood and wood products 

Basic chemicals 

Other chemicals 1 

Plastics in primary forms and synthetic rubber 

Plastic products 

Other intermediate materials 

Non-durable goods2 

Non-durable goods 

Machinery for rubber, plastics and paper industries and 
other special purpose machinery 

Other durable goods 

Road, passenger and freight transport 

Communications (and other transport) 

Energy: Refined petroleum products (BR, US) and 
Electricity (CN) 

Recycling (and other "Energy utilities") 

Business and management consultancies 

Services 

Monetary intermediation3 

Other services 

Taxes less subsidies 

Taxes less subsidies 

Raw materials (and process 
materials) 

Capital costs 

Labour 

Transport and logistics 

Energy 

Other costs 

Source:  Authors’  elaboration  1  Other  chemical:  In  relation  to  the  forest-based  industries  these  may  include: 
gelatine and its derivatives, glues and prepared adhesives, activated carbon, catalysts and other chemical products 
for  industrial  use.  2  Non-durable  goods:  In  relation  to  enterprises  these  may  relate  to  e.g.  employee  catering 
facilities. 3 Monetary intermediation: the sum of ISIC 3.1 Division 65 (Financial intermediation, except insurance 
and pension funding) and Division 67 (Activities auxiliary to financial intermediation). 

151 

 
 
 
 
Cost  data  from  the  Euromonitor  reports  were  provided  in  local  currency,  then  converted  to  Euro  by 
applying  the  ECB  reference  exchange  rate  for  the  indicated  reference  year.  Percentages  were 
recalculated  for  the  cost  sub-categories.  On  this  basis  comparisons  were  drawn  between  target 
countries and the EU.  

6.2  Country overview: Brazil 

6.2.1  General description of the forest-based sector 

6.2.1.1 

Forest resources profile 

Brazil has total forest area of 493.5 million ha (59% of the total land area in 2015). This has decreased 
from 546.7 million ha in 1990 (FAO, 2015). Most of the Brazilian forest is in the Amazon, and this is 
where the majority of deforestation takes place. Since 2004 when the deforestation rate in the Amazon 
was 2.8 million ha per year, the deforestation rate has decreased annually to 0.6 million ha per year in 
2015  (although  there  were  increases  in  2008  and  2013)  (INPE,  2015).  There  are  7.7  million  ha  of 
plantations (1.6% of total forest area), mainly in the south and east of the country. A policy is in place 
to  increase  the  area  of  plantation  forest  to  11  million  ha  by  2020.  Most  of  the  plantation  forests  are 
eucalypts  and  pines  and  serve  almost  the  full  needs  of  the  pulp,  paper  and  paperboard  industries, 
while part of plantation production supplies the woodworking industries (e.g. teak). In 2011, the total 
quantity of roundwood produced was 273.1 million m3, of which 62.5 million m3 originated from native 
forests  and  210.6  million  m3  from  forest  plantations.  From  those  amounts,  the  industry  uptake  was 
respectively 23 % and 60 %, amounting to 140.0 million m3 in total, with the rest of the wood destined 
for energy production (Brazilian Forest Service, 2013).  

6.2.1.2 

Sectoral structure  

The  tables  below  presents  the  structure  of  the  wood  products  manufacturing  and  pulp,  paper  and 
paperboard  manufacturing  sectors  according  to  the  number  of  employees.  Table  43,  extracted  from 
the Instituto Brasilerio de Geografia e Estatestica (IBGE) data72, presents the number of companies for 
woodworking and pulp, paper and paperboard , while Table 44, taken from Euromonitor International 
only displays the woodworking sector. 

IBGE  information  on  wood  products  manufacturing  is  subdivided  into  two  sub-sectors:  sawmilling; 
and  manufacture  of  wood,  cork  and  plaited  products.  Information  with  regard  to  pulp,  paper  and 
paperboard manufacturing is available in four sub-sectors: 1) production of pulp and other materials 
for paper production; 2) manufacture of paper and  paperboard; 3) packaging; and 4) manufacture of 
other paper and paperboard products. 

While  IBGE  data  suggest  fewer  than  21 000  companies  in  the  Brazilian  wood  working  sector  (Table 
43),  data  from  Euromonitor  International  (2014)  suggest  this  number  to  be  closer  to  30 000  (Table 
44); the difference possibly emanate from the fact that Euromonitor International data are synthesised 
from various information sources. 

72 The data are from the SIDRA database of the Brazilian Institute of Geography and Statistics (IBGE) which uses the Brazilian 
classification of economic activities (Classificação Nacional de Atividades Econômicas  - CNAE 2.0). CNAE 2.0 is based on the 
ISIC Rev. 4 with the first and second levels being identical. For division 16 (Wood products manufacturing) the subdivisions are 
also  identical  to  the  ISIC  subdivisions.  For  division  17  (Pulp  and  paper  manufacturing)  the  CNAE  classification  separates 
manufacture of pulp and manufacture of paper and paperboard at the third level. In the ISIC classification this is done at the 
fourth level. 

152 

 
 
 
 
 
                                                             
Table  43  Number  and  size  of  Brazilian  businesses  in  wood  products  and  paper  manufacturing  sectors  for  the 
year 2012 

Size of business (number of employees) 

1-4 

5-9 

10-19 

20-49 

50-99 

100-
249 

250-
499 

≥500 

Total 

5067 

1894 

1599 

833 

179 

61 

15 

6268 

2227 

1507 

840 

209 

99 

29 

4 

21 

9652 

11200 

11335 

4121 

3106 

1673 

388 

160 

44 

25 

20852 

1-4 

5-9 

10-19 

20-49 

50-99 

250-
499 

≥500 

Total 

37 

8 

8 

7 

6 

- 

2 

6 

74 

107 

22 

23 

34 

42 

29 

16 

14 

287 

144 

30 

31 

41 

48 

29 

18 

20 

361 

Sawmilling and 
planing 

Manufacture of 
wood, cork, straw 
and plaiting 
materials 

Total: Wood 
products 
manufacturing 

Manufacture of 
pulp and other 
materials for 
paper 
manufacture 

Manufacture of 
paper and 
paperboard 

Total: Pulp, 
paper and 
paperboard 
manufacturing 

Source: IBGE 2013 (http://www.sidra.ibge.gov.br/bda/tabela/listabl.asp?z=p&o=5&i=P&c=1936) 

Table 44 Number of Brazilian companies for ISIC20 – Wood and Wood Products - by Employment Size 2007–
2012 

Company category 

2007 

2008 

2009 

2010 

2011 

2012 

Micro (1-9 employees) 

24595 

24340 

24401 

24594 

25242 

25245 

Extra small(10-19 

Small (20-49 employees) 

3036 

1833 

Medium (50-249 employees) 

686 

Large (250+ employees) 

108 

3023 

1734 

596 

93 

3000 

3030 

1662 

1756 

555 

75 

597 

75 

3122 

1792 

615 

76 

3161 

1789 

605 

71 

Total 

30258 

29786 

29693 

30052 

30847 

30871 

Source: Euromonitor International 2014 

153 

 
 
 
 
 
 
 
 
 
 
 
 
Table  45  Employment  in  the  wood  products  manufacturing  and  paper  and  paper  products  manufacturing 
sector in Brazil (2007-2013) 
Classificação Nacional 
de Atividades 
Econômicas (CNAE 2.0) 

Employment (thousands FTE) 

16 Wood products 
manufacture 
17 Paper and paper 
products manufacture 

Source: IBGE 2013 

2007 
273,8 

2008 
252,7 

2009 
238,3 

2010 
247,9 

2011 
244,3 

2012 
239,7 

2013 
235,9 

193,8 

195,8 

199,4 

200,6 

196,8 

200,3 

209,1 

Employment in the wood products manufacturing sector declined from 2007 to 2009 and then again 
from 2010 to 2013. Employment in the paper and paper products manufacturing has  shown a steady 
increase from 2007 to 2013. 

6.2.1.3  Production, trade and consumption 

In  2014,  Brazil  was  the  world’s  fourth  largest  consumer  of  industrial  roundwood  (8%  of  global 
consumption;  149.4  million  m3),  the  sixth  largest  consumer  of  sawnwood  (3%;  13.8  million  m3)  and 
wood-based panels (3%; 9.8 million m3), and the seventh largest consumer of pulp for paper(4%; 6.3 
million tonnes)73. Brazil was the fourth largest  producer of pulp for  paper (9%; 16.4 million tonnes), 
the fifth largest producer of industrial roundwood (8%; 149.5 million m3), the sixth largest producer of 
wood-based panels (3%; 11.8 million m3), the seventh largest producer of sawnwood (3%; 15.2 million 
m3),  and  the  ninth  largest  producer  of  paper  and  paperboard  (3%;  10.4  million  tonnes).  It  was  the 
largest exporter of pulp for paper (19%; 10.6 million tonnes; US $4.9 billion) (FAOSTAT, 2015). 

The forest-based sector (including forestry and logging as  well as wood products manufacturing and 
the  paper  and  paper  products  manufacturing  sectors)  accounted  for  5.3%  of  the  Agricultural  and 
Manufacturing GDP in 2011 (down from 7.5% in 1995). Although the sector has grown in the period, it 
has not grown as fast as other sectors in the Brazilian economy. 

n 2010, at least 75% of Brazil’s commercial log production volume of 128.4 million m3 was produced in 
plantations  (Oliver, 2013).  In 2013,  plantations accounted for more than 95% of Brazilian exports of 
wood-based products by export value and roundwood equivalent volume (RWE). The majority of those 
exports were pulp, paper and paperboard (approximately 70% and 10%, respectively in terms of RWE 
volume  (Wellesley,  2014).  Brazilian  legislation  to  counter  deforestation  required  wood  companies  to 
increase their purchase of wood from legal sources. This has led to a scarcity of legal wood and to an 
increase in the availability and price of wood from natural forests of more than 350%. (Tomaselli et al., 
2012) In turn, this decreased competitiveness of wood industries and it has caused the closure of many 
sawmills (Tomaselli et al., 2012). 

73 Apparent consumption is the production (or removals) plus imports minus exports. 

154 

 
 
 
 
 
 
 
 
 
 
 
 
                                                             
Table 46. Overview of Brazil’s FB-I production and trade in 2014. 

  

In  2014,  Brazil  produced  15.2  million  tonnes  of  sawnwood.  Imports  of  sawnwood  were 
worth $US 26.3 million (33 484 m3) and exports $US 425 million (425 333 m3). 

   Wood-based  panels:  In  2014,  Brazil  produced  11.8  million  m3  of  wood-based  panels,  and 

exported $US 0.7 billion worth of panels (2.2 million m3). 

   Furniture: In 2014, Brazil imports of furniture were worth $US 1.2 billion and exports were 

worth $US 0.9 billion. 

   The pulp, paper and paperboard sector is dominated by large companies. The Brazilian Pulp 
and  Paper  Association  (BRACELPA)  represents  44  associated  companies,  which  jointly 
account  for  100%  of  the  pulp  produced  domestically  and  80%  of  the  paper  produced 
domestically.  

   Wood  pulp:  Brazil  produced  about  16.8  million  tonnes  of  wood  pulp  in  2014.  It  exported 
$US 5.3 million (11 million tonnes). Imports were worth $US 327 842 (429 074 tonnes).  

   Paper and paperboard: Brazil produced about 10.4 million tonnes of paper and paperboard 
in 2014; its imports were worth $US 1.1 billion (1.1 million tonnes) and exports were worth 
$US 1.7 billion (1.7 million tonnes).  

   Printing: Imports were worth $US 248.6 million and exports were worth $41.8 million. 

Source:  production  and  trade  for  wood  and  pulp,  paper  and  paperboard  products  –  FAOSTAT  2015;  trade  for 
furniture and printing – ITC 2015. 

While  Table  46  shows  the  latest  available  data  for  Brazilian  production  and  trade,  the  evolution  of 
production quantity and trade (value and quantity) are shown in Figure 51 to Figure 58. 

The  impact  of  fluctuating  currency  exchange  rates  can  be  highly  significant  and  thus  the  impact  of 
monetary policy. It was recently reported in the Economist that the “recession and political upheaval 
have brought Brazil’s currency, the Real, down by three-fifths against the dollar since 2011.” This has 
been a major benefit for Brazil’s exporters, including pulp producers who export nearly all their output 
(The Economist, 2016).  

155 

 
 
 
 
 
Figure 51 Production of wood products – Brazil 

Figure  52  Production  of  pulp,  paper  and  paperboard 
products – Brazil  

160

140

120

100

80

60

40

20

0

3
m

s
n
o
i
l
l
i

M

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Industrial Roundwood - Production - m3

Sawnwood - Production - m3

Wood-based panels - Production - m3

s
e
n
n
o
t

s
n
o
i
l
l
i

M

18

16

14

12

10

8

6

4

2

0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Wood Pulp - Production - tonnes

Paper and paperboard - Production - tonnes

Source: FAOSTAT, 2015 

Source: FAOSTAT, 2015 

Figure  53  Import  value  of  wood  and  paper  products  – 
Brazil  [currency  in  US$  as  international  reporting 
standard] 

Figure 54 Import quantity of wood products – Brazil 

$
S
U
n
o
i
l
l
i

M

1500

1000

500

0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Industrial Roundwood - Import Value
Wood Pulp - Import Value
Paper and paperboard - Import Value
Sawnwood - Import Value

3
m
n
o
i
l
l
i

M

0.45

0.4

0.35

0.3

0.25

0.2

0.15

0.1

0.05

0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Industrial roundwood

Sawnwood

Wood-based panels

Source: FAOSTAT, 2015 

Source: FAOSTAT, 2015 

Figure 55 Import quantity of paper products – Brazil 

Figure 56 Export values of wood and paper products – 
Brazil [currency in US$  

s
e
n
n
o
t
n
o
i
l
l
i

M

1.6

1.4

1.2

1

0.8

0.6

0.4

0.2

0

$
S
U
n
o
i
l
l
i

B

6

5

4

3

2

1

0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Wood Pulp

Paper and paperboard

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Industrial Roundwood - Export Value
Wood Pulp - Export Value
Paper and paperboard - Export Value
Sawnwood - Export Value
Wood-based panels - Export Value

Source: FAOSTAT, 2015 

Source: FAOSTAT, 2015 

156 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Figure 57 Export quantity of wood products – Brazil 

Figure 58 Export quantity of paper products – Brazil 

3
m
n
o
i
l
l
i

M

5000000

4500000

4000000

3500000

3000000

2500000

2000000

1500000

1000000

500000

0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Industrial roundwood

Sawnwood

Wood-based panels

s
e
n
n
o
t
n
o
i
l
l
i

M

12

10

8

6

4

2

0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Wood Pulp

Paper and paperboard

Source: FAOSTAT, 2015 

Source: FAOSTAT, 2015 

6.2.2  Production cost structures in the selected F-BI sub-sectors 

6.2.2.1  Production cost structure in the woodworking sub-sector 

In 2012, raw materials (14.4%) plus intermediate wood and wood products (31.7%) accounts for 46.1% 
of the total costs.  Domestic demand for wood and  wood products is a key driver for higher log costs 
(Euromonitor  International,  2014).  Although  Brazil  is  a  forest-rich  country,  costs  of  raw  materials 
have  increased  as  pressure  to  decrease  deforestation  [mostly  driven  by  agriculture,  but  resulting  in 
wood harvest as a ‘by-product’] and ensure raw materials are sourced responsibly and sustainably has 
increased  (see  e.g.  Tomaselli  et  al.,  2012).  However,  in  the  same  time,  more  advanced  technologies 
allowed  Brazilian  wood  manufacturers  to  produce  a  similar  volume  of  finished  products  from  a 
reduced  volume  of  raw  materials,  leading  in  turn  to  higher  operating  margins  (Euromonitor 
International,  2014).  Integrated  companies  in  the  woodworking  industries  (as  well  as  in  the  pulp, 
paper and paperboard sector) own significant areas of forest plantations and this contributes to some 
degree of control of costs of raw materials. 

Labour costs account for 27.3% of the total costs. Average hourly compensation costs in the wood and 
wood  products  manufacturing  sector  (not  including  furniture)  increased  from  8.2  R$  ($US 4.49 
according an exchange rate for 2008) per hour in  2008 to 12.7 R$ ($US 5.91 according an exchange 
rate  for  2013)  per  hour  in  2013  (The  Conference  Board,  2014).  Besides  salary  increases,  also  the 
number of employees has increased in the industry (Euromonitor International, 2014). 

Transport  costs,  energy  costs,  and  other  costs  (including  financial  services,  taxes)  account  for  4.6%, 
5.9% and 6.0% of total costs, respectively. 

Table  47  presents  the  cost  structure  for  the  woodworking  sub-sector  in  Brazil.  Data  is  from  the 
Euromonitor  International  report  on  Wood  and  Wood  Products  in  Brazil:  ISIC  20  (Euromonitor 
International, 2014). 

157 

 
 
 
 
 
 
 
 
 
 
 
 
Table 47 Cost structure for the woodworking sub-sector in Brazil, 2014 

Main cost category 

Cost sub-category 

Cost items 

R$ million 

€ million74 

Forestry (wood mainly) 

3050.00 

1216 

Primary materials 

Agriculture 

Raw materials (and 
processed materials) 

Intermediate materials 

Other 

Wood and wood 
products 

Plastics in primary 
forms and synthetic 
rubber 

2.50 

1.40 

1.0 

0.6 

6728.00 

2682 

350.00 

140 

39.7% 

% of cost 
structure 

14.4% 

Other 

Plastic products1 

213.00 

85 

Other 

1131.00 

451 

Grain mill products2 

20.10 

Other 

9.00 

8 

4 

Machinery for rubber, 
plastics and paper 
industries and other 
special purpose 
machinery 

274.00 

109 

Other 

145.00 

58 

0.1% 

2.0% 

5802.00 

2313 

27.3% 

Road, passenger and 
freight transport 

572.00 

228 

Other 

594.00 

237 

Refined petroleum 
products 

716.00 

285 

Other (including utilities 
and recycling) 

542.00 

216 

Services (part of OPEX) 

Monetary 
intermediation 

431.00 

172 

Other 

594.00 

237 

4.6% 

5.9% 

4.8% 

Capital costs 

Labour 

Transport and logistics 

Energy 

Other costs 

Taxes less subsidies 
(monetary costs) 

247.00 

98 

1.2% 

Source:  Euromonitor  International,  2014  -  1  e.g.  packaging  for  products,  2  e.g.  non-durable  food  items  used  in 
employee catering facilities. 

74 R$ to € currency conversion based on the European Central Bank reference exchange rate for 2012. 

158 

 
 
 
 
 
 
 
 
 
 
 
 
                                                             
The following figure allows to compare cost structures from Brazil and EU, in relative terms: 

Figure 59 Cost structures for Brazil and EU in relative terms, as % of production costs, 2005 

Source: Euromonitor International 2014 for Brazil and ToSIA data, 2005 for EU 

6.2.2.2  Comparison of the EU and Brazil's production cost structure in the pulp, paper and 

paperboard sub-sector 

Direct  manufacturing  costs,  including  all  cost  categories  referred  in  the  table  below75    for  pulp 
production in 2014 are substantially higher in Europe than in Brazil (417 EUR/tonne in Europe vs. 321 
EUR/tonne  in  Brazil).  The  main  differences  are  raw  material  wood  costs  (122  EUR/tonne  vs  215 
EUR/tonne).  Focusing  on  Brazil,  further  than  raw  materials  costs,  another  important  category  is 
capital costs.  

Overall,  energy  is  not  a  major  component  in  the  cost  structure  for  either  of  the  geographic  areas. 
Moreover,  Brazil  displays  negative  electricity  costs  (-7  EUR/tonne).  The  explanation  can  be  traced 
back to the structural change of the energy matrix for the production of pulp, paper and paperboard in 
Brazil during the last 40 years. Brazil progressively diminished the use of fuel oil and firewood, to the 
benefit of black liquor (considered a major bioenergy source)76. In the late nineties, Brazilian mills also 
introduced  natural  gas.  In  fact,  generation  sources  of  supplied  electricity  in  Brazil  have  historically 
rested on hydroelectric power77. However, in the late nineties, factors such as lack of investments and 
environmental restrictions have undermined electricity generation concentrated in hydropower. This, 
together  with  the  existence  of  new  pulp  mills  located  in  areas  without  electricity  supply,  called  for 
increasing  self-generation  capacity.  The  main  substitution  has  happened  between  electricity 
(hydroelectric)  and  natural  gas,  with  the  installation  of  gas  turbines  able  to  generate  steam  and 

75  Direct  manufacturing  costs  include:  Capital  costs,  maintenance,  labor,  electricity,  fuels,  chemicals,  market  pulp,  recovered 
paper, and wood.  

76 BRACELPA (2014) The Brazilian pulp and paper industry 

77 Moldan. L. (2006) How Brazilian pulp and paper industry faces energy challenges, BRACELPA, Sao Paulo, Brazil 

159 

 
 
 
 
 
                                                             
electricity. This, in turn, has substantially increased the ability to sell electricity to the grid; to give an 
idea, electricity sold to the grid increased by34% only between 2006 and 2007.78 

Figure 60 Cost structure of Manufacture of pulp, Europe vs. Brazil, EUR/tonne, 2014 

Source: Authors’ elaboration based on RISI data 

Differently from the Chinese case, where costs for production of paper and paperboard reported to be 
higher than in Europe, manufacturing costs for this product group are lower in Brazil than in Europe. 
Despite  the  cost  of  wood  is  similar  in  the  two  geographic  areas79,  costs  for  other  raw  materials  than 
wood,  together  with  energy  and  labour  costs,  explain  the  relative  competitiveness  of  manufacturing 
paper production in Brazil. Nonetheless, as mentioned for the case of Brazilian pulp, capital costs are 
higher in Brazil than in Europe.  

78 Colodette at all. (2009) The Brazilian Pulp Industry: Performance And Potential For Bioenergy Generation, Federal University 
of Viçosa, Viçosa, MG Brazil 

79  The  mix  of  raw  materials  used  in  the  production  of  paper  in  Europe  is  different:  Europe  uses  a  lot  of  recovered  paper  at 
relatively low cost. 

160 

-50050100150200250300350400450EUBRWoodRecovered PaperMarket PulpChemicalsFuelsElectricityLabourMaintenanceCapital CostOther costsRaw materialsEnergyOther costs Raw materialsEnergyEnergy 
 
 
                                                             
Figure 61 Cost structure of Manufacture of paper and paperboard, Europe vs. Brazil, EUR/tonne, 2014 

Source: Authors’ elaboration based on RISI data 

The view by product group suggests that the highest differences between Brazilian raw materials and 
European raw materials are registered for uncoated wood-free (139 EUR/tonne cheaper in Brazil) and 
wrapping  papers  (166  EUR/tonne  cheaper  in  Brazil).  Analogously  to  the  comparison  with  China, 
Europe also stands out for higher costs in labour  (all products) and  in almost all of the  products for 
energy, except for newsprint (55 EUR/Tonne cheaper) and coated wood-free (44 EUR/tonne cheaper). 
The  making  of  uncoated  mechanical  paper,  uncoated  wood-free  and  wrapping  papers  is  consistently 
cheaper in Brazil than in Europe (except for slightly lower capital costs in Europe).  

161 

0100200300400500600EUBRWoodRecovered PaperMarket PulpChemicalsFuelsElectricityLabourMaintenanceCapital CostOther costsRaw materialsEnergyOther costsEnergyRaw materials 
 
 
Figure  62  Cost  structures  of  inputs  to  the  pulp,  paper  and  paperboard  sub-sector,  Europe  versus  Brazil,  in 
average EUR/tonne, 2014 

Source: Authors’ elaboration based on RISI data 

6.2.3 

Policy framework 

6.2.3.1  Forest-related and Environmental policies 

Brazilian  national  forest  and  forest-related  environmental  policy  is  regulated  by  a  series  of 
complementary  laws.  Forest  legislation  includes  the  Forest  Code  of  1965  (amended  in  2012), 
Protection of Fauna (Law n. 5.197/1967), National Environmental Policy (Law No. 6938/1981), Water 
Resources Policy (Law n 9.433/1997), Environmental Crimes Law (Law 9. 605/1998), Decree 3179 on 
penalties for forest crimes  (1999) and  Decree 3420  (2000) creating the  National Forest Programme. 

162 

0100200300400500600700800900EUBrazilEUBrazilEUBrazilEUBrazilEUBrazilEUBrazilEUBrazilEUBrazilEUBrazilEUBrazilNewsprintUncoated MechanicalCoated MechanicalUncoated WoodfreeCoated WoodfreeTissueWrapping PapersCartonboardContainerboardMarket PulpRaw materialsEnergyLabourOther costs 
 
 
Brazil  is  a  federal  republic  and  each  state  has  its  own  institutions  and  legislation  determining 
environmental  and  forest  policy  which  adds  notable  complexity  to  any  description  of  Brazil’s  forest 
and  environmental  policies.  A  more  complex  regulatory  environment  is  expected  to  add  to  the 
compliance costs for businesses to some (unidentified) extent.  

Deforestation and forest degradation in the Amazon is notably the most well-known forest policy issue 
in  Brazil  and  beyond,  having  global  effects.  It  is  important  to  note  that  most  deforestation  occurs  to 
clear land for agricultural production. Brazil has made huge efforts to enforce legislation and decrease 
deforestation.  Wood  companies  have  had  to  comply  with  new  requirements  to  source  wood  from 
sources  and  prevent  illegal  logging.  Based  on  a  resolution  issued  in  2006  by  Brazil’s  ‘National 
Environmental  Council’  (CONAMA),  electronic  volume-based  supply  chain  control  systems  were 
introduced by Brazilian States (EFI EU FLEGT Facility, 2012).80  

In preparation for the CoP21 in Paris, Brazil announced that it will cut carbon emissions by 37% from 
2005  levels  by  2025  (Federative  Republic  of  Brazil,  2015).  It  aims  to  achieve  this  by  reducing 
deforestation and increasing the share of renewable sources of energy. Brazil stated it will strengthen 
and  enforce  implementation  of  the  Forest  Code  at  all  government  levels;  and  aim  to  achieve  zero 
deforestation by 2030; restore and reforest 12 million ha of forest by 2030; and enhance sustainable 
management  of  natural  forests.  Brazil  also  aims  to  increase  the  share  of  renewables  (including 
biomass,  solar  and  wind)  to  at  least  23%  by  2030.  The  likely  effect,  to  avoid  negative  impact  on  the 
woodworking sector’s wood supply is that it should  become increasingly reliant on plantation-grown 
stock. 

The  Plano  Agricola  e  Pecuário  (The  Agriculture  and  Livestock  plan)  is  an  annual  plan  from  the 
Ministry of Agriculture. The plan aims to “increase agriculture production (including the area of forest 
plantations)  and  encouraging  environmentally  sustainable  practices.  It  outlines  strategic  actions 
dealing  both  with  cross-cutting  issues  (such  as  access  to  finance,  product  marketing,  rural  risk 
management, infrastructures) and with sub-sector specific issues” (ITC, 2014). The plan for 2016-2017 
earmarks  R$202.88  billion  (US $58.4  billion)  credit  for  rural  production  enterprises  (including 
forestry). Priority is given to small- and medium-sized enterprises.81 Within the plan is a programme 
for  the  development  of  the  forest  plantation  area  in  Brazil.  The  aims  of  the  programme  include  to 
increase  the  area  of  forest  plantations  from  7.6  million  ha  to  10.6  million  ha  over  the  period  2015-
2025, and to reach exports of US $20 billion by 2025 (Ministry of Agriculture, 2015). The aim of the 
investment in increasing forest plantation area is to provide the forest-based industries in Brazil with a 
reliable (with regard to supply and price) and sustainable source of raw materials. Besides increasing 
plantation  area,  net  annual  increment  in  plantations  is  expected  to  increase  as  a  result  of  tree 
breeding. 

In  the  long-term  the  efforts  to  increase  the  plantation  area  and  the  increment  in  plantations  will 
increase Brazil’s domestic capacity to produce wood and should stabilise wood prices. 

Table 48 presents a summary of forest-related and environmental policies for Brazil, with their likely 
cost impact. 

80 DOF (Document of forest origin) was introduced in 2006; DOFex (DOF Export), an extension of the DOF system initiated in 
early 2011; and SISFLORA (System for the Commerce and Transport of Forest Products), developed in 2006 and used instead of 
DOF in the states Pará and Mato Grosso. 

81 See: http://www.agricultura.gov.br/pap  

163 

 
 
 
 
 
 
 
                                                             
Table 48 - Summary table of forest-related and environmental policies for Brazil 
Policy area 
Environment 

Date 
1981 

Policy name 
National 
Environmental 
Policy 

Water Resources 
Policy 
Environmental 
Crimes Law 

1997 

1998 

Forest-related 

Forest Code of 
1965 (amended 
in 2012) 

1965 (latest 
amendment 
2012) 

Decree 3179 on 
penalties for 
forest crimes 
Decree 3420 

1999 

2000 

Agriculture and 
Livestock Plan 
2011-2012 

2011 

Areas covered by the NEP include: 
definition of standards, licensing, 
environmental impact assessments, 
establishing special areas for 
preservation, incentives for cleaner 
production, and environmental 
zoning 
Protection of Brazil’s river basins 
and the natural vegetation  
Establishment of criminal penalties 
for those found guilty of committing 
environmental crimes. 
The 2012 law regulates and restricts 
activities in specifically 
environmentally protected areas. 
The 1965 law established that 50% 
of rural land should be maintained 
as forest (legal reserves) and 
prohibited the clearing of natural 
vegetation in sensitive areas. 
Regulating the application of 
penalties for forest crimes 

Creation of the national forest 
programme. The aims of the NFP 
aims are to: (1) promote and 
implement sustainable forest 
development; (2) protect 
biodiversity of forest ecosystems; 
(3) harmonize sustainable forest 
development with sectoral policies 
and other sectors; (4) institutional 
development, with the Federal 
Government playing a key role in 
the coordination and modulation of 
activities. Specific objectives 
include: ensuring the production of 
raw materials to meet the needs of 
the domestic and external markets; 
and boosting the supply of forest 
products and by-products, restoring 
degraded areas, reducing waste, 
introducing technologies and new 
markets and promoting 
employment and income. 
The Agriculture and Livestock plan 
aims to increase agriculture 
production (including the area of 
forest plantations) and encouraging 
environmentally sustainable 
practices.  

Cost area 
Cost/Availability 
of raw materials 

Cost/Availability 
of raw materials 
Cost/Availability 
of raw materials 

Cost/Availability 
of raw materials 

Cost/Availability 
of raw materials 

Cost/Availability 
of raw materials 

Cost impact 

↗ 

↗ 

↗ 

↗ 

↗ 

↗ 

Cost/Availability 
of raw materials 

6.2.3.2  Trade policy  

Brazil  is  a  member  of  Mercosul  (Mercado  Comum  do  Sul  in  Portuguese),  a  South  American  trading 
bloc with five members, and six associate members and two observer countries. 

The Global Enabling Trade Report assesses countries with regard to the Enabling Trade Index (ETI). 
ETI  captures  various  dimensions  of  enabling  trade,  e.g.  market  access,  border  administration, 
infrastructure and operating environment. With regard to market access, Brazil was ranked 108th out 
of  138  countries  in  terms  of  the  barriers  to  its  domestic  market  (an  assessment  of  the  level  and 
complexity of a country’s tariff protection as a result of its trade policy), and 77th out of 138 countries 
with regard to foreign market access (an assessment of the barriers its exporters faced) (WEF, 2014a). 

164 

 
 
 
 
 
The International Trade Centre (ITC) provides an overview of trade strategy and policy for Brazil (ITC, 
2014).  Although  no  cost  implications  could  be  directly  concluded,  the  following  initiatives  are  of 
relevance for the forest-based industries:  

   Brasil  Maior.  “The  plan  Brasil  Maior  aims  to  foster  innovation  and  competitiveness  in  the 
Brazilian  economy.  It 
focuses  on  strengthening  production  processes,  developing 
technological  and  entrepreneurial  skills,  improving  energy  supply,  diversifying  exports  and 
increasing internationalisation, and developing competences for sustainable development. The 
plan targets specific productive sectors [including the pulp, paper and paperboard sector], and 
it deals with cross-cutting issues such as international trade, investment, innovation, technical 
and  vocational 
training,  sustainable  production,  small  and  medium  enterprises’ 
competitiveness,  special  initiatives  for  regional  development,  customers’  well-being,  labour 
conditions and relations” (ITC, 2014).82  

   The  Brazilian  Export  Strategy.  “The  document  provides  a  diagnostic  analysis  of  the 
current  export  performance  of  the  Brazilian  economy  and  it  outlines  a  strategy  aiming  to 
increase exports and  meeting the targets  of the national productive development policy. The 
strategy envisages five main objectives: 1) increase competitiveness of Brazilian exporters; 2) 
increase  exports’  added  value;  3)  increase  the  number  of  exporters  and  in  particular 
strengthening  the  position  of  small-  and  medium-sized  enterprises;  4)  increase  access  to 
foreign  markets;  5)  increase  exports  of  services”  (ITC,  2014).83  ApexBrazil  is  a  government 
agency  dedicated  to  promoting  Brazilian  products  and  services  overseas,  and  promoting 
foreign  investment  in  Brazil.  The  development  of  the  pulp,  paper  and  paperboard  sector, 
backed  by an ambitious investment plan in the private sector84, is an area that is specifically 
targeted by the national export strategy.85  

The  average  duty  imposed  on  imports  from  countries  with  most-favoured-nation  (MFN)  status  was 
7.9%  (range  2-14%)  on  woodworking  products  (HS4486),  3.6%  (range  2-4%)  on  pulp  (HS47),  and 
13.2% (range 0-16%) on paper (HS48) (WTO, 2016). The average tariff based on all imports of wood 
and paper products etc. (relating to HS Chapters 44, 45, 47, 48, 49, 9401-04 (except 940490), 961900) 
was 28.4% on average (WTO, 2016). These levels of import duties are quite high, especially compared 
to the EU which applies 0% import duties on imports of pulp (HS 47), paper (HS 48) and many other 
forestry products. CEPI reported that imports of some particular paper grades are charged tariffs of up 
to 25% for countries with non-MFN status. Wood, pulp, paper and paperboard products accounted for 
1.3% of imports to Brazil.  

Table 49 presents a summary of forest-related and environmental policies for Brazil, with their likely 
cost impact. 

82 See: 
http://www.bndes.gov.br/SiteBNDES/bndes/bndes_en/Hotsites/Annual_Report_2011/Capitulos/institutional_operations/th
e_bndes_and_public_policies/brasil_maior_plan.html 

83 http://www.desenvolvimento.gov.br/arquivos/dwnl_1220468182.pdf 

84 http://bracelpa.org.br/bra2/?q=en/node/332 

85 www.apexbrasil.com.br 

86  Harmonized  Commodity  Description  and  Coding  System  (HS)  as  maintained  by  the  World  Customs  Organization  (WCO), 
HS44 refers to chapter 44 that groups commodities “Wood and articles of wood; wood charcoal”. 

165 

 
 
 
 
 
 
 
 
 
                                                             
Table 49 Summary table of trade policies for Brazil 

Policy area 

Policy name 

Date 

Trade 

Brasil Maior 

2011 

Brazilian Export 
Strategy 

2008 

Cost area 

Cost impact 

Cost/Availability 
of capital 

↘ 

Cost/Availability 
of capital 

↘ 

It 

energy 

focuses 

technical 

competences 

The  plan  Brasil  Maior  aims  to 
foster 
and 
innovation 
competitiveness  in  the  Brazilian 
on 
economy. 
strengthening 
production 
processes, developing technological 
skills, 
and 
entrepreneurial 
improving 
supply, 
diversifying  exports  and  increasing 
and 
internationalization, 
developing 
for 
sustainable  development.  The  plan 
targets  specific  productive  sectors 
[including  the  pulp,  paper  and 
paperboard  sector],  and  it  deals 
with  cross-cutting  issues  such  as 
investment, 
international 
trade, 
and 
innovation, 
vocational 
sustainable 
training, 
production,  small  and  medium 
competitiveness, 
enterprises’ 
special 
regional 
customers’  well-
development, 
being, 
  conditions  and 
relations. 
a 
The 
diagnostic  analysis  of  the  current 
export  performance  of  Brazilian 
economy  and  it  outlines  a  strategy 
aiming  to  increase  exports  and 
meet  the  targets  contained  in  the 
national  productive  development 
policy.  The  strategy  envisages  five 
increase 
main 
competitiveness 
Brazilian 
increase  exports 
exporters;  2) 
the 
added-value;  3) 
number  of  exporters;  4)  increase 
access 
foreign  markets;  5) 
increase exports of services. 

objectives: 

document 

initiatives 

provides 

increase 

labour 

for 

to 

of 

1) 

6.2.3.3  Third party certification in aid of compliance with legality requirements 

The  national  report  of  the  10th  session  of  the  United  Nations  Forum  on  Forests  refers  to  a  policy  to 
increase the area of certified forests from 6.3 million ha to 7.2 million ha  over the period 2008-2011 
(UNFF-Brazil, 2012). Cerflor (endorsed by the Programme for the Endorsement of Forest Certification 
-  PEFC)  and  the  Forest  Stewardship  Council  (FSC)  provide  third-party  certification  in  Brazil.  The 
latest figures from FSC stated that there are 1089 Chain of Custody certificates and the certified forest 
area is 6.0 million ha (106 certificates, both for plantation and natural forests), slightly over 1% of the 
total  forest  areas  (FSC  International,  2016).  The  latest  figures  from  PEFC  stated  that  there  are  75 
Chain  of  Custody  certificates;  the  PEFC  certified  forest  area  is  2.7  million  ha  (PEFC,  2015).  The 
Brazilian  Forest  Certification  Programme  (Cerflor)  was  developed  within  the  national  framework  of 
SINMETRO  -  National  System  of  Metrology,  Standardisation  and  Industrial  Quality  guided  by  the 
rules of the National Council of Metrology, Standardisation and Industrial Quality (Conmetro), and by 

166 

 
 
 
 
 
 
 
 
its  executive  body  the  National  Institute  of  Metrology,  Standardisation  and  Industrial  Quality 
(Inmetro). 

6.2.3.4  Analysis of the likely cost impacts of national and EU legislation 

According  to  the  Indústria  Brasileira  de  Árvores  (Brazilian  Tree  Industry  -  Ibá),  the  organisation 
representing the Brazilian Tree Industry from forest plantations to the wood products and pulp, paper 
and  paperboard  industries,  the  forest-based  sector  has  had  to  deal  with  a  number  of  challenges  and 
structural  issues  which  have  reduced  competitiveness  (Ibá,  2015,  2014).  These  challenges  and  issues 
mentioned by Ibá include:  

  

Increasing  cost  of  labour  without  a  corresponding  increase  in  productivity  [the  main  source  of 
laws  related  to  employment  is  “Consolidação  das  Leis  do  Trabalho”  referred  to  as  the  “Labour 
Code” – enacted in 1943 and subject to many changes.]; 

   Labour taxes and other deductions represented 58% of gross salaries, while the global average was 

23%; 

   Complex federal and state environmental legislation (see also section 6.2.3.1);  

   National credit policies which are not favourable for long-term investment in forest production;  

   Restrictions  on  land  acquisition  by  foreign  capital  companies  and  Brazilian  companies  with  a 

majority share of foreign capital;  

  

Lack of bilateral and multilateral trade agreements involving Brazil. [As such, the Brazilian F-BI 
sector  is  subject  to  trading  tariffs,  particularly  of  significance  for  exports  abroad  –  see  section 
6.2.3.2; note there is no free trade agreement yet between EU and Mercosur. Intense negotiations 
took place between 1999 and 2004, and were relaunched at the EU-Mercosur summit in Madrid 
in 2010. However, here has not been much recent progress.];  

   Subsidies  for  extraction  and  consumption  of  fossil  fuels  at  the  expense  of  renewable  energy  and 
forest biomass; [Since the 1990s, Brazil has emerged as a major-oil producing country with the oil 
and  gas  sector  dominated  by  the  state-owned  company  Petrobras.  There  is  a  wide  variety  of  tax 
exemptions, suspensions and reductions that benefit the fossil fuels sector directly, at the expense 
of other sectors (Nuaimy-Barker, 2015).] 

   Lack  of  funding  for  research  in  strategic  areas  such  as  industry  innovation;  biotechnology  and 

genetic improvement. 

One of the Brazilian respondents (pulp, paper and paperboard) mentioned in an interview that ”they 
hoped  that  mergers  and  acquisitions  would  occur  over  the  coming  years  to  increase  the  average 
company size and the competitiveness of the sector”. However, the EU merger experience shows that 
mills rather than companies end up competing with each other. 

Although  there  have  been  increases  in  labour  productivity  in  Brazil,  Ibá  has  expressed  a  general 
concern  that  the  cost  of  producing  wood  has  become  relatively  higher  in  relation  to  other  leading 
producers over the last 15 years. With respect to the increase in the costs of producing wood, in 2000 
the cost was 40% less than in the US. By 2014, although still less expensive than the United States, the 
difference  was  less  than  10%  (Ibá,  2015).  An  evolution  of  the  trend  in  cost  of  wood  production  is 
shown in Figure 63  

167 

 
 
 
 
Figure 63. Increase in the cost of wood production (INCAF – Indice Nacional de Custos da Atividade Florestal; 
National  Index  of  Forestry  Activity  Costs)  versus  Brazilian  Inflation  (IPCA  –  Indice  Nacional  de  Precos  ao 
Consumidor Amplo; extended National Consumer Price Index).  

Source: Pöyry Indice Nacional de Custos da Atividade Florestal in Ibá 2015. 

Of  particular  importance  to  the  Brazilian  forest  industries  was  pressure  coming  from  domestic 
requirements to use legally sourced wood (Forest  Code, National  Environmental  Policy, Decree 3179 
on  penalties  for  forest  crimes  (1999)  and  Decree  3420  (2000)  creating  the  National  Forest 
Programme;  see  section  6.2.3.1).  At  the  beginning  of  the  previous  decade,  the  legality  requirements 
dramatically  increased  raw  material  costs  for  Brazilian  industries,  pushing  many  of  particularly  the 
smallest  companies  out  of  business:  when  the  Brazilian  authorities  began  to  enforce  these  measures 
more strictly, legally sourced wood from natural forests became scarce and overall wood prices soared 
–  by  up  to  356%.  This  affected  the  industry  and  many  sawmills  closed  in  the  period  following  2001 
(Tomaselli  et  al.,  2012).  The  early  adoption  and  enforcement  of  domestic  measures  to  tackle  illegal 
logging by Brazil should, in principle, reduce the impacts of the EU Timber Regulation on costs of local 
businesses exporting to the EU. Li et al. (2008) modelled what effect eliminating illegal logging would 
have on forest industries, trade and forest resources. For Brazil, the limits set by Li et al. for the intial 
share of illegally logged industrial roundwood were extremely broad and ranged from a high estimate 
of  0.8  to  a  low  estimate  of  0.05.  Elimination  of  illegal  logging  was  predicted  to  increase  revenues  in 
wood-producing countries, except where industries’ inputs depended on high levels of illegal logging 
in Brazil and Malaysia. 

Taxes, interest rates, labour and strict environmental legislation were mentioned (but not specified) by 
respondents as the most significant costs affected by legislation. In relation to trade with EU countries, 
high cost of export taxes and high transport costs were mentioned. High interest rates for  all types of 
investments and the economic crisis were mentioned as key current and future barriers for investment 
and  innovation.  The  current  key  interest  rates  in  Brazil  (at  14.25%  in  July  2016)  are  at  their  highest 
rate for 10 years. One company correspondent stated that ensuring compliance with the EUTR or with 
the Lacey Act was a “hassle” in the beginning, yet it had to be mandatorily implemented in order to sell 
into EU and US markets. However, more recently it was considered as a standard procedure for those 
suppliers,  trading  companies  and  clients  that  are  involved  in  exporting  to  the  EU  and  the  United 
States.  Another  responding  company  (an  exporter  of  timber)  considered  that  the  EU  Timber 
Regulation  did  indeed  not  deter  or  prevent  them  from  doing  business  with  Europe  as  they  already 
fullfil all criteria required by the EU Timber Regulation. The correspondent continued that there is no 
price differentiation for their exports because of administrative requirements for the suppliers,  as for 
the  same  product,  they  are  independent  from  the  sales’  destinations  (United  States,  Europe, 
Caribbean, Far East or South Africa). Market premiums for e.g. FSC certified products are not so much 
an issue for governmental clients when they are required to purchase certified  wood-based products. 
However,  European  importers  selling  to  other  customers  are  only  interested  when  price  levels  of 
certified products are the same as for non-certified products.  

One  respondent  pointed  out  the  significant  effects  of  monetary  policy  and  forex  rate  fluctuations  on 
the shaping of markets. The Brazilian Real is weak compared to the US dollar and Chinese renminbi 

168 

 
 
 
making  Brazilian  exports  relatively  competitive  (UNECE/FAO,  2015).  Current  (July  2016)  interest 
rates in Brazil are high 14.25% compared with the United States (0.5%), China (4.35%) and the Euro 
area (o%). This reflects confidence in the Brazilian economy. 

6.3  Country overview: China 

6.3.1  General description of the forest-based sector 

6.3.1.1 

Forest resources profile 

The  Chinese  forest  area  has  increased  between  2005  and  2015  from  193  million  hectares  to  208 
million hectares, an increase of 1.5 million hectares per year on average; 77% of which attributable to 
planted  forests  (all  new  reforestation  and  afforestation  activities  for  restoration  of  ecosystems  and 
wood production). With regard to ownership of wood forests in China, 28.3% are state-owned, 34.3% 
are collectively owned, and 37.4% are privately owned (reported in the 7th National Forest Inventory of 
China  2004-2008).  The  proportion  of  privately  owned  wood  production  forest  has  increased  from 
18.5%  since  the  6th  NFI  (1999-2003)  (see  Table  50)  (State  Forestry  Administration,  2014).  The 
growing  stock  that  has  increased  in  the  same  period  from  13.6  billion  m3  o.b.  to  16  billion  m3  o.b.. 
However,  the  forest  of  designation  “wood-production  forest”,  is  still  much  below  the  84.0  million 
hectares that it was in 1990, and despite having increased to 64.7 million hectares in 2015, from 63.8 
million hectares in 2005.  

Table 50 Changes in ownership of wood forests in China. (source: 7th and 6th China national forest inventory) 

Ownership type 

6th NFI 1999-2003 

7th NFI 2004-2008 

Area (in million ha) 

% of wood-
production forest 

Area (in million ha) 

% of wood-
production forest 

State owned 

Collective  

Individual  

Totals 

3.54 

3.27 

1.54 

8.35 

42.4% 

39.1% 

18.5% 

100% 

1.81 

2.20 

2.40 

6.42 

28.3% 

34.3% 

37.4% 

100.00% 

Source: 7th and 6th China national forest inventory 

6.3.1.2 

Sectoral structure 

The contribution of the forest-based industries to GDP in China has increased by 11 times since 2000 
to 3.9 trillion RMB (at current foreign exchange rates, equivalent to €538 bn) in 2012 (FAO-FRA2015, 
2015).  The  primary  wood-processing  sector  in  China  (in  this  case  primary  processing  is  mainly 
sawmills and excludes plywood mills) is highly fragmented with many small-sized logging companies 
and sawmills located in over 20  provinces (IBISWorld, 2011).87 In comparison,  the secondary  wood-
processing sector (i.e. wooden building materials, wood-based panels, wooden pallets and packaging) 
is relatively concentrated within three economic development zones: the Pearl River Delta, the Yangtze 
River  Delta  and  the  Bohai  Bay  Area    (Figure  64).  These  economic  development  zones  are  located  in 
close  vicinity  to  the  Guangzhou,  Shanghai  and  Beijing  metropolitan  areas,  respectively  (Cao  et  al, 
2013).  

87 IBISWorld, 2011. World Furniture Manufacturing in China. Santa Monica, CA: IBISWorld Inc.  

169 

 
 
 
 
 
                                                             
Figure 64. Map of China indicating the Bohai Bay, Yangtze River Delta and Pearl River Delta Regions 

Base map: Google maps 

It is estimated that small- and medium-sized wood-processing enterprises account for 87% of the total 
production (Sun and Chen, 2003). There are no precise statistics  on the number of wood-processing 
mills. However, Euromonitor International has compiled statistics for the overall woodworking sector 
as presented in the following table (Euromonitor International, 2013). 

Table 51 Number of Chinese companies for ISIC20 – Wood and Wood Products, by Employment Size 2007–2012  

Number of companies 

2007 

2008 

2009 

2010 

2011 

2012 

Micro (0-7 employees) 

8285 

9347 

10140 

10425 

10934 

11407 

Extra small(8-19 

19472 

22817 

23663 

23206 

23702 

23590 

Small (20-49 employees) 

17518 

21006 

23348 

24626 

26289 

28031 

Medium (50-299 employees) 

9510 

11030 

12315 

13042 

13953 

14931 

Large (300+ employees) 

669 

742 

771 

755 

771 

768 

Total 

55454 

64942 

70237 

72054 

75649 

78727 

Source: Euromonitor International, 2013 

6.3.1.3  Production, trade and consumption 

China is a big player in the global markets, competing directly with EU-based F-BI on the input side on 
the wood raw material markets, and on the output side with wood-based products destined for the EU 
and  other  markets.  China  also  exports  many  innovative  wood-substituting  products  (e.g.  based  on 
bamboo  and  rattan).  China  is  the  world  leading  producer  and  exporter  of  manufactured  wood 
products,  including  wood-based  panels,  wooden  furniture,  plywood,  wooden  flooring,  musical 
instruments and a variety of other wooden building products and handicrafts (Cao et al., 2013). 

170 

 
 
 
 
In 2014, China imported forest products88 for a total value of $US 46.8 bn, while it exported for a total 
value  of  about  $US  16.2  bn  (FAOSTAT,  2015).  In  order  to  satisfy  the  huge  demand  for  wood  raw 
material,  China  needs  to  import  considerably.    Over  the  past  years,  the  main  suppliers  in  terms  of 
metric volume of e.g. roundwood are the Russian Federation, New Zealand and USA; for sawnwood, 
these are Canada, Russian Federation and the USA. Roundwood imports were about 53.7 million m3 in 
2014,  when  exports  in  that  category  were  only  negligible  at  57 800  m3  (FAOSTAT,  2015).  In  2014, 
China  was  the  leading  consumer  of  sawnwood  (22%  of  global  consumption  (ogc);  95.4  million  m3), 
wood-based panels (47% ogc; 179.3 million m3, of which slightly less than half is plywood), and paper 
and  paperboard  (27%  ogc;  106.0  tonnes).  China  was  the  second  leading  consumer  of  industrial 
roundwood (12% ogc; 216.1 million m3) and pulp for paper (19% ogc; 33.9 million tonnes).89 It was the 
leading  producer  of  wood-based  panels  (49%;  191.2  million  m3),  recovered  paper  (24%;  53.7  million 
tonnes), and paper and paperboard (27%; 108.8 million tonnes); and the second leading producer of 
pulp for paper (10%; 17.5 million tonnes), and sawnwood (16%; 68.4 million m3) (FAOSTAT 2015). 

Cao  et  al.  (2013)  amended  using  FAOSTAT,  gives  a  good  overview  of  the  production  capacity 
development for sawmilling, wood-based panels, flooring and furniture sectors, as follows.  

Table 52 Overview of China’s FB-I production and trade  

   Sawmilling: It is estimated that there are about 2800 logging companies and over 200 000 
sawmills  in  China  (IBISWorld,  2011).  90%  of  these  mills  are  small  and  most  are  running 
with out-dated production technology. In 2014 China produced 68 million cubic metres of 
sawnwood. Imports of sawnwood were worth $US 8.6 billion (27 million cubic metres) and 
exports $US 408 million (423 000 cubic metres) (FAOSTAT, 2015). 

   Wood-based  panels:  In  2014  China  produced  191  million  m3  of  wood-based  panels,  and 
exported 15 million m3 or in value $US 7.9 billion worth of panels (FAOSTAT, 2015). China 
is  the  world’s  largest  manufacturer  of  wood-based  panels  in  terms  of  total  production 
volume, mainly plywood (in 2014: 104.1 million m3), fibreboard (in 2014: 56.8 million m3) 
and particleboard (in 2014: 20.6 million m3) (FAOSTAT, 2015). Flooring: Wooden flooring 
production has greatly increased between 2000 and 2010, from 108 to 479 million m2. 

   Furniture: China is the largest manufacturer and exporter of wooden furniture in the world, 
with  exports  in  2011  exceeding  $US  10  billion,  accounting  for  30%  of  the  world’s  total 
wooden furniture exports 

   Wood pulp: The country produced about 10.4 million tonnes of wood pulp in 2014, of which 
it exported only 48 000 tonnes ($US  29.2  million).  China  imported 18.7  million tonnes of 
wood pulp, worth $US 12.6 billion (FAOSTAT, 2015). 

   Paper:  China  produced  about  109  million  tonnes  of  paper  and  paperboard  in  2014, 
imported  4.6  million  tonnes  (at  a  value  of  $US  4.9  billion)  and  it  exported  7.3  million 
tonnes ($US 7.5 billion) (FAOSTAT, 2015), making it the world’s largest producer. 

   Printing:  In  2014,  China  imports  of  printed  materials  were  worth  $US 1.9  billion  and 

exports were worth $US 3.8 billion. 

Source: production and trade for furniture, wood products, and pulp, paper and paperboard products – Cao et al. 
2013 and FAOSTAT 2015; trade printing – ITC 2015. 

88 Forest products: i.e. All forest products listed in the FAOSTAT database: chips and particles, wood fuel, wood residues, wood 
charcoal,  wood  pellets,  sawnwood,  industrial  roundwood,  wood-based  panels,  pulp,  recovered  paper,  paper,  paperboard. 
Bamboo and rattans are included in the forest product definitions (e.g. within ‘wood in the rough’ and ‘pulp other than wood’. 

89 Apparent consumption is the production (or removals) plus imports minus exports. 

171 

 
 
 
 
                                                             
Figure 65 to Figure 72 present the evolution of production quantity, and trade (value and quantity) for 
the period 2005-2014. The value of trade is presented in $US as the international reporting standard. 

Figure 65 Production of wood products – China 

Figure  66  Production  of  pulp,  paper  and  paperboard 
products – China 

3
m

s
n
o
i
l
l
i

M

250

200

150

100

50

0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Industrial Roundwood - Production - m3
Sawnwood - Production - m3
Wood-based panels - Production - m3

e
n
n
o
T
s
n
o
i
l
l
i

M

120

100

80

60

40

20

0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Wood Pulp - Production - tonnes

Paper and paperboard - Production - tonnes

Source: FAOSTAT, 2015 

Source: FAOSTAT, 2015 

Figure 67 Imports of wood and paper products – China 
[currency in US$ as international reporting standard] 

Figure 68 Import quantity of wood products – China 

$
S
U
n
o
i
l
l
i

B

14

12

10

8

6

4

2

0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Industrial Roundwood - Import Value
Wood Pulp - Import Value
Paper and paperboard - Import Value
Sawnwood - Import Value
Wood-based panels - Import Value

3
m
n
o
i
l
l
i

M

60

50

40

30

20

10

0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Industrial roundwood

Sawnwood

Wood-based panels

Source: FAOSTAT, 2015 

Source: FAOSTAT, 2015 

172 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Figure 69 Import quantity of paper products – China 

Figure 70 Exports of wood and paper products – China 
[currency in US$ as international reporting standard] 

s
e
n
n
o
t
n
o
i
l
i

M

20

18

16

14

12

10

8

6

4

2

0

10

8

6

4

2

0

$
S
U
n
o
i
l
l
i

B

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Wood Pulp

Paper and paperboard

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Industrial Roundwood - Export Value
Wood Pulp - Export Value
Paper and paperboard - Export Value
Sawnwood - Export Value
Wood-based panels - Export Value

Source: FAOSTAT, 2015 

Source: FAOSTAT, 2015 

Figure 71 Export quantity of wood products – China 

Figure 72 Export quantity of paper products – China 

3
m
n
o
i
l
l
i

M

18

16

14

12

10

8

6

4

2

0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Industrial roundwood

Sawnwood

Wood-based panels

s
e
n
n
o
t
n
o
i
l
l
i

M

8

7

6

5

4

3

2

1

0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Wood Pulp

Paper and paperboard

Source: FAOSTAT, 2015 

Source: FAOSTAT, 2015 

6.3.2  Production cost structures in the selected F-BI sub-sectors 

6.3.2.1  Production cost structure in the woodworking sub-sector 

In  2012,  raw  materials  (20.8%)  plus  intermediate  wood  and  wood  products  (materials  produced 
within  the  manufacturing  sector  and  not  within  the  primary  forestry  sector)  (35.9%)  accounted  for 
56.7% of total costs (Table 53). Agricultural raw materials accounted for 6.7% of the total costs. China 
has  invested  a  lot  in  the  development  of  its  manufacturing  industries  and,  although  it  has  the  fifth 
largest forest area in the world (FAO, 2015), supply from Chinese forests cannot keep up with demand 
from  the  forest-based  industries.  In  any  case,  there  are  very  strictly  enforced  restrictions  on  cutting 
Chinese forests. Consequently, China imports a lot of raw materials to supply its industries, and raw 
material  costs  are  dependent  on  price  and  currency  fluctuations  in  the  global  markets.  China  is  also 
investing  in  the  development  of  the  forest  plantation  area,  but  the  plantations  are  still  relatively 
immature and the benefits of this policy have not been realised yet (Haley and Haley, 2013). Zeng et al. 
(2012) report that the price of raw materials including raw wood and sawn timber increased by 10% - 
30%  compared  with  2008.  Requirements  to  comply  with  the  EU  Timber  Regulation  are  expected  to 

173 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
add extra pressure to the operating environment for SMEs in the wood product industry (Zeng et al., 
2012), notably raw material and administrative costs. 

Labour costs accounted for 10.2% of total costs. This was the lowest of the three countries selected for 
the  international  comparison.  However,  labour  costs  are  also  increasing  faster  than  in  competitor 
countries. Heavy machinery usage is also mentioned as a factor that keeps the share of labour low as 
proportion  of  total  costs  (Euromonitor  International,  2013).  In  comparison  to  labour  costs  in  the 
United  States,  the  average  hourly  remuneration  costs  for  the  whole  manufacturing  sector  have 
increased from slightly more than 2% of the labour costs in the US in 2002, to more than 8% of the 
labour costs in the United States in 2012 (The Conference Board, 2014). Several provinces introduced 
mandatory wage increases in 2010 (EIU, 2010). While China is still considered as one of the countries 
with  the  cheapest  labour  in  the  world,  many  industries  are  concerned  with  the  rapidly  rising  labour 
costs  (Euromonitor  International,  2013)  and  some  companies  may  relocate  their  production  lines 
partly or fully to lower-wage countries. Lower labour costs in some of China’s neighbouring countries, 
such as Vietnam, have been a boon for industries located there. 

Transport costs, energy costs, and other costs (taxes, financial services) accounted for 2.7%, 5.2%, and 
4.8% of total costs, respectively (Table 53).Overall manufacturers’ costs increased 236% between 2008 
and  2012,  while  profitability  stayed  at  10%,  explained  by  rising  prices  and  wages  (Euromonitor 
International, 2013). 

The  increased  raw  materials  costs,  increased  payments  for  production-line  workers,  and  impact  on 
export costs from the cumulative appreciation value of Chinese currency (RMB) (up to 6.6%)resulted 
in a rise of the mean export cost of a unit product by around 20 – 40% (Zeng et al., 2012).  

174 

 
 
 
 
Table  53  Cost  structure  for  the  woodworking  sub-sector  in  China  for  the  year  2012  (see  Table  42  for  an 
explanation of the categories) 

Main cost category 

Cost sub-category 

Cost items 

RMB million 

€ million90 

% 

Raw materials and 
processed Materials 

Primary material 

Forestry (wood mainly 
–including production 
of bamboo and 
rattans) 

212242 

26186 

Agriculture  

101650 

12541 

Other 

13.2 

2 

Wood and wood 
products 

542845 

66975 

Intermediate materials 

Basic chemicals 

60099 

7415 

Other chemicals 

59012 

7281 

Other 

119208 

14708 

Other 

Pharmaceuticals 

Other 

5884 

14016 

726 

1729 

Capital costs 

Durable goods 

Machinery for rubber, 
plastics and paper 
industries and other 
special purpose 
machinery 

11157 

1377 

Other 

38752 

4781 

20.8% 

51.6% 

1.3% 

3.3% 

Labour 

153751 

18969 

10.2% 

Transport and logistics 

Energy 

Other costs 

Services (part of 
OPEX) 

Source: Euromonitor International, 2013 

Cargo handling, 
warehousing and 
travel agencies 

17341 

2139 

Other 

23993 

2960 

Production, collection 
and distribution of 
electricity 

Other (including 
recycling) 

Monetary 
intermediation 

36539 

4508 

42484 

5242 

16573 

2045 

Other 

29247 

Taxes less subsidies 

27663 

3608 

3413 

2.7% 

5.2% 

3.0% 

1.8% 

90 RMB to € currency conversion based on the European Central Bank reference exchange rate for 2012. 

175 

 
 
 
  
 
 
 
  
 
 
                                                             
The following figure allows to compare cost structures from China and EU, in relative terms: 

Figure 73 Cost structures for China and EU in relative terms, as % of production costs, 2005 

Source: Euromonitor International 2013 for China and ToSIA data 2005 for EU 

6.3.2.2  Cost structure in the pulp, paper and paperboard sub-sector 

Reference  to  Figure  74  indicates  that  in  2014,  direct  manufacturing  costs  for  the  production  of  pulp 
are overall higher in China than in Europe (a  difference of 67 EUR/tonne). Raw material wood costs 
account for more than a half of the Chinese manufacturing costs (278 EUR/tonne), and approximately 
for  half  of  the  European  costs  (215  EUR/tonne).  Looking  at  previous  years,  raw  material  costs  for 
wood  in  China  are  set  higher  than  the  European  ones,  starting  from  2010,  with  the  highest  price 
difference was registered in 2014. Chemicals are other significant raw materials  costs (54 EUR/tonne 
in  EU28,  70  EUR/tonne  in  China).  Energy  costs  are  dominated  by  fuels  in  both  Europe  and  China, 
nonetheless,  fuel  is  reported  to  be  more  expensive  in  China  than  in  Europe  (33  EUR/tonne  vs.  16 
EUR/tonne).  Conversely,  labour  and  maintenance  are  more  expensive  in  Europe  than  in  China  (71 
EUR/tonne  vs.  50  EUR/tonne).  However,  it  should  be  recalled  that  the  pulp,  paper  and  paperboard 
sector is far from being a labour-intensive one. 

To summarise, direct manufacturing costs for the production of pulp are higher in China, where they 
are  dominated  by  wood  raw  material  costs,  chemicals,  and  capital  costs.  In  Europe,  higher  costs  are 
observed for labour and maintenance.  

176 

 
 
 
 
Figure 74 Cost structures in manufacturing of pulp, Europe vs China, EUR/tonne, 2014 

Source: Authors’ elaboration, based on RISI data 

As can be seen in Figure 75, the total costs in Euro per tonne for the paper and paperboard produced 
in 2014 show an inverted picture, with higher total costs in Europe than in China; a difference of 45 
EUR/tonne.  The  costs  structure  for  the  production  of  paper  and  paperboard  is  more  fragmented 
between  the  various  cost  categories,  reflecting  a  greater  intensity  of  processing  than  for  pulp.  Other 
raw  materials  than  wood  (i.e.  recovered  paper,  market  pulp  and  chemicals)  account  for  the  highest 
share of the costs. What marks the gap between the higher production costs in Europe than in China 
are  mainly  labour  costs  (19  EUR/tonne  in  China  and  53  EUR/tonne  in  Europe),  wood  costs  (23 
EUR/tonne  in  China,  40  EUR/tonne  in  Europe),  and  energy  costs  (60  EUR/tonne  in  china,  84 
EUR/tonne  in  Europe).  Figure  17,  the  total  costs  in  Euro  per  tonne  for  the  paper  and  paperboard 
produced  in  2014  show  an  inverted  picture,  with  higher  total  costs  in  Europe  than  in  China;  a 
difference of 45 EUR/tonne. The costs structure for the production of paper and paperboard is more 
fragmented  between  the  various  cost  categories,  reflecting  a  greater  intensity  of  processing  than  for 
pulp. Other raw materials than wood (i.e. recovered paper, market pulp and chemicals) account for the 
highest share of the costs. What marks the gap between the higher production costs in Europe than in 
China are mainly labour costs (19 EUR/tonne in China and 53 EUR/tonne in Europe), wood costs (23 
EUR/tonne  in  China,  40  EUR/tonne  in  Europe),  and  energy  costs  (60  EUR/tonne  in  china,  84 
EUR/tonne in Europe).  

177 

0100200300400500600EUCNWoodRecovered PaperMarket PulpChemicalsFuelsElectricityLabourMaintenanceCapital CostRaw materialsEnergyOther costsOther costsEnergyRaw materials 
 
 
Figure 75 Cost structures in manufacturing of paper and paperboard, Europe vs. China, EUR/Tonne, 2014 

Source: Authors’ elaboration, based on RISI data 

From the breakdown by product (Figure 76), it can be observed that raw materials (taken together and 
separately for wood) are cheaper in Europe than in China, for all pulp, paper and paperboard products 
(the highest difference is for uncoated mechanicals, where Europe is cheaper of 106 EUR/tonne than 
China).  Nonetheless,  the  picture  for  energy,  labour,  capital  and  maintenance  is  overall  more 
favourable  to  China;  Europe  is  considerably  more  expensive  for  the  almost  all  products  (with 
differences  averaging  18EUR/tonne  for  energy  and  31EUR/tonne  for  labour).  Only  capital  costs  for 
three  paper  grades  are  lower  in  Europe  than  in  China  (coated  mechanical,  uncoated  wood-free  and 
coated wood-free).  

178 

0100200300400500600EUCNWoodRecovered PaperMarket PulpChemicalsFuelsElectricityLabourMaintenanceCapital CostOther costsEnergyEnergyRaw materialsRaw materialsOther costs 
 
 
 
 
Figure 76 Cost structure of inputs to the pulp, paper and paperboard sub-sector, Europe versus China, average 
EUR/tonne, 2014 

Source: Authors’ elaboration based on RISI data 

6.3.3  Policy framework 

6.3.3.1  Forest-related and Environmental Policy 

The  Forest  Law  was  adopted  in  1984  and  came  into  force  in  1985.  Article  1  of  the  law  mentions 
protection,  nurture  and  rational  utilization  of  forest  resources  and  acceleration  of  the  greening  of 
China. Article 3 states that “The forest resources shall belong to the state, unless the law stipulates they 
belong to the collective. For the forests, trees and woodlands owned by the state and the collective and 
the trees and woodlands owned by private individuals, the people's government above the county level 
shall register and record them, issue certificates and confirm the ownership and the right to use”. In 

179 

0100200300400500600700800900EUChinaEUChinaEUChinaEUChinaEUChinaEUChinaEUChinaEUChinaEUChinaEUChinaNewsprintUncoated MechanicalCoated MechanicalUncoated WoodfreeCoated WoodfreeTissueWrapping PapersCartonboardContainerboardMarket PulpRaw materialsEnergyLabourOther costs 
 
 
response to environmental disasters in the 1990s, the law was amended in 1998 with a view on shifting 
emphasis  from  wood  production  towards  a  more  comprehensive  sustainable  management  approach 
(Standing  Committee  of  the  National  People's  Congress,  1998).  The  new  law  focusses  on  increased 
public  financing,  enhanced  authority  of  forest  agencies,  harmonised  restoration,  development, 
protection  and  use  of  forests  and  wildlife  with  the  ultimate  aim  of  achieving  sustainable  forestry 
development.  Objectives  of  Chinese  forest  policy  after  1998  included:  1)  improving  biodiversity 
conservation and securing national ecological safety; 2) restoration of key ecosystems; 3) promotion of 
sustainable  forest  management;  4)  clarification  of  forest  land  tenure  and  securing  farmers’  rights  in 
relation to forests, plantations and forest land management (as individual households can hold forest 
ownership  titles)  ;  5)  promotion  of  a  balanced  forest  industry  development;  6)  strengthening  of 
international  cooperation  (Chen,  2010  in  Yasmi  et  al.,  2010).  Domestic  harvesting  restrictions  and  a 
logging  quota  system  have  led  to  increasing  roundwood  imports,  especially  in  softwood  species 
(Indufor, 2013), mainly from Russia, New Zealand and the United States (Chinese Customs Statistics, 
2015) which in theory should have an upward effect on wood prices. 

The  government  has  implemented  six  key  forestry  programmes  to  develop  sustainable  forest 
management  in  China:  1)  The  Natural  Forest  Protection  Programme;  2)  Conversion  of  Agricultural 
Land  to  Forests  and  Grasslands  (Grain  for  Green);  3)  Desertification  Control;  4)  Key  Shelterbelts 
Programme); 5) Wildlife Conservation and Nature Reserve Development Programme; 6) Fast Growing 
and  High  Yield  Forest  Plantation  Programme.  Along  with  the  development  of  the  plantation  area, 
there  is  an  increased  policy  emphasis  on  the  sustainability  of  forest  management  and  on  the  other 
functions of forests apart from production of raw materials (FAO 2010). 

As  regards  the  forest-based  industries,  compared  to  the  woodworking  industry,  the  Chinese 
government  has  invested  heavily  in  the  development  of  the  pulp,  paper  and  paperboard  industry. 
China is trying to expand its forest resources and reduce its reliance on imports of raw materials, and 
has  reduced  taxes  on  plantations  and  tariffs  on  imports  of  processing  machinery.  The  central 
government  and  local  governments  have  provided  subsidies  to  establish  new  plantations.  However, 
the growth of the paper and woodworking manufacturing industries has outstripped the growth of the 
forest area. This situation is unlikely to change in the near future (Haley and Haley, 2013). 

In  2009  a  plan  on  “revitalization  of  the  Chinese  forest  industry”  was  published  by  five  government 
agencies: the State Forest Administration (SFA), the National Development and Reform Commission 
(NDRC),  the  Ministry  of  Finance,  the  Ministry  of  Commerce  and  the  State  Tax  Administration.  The 
plan outlines support to 100 leading enterprises and 10 wood-industry clusters. The plan aims to raise 
the  sector’s  output  value  from  1.4  trillion  RMB  (US$209.9  billion)  in  2008  to  2.3  trillion  RMB 
(US$329.4 billion) in 2012, and to maintain annual sector growth of around 12%. The agencies expect 
annual trade in wood products to exceed $US 90 billion and exports to exceed $US 50 billion (Haley 
and Haley, 2013). 

China’s  Five-Year  Plans  are  initiatives  for  social  and  economic  development,  triggering  reforms  and 
implementing  targets  in  different  fields,  such  as  agriculture,  climate,  environment,  innovation,  etc. 
These  plans  are  re-iterated  every  five  years,  updating  priorities,  measures  and  goals.  Overall,  targets 
for resource conservation and environmental protection are increasing drastically. Targets specific to 
forestry  and  forest-based  industries  relate  to  forest  increase  with  indicators  of  forest  coverage  rate 
(rising from  20.36% in  2010, to 21.66%  in  2015, and to 23%  in  2020) and of  increasing forest stock 
(from  137  m³  in  2010  to  143  m³  in  2015).  Other  important  targets  concern  the  decrease  in  water 
consumption  per  unit  of  value  added  from  industrial  output,  the  increase  of  non-fossil  fuel  usage  in 
primary energy consumption, the decrease in energy consumption in general per unit of GDP, etc.  

In  this  perspective,  the  12th  Five-Year  Plan  to  Promote  Paper-making  Industry  (the  so-called 
“Circular”)  was  issued  and  highlighted  “tight  output  control,  accelerated  development  of  forestry-
paper integration programme, upgrading of raw material structure, optimisation of product structure, 

180 

 
 
determination  of  controlling  parameters  for  energy  saving  and  emission  reduction,  improving  of 
industrial cluster and the like91”. This Plan anticipates the following tasks92: 

  

Improve  raw  material  structure,  increase  domestic  supply  by  heightening  the 
proportion  of  wood  fibre,  advocating  the  recovery  and  reutilization  of  waste  paper  and 
realizing the scientific and rational utilisation of non-wood fibre;  

   Heighten  innovation  ability,  enhance  technical  level  by:  researching  and  developing 
the low consumption, less pollution, high quality, high efficiency  pulp, paper and paperboard 
production  technology,  researching  and  developing  the  advanced  suitable  equipment  with 
independent  intellectual  property,  heightening  the  ability  to  make  technical  innovation, 
energetically  push  forward  the  integration  of  informatisation  and  industrialisation  and 
optimising the human resource structure, build the high quality personnel team. 

   Optimise industrial layout, realize rational resource allocation; 

   Push forward clean production, protect ecological environment by: actively pushing 
forward  energy  saving  and  reduce  consumption,  realizing  the  high  efficiency  of  resource 
utilisation, by disseminating the clean production technology, strengthening pollution control, 
by  enhancing  the  consciousness  of  environmental  protection,  tightening  supervision  and 
control,  by  accelerating  to  eliminate  outdated  capacity,  reducing  production  and  decreasing 
drain  and  by  attaching  importance  to  the  emission  reduction  of  dioxin-persistent  organic 
pollutants and ammonium nitrate. 

   Optimise corporate structure, promote merger and reorganisation by fostering the 
backbone enterprises, by guiding small and medium-sized paper enterprises to develop in the 
direction of being professional, exquisite, special and new, and by regulating the business scale 
and structure; 

   Regulate product structure, improve product  quality  by developing the  light-weight, 
functional paper and paper board new products, by accelerate the upgrading and updating of 
low  grade  products,  and  by  making  great  efforts  in  the  development  of  environmentally 
friendly paper products. 

   Set up saving mode, advocate rational consumption. 

Table 54 presents a summary of forest-related and environmental policies for China, with their likely 
cost impact. 

91 Shandong Zhangqiu Daxing Paper-making Machinery Co (2013) http://en.sd-daxing.com/news_detail/newsId=1.html  

92  National  Development  and  Reform  Commission,  Ministry  of  Industry  and  Information  Technology,  State  Forestry 
Administration (2011), Twelfth Five-Year Development Plan of Paper Industry 

181 

 
 
 
 
 
 
 
 
 
 
 
 
 
                                                             
Table 54 - Summary table of forest-related and environmental policies for China 

Policy area 

Policy name 

Date 

Notes 

Environment  Wildlife 

Conservation and 
Nature Reserve 
Development 
Programme 

Forest-
related 

Forestry Law 

1984 

The Natural 
Forest Protection 
Programme 

1998 

1999 

Conversion of 
Agricultural Land 
to Forests and 
Grasslands (Grain 
for Green) 

1994- 

China National 
Action 
Programme To 
Combat 
Desertification 

Key Shelterbelts 
Programme 

1978 

soil 

and 

species 

logging 

in  1999 

WCNRDP 

requirements  of 

targeted 
The 
conservation 
and 
of 
habitats.  Between  2001  and  2006, 
831  natural  reserves  were  created 
and  19.5  million  ha  of  forest  and 
other  sites  were  protected.  By 
2010,  the  number  of  reserves  was 
predicted  to  reach  1800  (16%  of 
the  total 
land  area)  with  220 
national nature reserves. 
Enacted  with  a  view  to  protecting, 
rationally 
and 
cultivating 
resources, 
forest 
exploiting 
accelerating 
territorial 
afforestation  and  making  use  of 
forests  in  water  storage  and  soil 
conservation,  climate  regulation, 
environmental  improvement  and 
supply  of  forest  products  to  meet 
socialist 
the 
construction 
people's 
livelihood. 
Affecting 
restrictions, 
protected  areas,  replanting,  and  a 
range  of  other  policies  aimed  at 
protecting  China’s 
forests  and 
reducing  the  risk  of  erosion  and 
flooding 
Initiated 
in  order  to 
combat  deforestation,  ecological 
degradation  and 
erosion 
resulting  from  over-cultivation.  At 
the  16th  Party  Congress  in  2002, 
the GFG programme was expanded 
to  a  nation-wide  programme. 
Some  151.36  billion  yuan  was 
committed  to  the  programme.  The 
grain-for-green  policy  aimed  to 
move  15  million  ha  of  low-yield 
farmland  to  forest  and  to  afforest 
another  17  million  ha  of  barren 
land. 
programme  was 
suspended  in  2007.  By  2008,  8.2 
million  ha  of  cropland  had  been 
converted  to  forest  through  the 
programme. 
China  signed  UN  Convention  to 
in  1994 
Combat  Desertification 
and  ratified  the  convention 
in 
1997.  The  first  national  action 
programme was published in 1996. 
An update was issued in 2005. The 
long-term  objective  (-2050)  is  to 
establish  34  million  ha  of  forest 
and  grassland,  1.8  million  ha  of 
forest 
a 
further  19  million  ha  of  desert  to 
enable  regeneration  of  forest  and 
grassland. 
The  program  was  planned  initially 
for  the  period  (1978-2050)  in  8 
phases. 
planned 
investment  was  7.68  billion  yuan 
and 
of 
afforestation  was  planned.  By  the 
end  of  2008,  a  total  24.47  million 
ha 
been 
had 
afforestation 
conserved by the program 

35.08  million 

shelterbelts, 

enclose 

total 

The 

The 

ha 

Cost area 

Cost/Availability 
of raw materials 

Cost 
impact  
↗ 

Cost/Availability 
of raw materials 

↘ 

Cost/Availability 
of raw materials 

? 

Cost/Availability 
of raw materials 

↘ 

Cost/Availability 
of raw materials 

↘ 

Cost/Availability 
of raw materials 

↘ 

Legend: ↗ : cost increase ; ↘ : cost decrease ; → : no significant cost implication ; ? : cost impact uncertain 

182 

 
 
 
 
 
 
 
 
 
6.3.3.2  Trade policy 

Forest  product  related  trade  policy  in  China  is  significantly  influenced  by  the  issue  of  legality 
verification for the wood raw materials, as required in key export markets such as the USA and the EU. 
It is estimated that about 17% of the volume of China’s wood-based imports are at high-risk of illegality 
(Wellesley, 2014). However, this proportion has decreased significantly since 2000 as China has made 
progress  in  its  efforts  to  tackle  the  illegal  trade  in  wood  products.  These  efforts  have  included 
development  of  a  draft  national  wood  legality  verification  system  and  active  engagement  with 
producer and consumer countries. 

In  order  to  meet  the  new  requirements  set  by  the  Lacey  Act  Amendment  and  the  EU  Timber 
Regulation,  China  is  in  the  process  of  implementing  the  China  Timber  Legality  Verification  Scheme 
(CTLVS)  (Jonson  et  al.,  2015).  The  CTLVS  is  based  on  China’s  domestic  wood  management  and 
control  system,  which  includes  a  forest  harvesting  permit,  a  wood  shipment  permit,  and  a  wood 
processing permit. Under CTLVS, Chinese-authorised organisations issue wood legality certificates. 

 However, there are still many challenges to be overcome in the progress of implementing the scheme 
(Jonson et al., 2015). The wood enterprises in China have two functionally different options to ensure 
the  legal  sources  of  their  raw  materials:  1)  they  can  use  FM  (Forest  Management)  certified  wood, 
otherwise;  and  2)  they  can  use  the  verified  legal  wood.  The  wood  enterprises  have  two  functionally 
different  options  to  ensure  the  traceability  along  their  supply  chain:  1)  they  can  apply  the  Chain-of-
Custody (CoC) certification for forest enterprises; or 2) they can provide an all-conditioned traceability 
system  along  their  production  and  marketing  processes  (Zeng  et  al.,  2012).  Zeng  et  al.  (2012)  cite 
Rametsteiner  and  Simula  (2003)  in  arguing  that  FM  certification  is  a  more  rigorous  process  than 
legality verification. 

The average duty imposed on imports of wood and paper products from countries with most-favoured-
nation (MFN) status was 4.3% (range up to 20%) (WTO, 2016).  

The EU is the biggest trading partner for China, and China is the second biggest trading partner for the 
EU  (after  the  United  States).  Negotiations  concerning  an  EU-China  investment  agreement  were 
launched  in  January  2014  with  the  aim  of  ensuring  that  markets  are  open  to  investment  in  both 
directions.  In  January  2016  the  EU  and  China  agreed  that  the  “future  deal  should  improve  market 
access opportunities for their investors by establishing a genuine right to invest and by guaranteeing 
that they will not discriminate against their respective companies.” 

 Table 55 presents a summary of trade-related for China, with their likely cost impact. 

Table 55 - Summary table of trade-related policies for China 

Policy area  Policy name 

Date 

Notes 

Trade 

Trade 

n.a. 

China Timber 
Legality 
Verification 
Scheme (CTLVS) 

EU-China bilateral 
talks on 
investment 

January 
2016 

In order to meet the new 
requirements set by the Lacey Act 
Amendment and the EU Timber 
Regulation, China is in the process 
of implementing the China Timber 
Legality Verification Scheme 
(CTLVS) 
Negotiations on-going to improve 
and create level bilateral market 
access opportunities for investors 

Legend: ↗ : cost increase ; ↘ : cost decrease ; → : no significant cost implication ; ? : cost impact uncertain 

Cost area 

Cost/Availability 
of raw materials 

Cost 
impact  
↗ 

Access to capital 
and goods 

↘ 

6.3.3.3  Third party certification 

In  the  private  sector  of  forest  ownership  (see  above)93,  a  rapid  growth  in  third-party  certification 
occurred  in  the  last  decades.  The  Chinese  Forest  Certification  Scheme  was  launched  in  2010  and  is 
endorsed by PEFC. The latest figures from PEFC state there are 255 Chain of Custody certificates and a 

93  7th  NFI  (2004-2008)  states  that  32.1%  of  all  forests  and  37.4%  of  timber  forests  are  owned  by  individuals.  (State  Forestry 
Administration, 2014). This has increased since the 6th NFI (1999-2003). 

183 

 
 
                                                             
certified  forest  area  of  5.6  million  ha  (PEFC,  2015).  The  latest  figures  from  FSC  state  that  there  are 
4157  Chain  of  Custody  certificates  and  a  certified  forest  area  of  1.2  million  ha  (66  certificates)  (FSC 
International, 2016). 

6.3.3.4  Analysis of the likely cost impacts of national and EU legislation  

China’s huge investments in pulp, paper and paperboard production has created market disturbances 
at the global level for pulp, paper and paperboard, and also wood and recovered paper (CEPI, 2016). 

One  expert  mentioned  that  in  general  for  the  forest-based  sector,  the  most  significant  pieces  of 
domestic  legislation  affecting  costs  were  generally  those  concerning  chemical  emissions  and  the 
environment.  Another  consultant,  representing  the  woodworking  sector,  commented  that  costs  had 
increased to compliance with domestic environmental legislation and domestic labour legislation.  The 
consultant  remarked  that  the  EU  sets  higher  environmental  and  chemical  requirements  compared 
with selling to domestic markets, and therefore the costs of placing products onto European markets 
are  higher.  Another  expert,  answering  from  the  point  of  view  of  the  ‘builders’  carpentry  and  joinery 
sub-sector’, stated that EU legislation was “definitely harder [to comply with than domestic legislation] 
due to 1) complexity of many furniture and flooring products; 2) the growth of markets within Asia for 
furniture and flooring, which have no similar legislation; 3) many SMEs operating in the sector with 
limited resources for comprehensively [addressing] the EU regulations.” This implies higher costs for 
producers  wanting  to  export  to  the  EU  market,  but  this  does  not  mean  that  products  placed  on  the 
domestic market are of a higher quality. However, of course one could consider that theoretically the 
producers  have  the  option  to  diversify  their  product  range  for  the  domestic  market  with  lower  and 
higher grade products. 

Legality  verification  and  laws  against  illegal  logging  and  trade  are  largely  depicted  as  the  foreign 
legislation  with  the  highest  impact  on  the  production  costs  of  Chinese  companies.  This  holds 
particularly true for the stringent forest legality requirements by instruments such as the EU Timber 
Regulation  and  the  US  Lacey  Act  (2008)  Amendment.  These  were  expected  to  have  a  big  impact  on 
particularly export-oriented Chinese enterprises (Zeng et al., 2012), which has recently been confirmed 
by Xu et al. (2014) who surveyed Chinese wood-processing businesses via a questionnaire handed out 
to  210  companies  and  interviews  and  visits  to  10  wood-processing  businesses.  Over  two-thirds  of 
questionnaire  respondents  (74  businesses  responded)  indicated  that  the  impact  of  international 
demand  for  legal  forest  products  had  a  great  impact  on  Chinese  trade  in  forest  products,  and  31% 
indicated a great impact on their own business. One expert commented that the EUTR was the most 
significant  piece  of  EU  legislation  resulting  in  increased  costs  of  production,  but  that  the  EUTR  was 
not more administratively burdensome than US Lacey requirements.  

For  the  two  options  to  tackle  legality  issues  (CoC  certification  versus  all-conditioned  traceability 
system),  cost  estimates  are  as  follows:  1)  when  an  enterprise  only  employs  the  forest  certification 
measures, i.e. the FM certified wood plus the CoC certification, implementation of this higher standard 
will bring about a rise by 3 – 24% in the product costs; 2) when it applies the verified legal wood and 
an all-conditioned self-run traceability system, the cost increase can be controlled below 6%. However, 
the increased product costs are inevitable, whatever measures the enterprises adopt.  

The  experts  commented  that  domestic  and  foreign  legislation  (relating  to  wood  legality  and 
environment)  has  meant  that  companies  have  to  invest  in  more  modern  and  cleaner  operations  in 
order to reduce (e.g. air and water) pollution. In the short-term, this may decrease the competitiveness 
of  Chinese  companies,  but  in  the  long-term  the  requirements  will  result  in  more  modern  and  more 
sustainable business. 

The combination of the saturation of domestic markets together with an overall expansion of the pulp, 
paper and paperboard industries in China have resulted in overcapacity in the sector, hence increasing 
exports  of  paper  products  from  China.  Moreover,  being  a  country  with  very  few  forestry  resources 
despite being the fastest-growing paper industry, China imports a significant part of its raw materials 
at  world  prices.  In  order  to  reduce  the  dependency  on  imported  raw  materials,  the  Chinese 
government  provides  subsidies  and  loans  to  support  the  industry’s  expansion.  In  this  perspective,  a 

184 

 
 
paper  from  the  Economic  Policy  Institute  from  2010  estimates  that  the  subsidies  between  2002  and 
2009 in the paper industry has reached $33.1b, that can be broken down as follows94: 

  Subsidies for electricity: $778m from 2002 to 2009; 
  Subsidies for coal: $3b from 2002 to 2009; 
  Subsidies for pulp: $25b from 2004 to 2009; 
  Subsidies for recycled paper: $1.7b from 2004 to 200895;  
  Subsidy income: $442m from 2002 to 2009; 
  Loan-interest subsidies: $2b from 2002 to 2009. 

Such  subsidies  have  been  provided  by  both  central  and  local  governments  and  aim  to  “develop  fast-
growing,  high-yield  plantations;  reduce  taxes  and  fees  on  plantations  to  stimulate  investment; 
reduce  tariff  s  on  imports  of  processing  machinery;  promote  exports  of  wood  and  paper  products 
through  value-added  tax  (VAT)  rebates;  provide  loans  and  loan-interest  subsidies  for  technology 
renovation; promote foreign investment in state-owned enterprises (SOEs); and protect debt-ridden 
SOEs  and  small  local  companies  with  excess-production  capacity  through  local  governments’  soft 
loans, subsidies, and loan96”. 

Subsidies are one of the reasons for which, under the Chinese WTO Accession Protocol, China can be 
considered  as  a  non-market  economy  in  anti-dumping  procedures.  Its  overcapacity  in  various 
industries has hence led to dumping and flood of imports on foreign markets. Provided that China is 
involved  in  the  highest  number  of  anti-dumping  investigations,  the  obtaining  the  Market  Economy 
Status  has  been  an  essential  objective  for  China.  Some  countries  have  already  granted  the  Market 
Economy  Status  to  China;  however,  only  two  countries  having  major  anti-dumping  proceedings  are 
among those, namely Australia and South Africa. On the other hand, the EU, the US, Canada, Japan, 
Mexico  and  India  have  not  recognised  China  as  a  Market  Economy.  China’s  status  of  Non-Market 
Economy expires after 11 December 2016, date after which there will be a legal obligation to grant the 
Market Economy Status to China.  

6.4  Country overview: USA 

6.4.1  General description of the forest-based sector 

6.4.1.1 

Forest resources profile 

The United States of America has about 310.1 million ha forest land (33.8% of the land area in 2015). 
The forest area is relatively stable, increasing from 302.4 million ha in 1990 (FAO, 2015). 37% of the 
forest land is owned publicly97 and the remaining 63% of the forest land is owned privately98(Butler, 
Hewes  et  al.,  2014).  The  ownership  pattern  in  the  western  United  States  differs  significantly  from 
other regions. In the western United States, 66% of the forests are publicly99 owned, 22% are owned by 
industrial  producers,  and  11%  by  private  non-industrial  owners,  whereas  in  the  southern  United 
States, 70% of land is owned by private non-industrial owners, 20% by industrial/institutional owners 
and 10% is publicly owned (Sun and Ning, 2014). 

94  The  Briefing  Paper  considers  these  numbers  are  conservative  estimates  as  only  subsicides  that  were  traced,  recorded  and 
confirmed were included in the calculations. 

95 Missing data for 2002, 2003 and 2009.  

96 Economic Policy Institute (2010), NO PAPER TIGER: Subsidies to China’s Paper Industry from 2002-09, EPI Briefing Paper 
#264 

97 28% of total forest is in federal ownership, 7% in state ownership and 2% in local ownership (county or municipal) 

98 Families, trusts and estates own 43% of the total US forest area, 16% is in corporate ownership and 4% is in other forms of 
private ownership 

99 In the US this is land administered by federal, state, county or municipal entities (FAO, FRA2010) 

185 

 
 
 
 
                                                             
The total growing stock (o.b.) on forest in 2015 is 40.7 billion m3 and has increased by 423.4 million 
m3/yr  over  the  period  2010-2015,  and  by  299 million  m3/yr  over  the  period  1990-2015  (FAO  FRA, 
2015). The National Report on Sustainable Forests 2010 (published in 2011) reported that the growing 
stock  on  “timber  lands”  i.e.  land  available  for  and  capable  of  wood  supply  is  932  billion  cubic  feet 
(~26.4 billion m3) and has increased by more than 50% since the 1950s. This increase has occurred in 
all regions with the exceptions of the Pacific Coast and Alaska in the 1970s and 1980s, when harvesting 
of large wood as well as the transfer of high-volume wood land to reserves resulted in declines (USDA 
Forest Service, 2011). 

6.4.1.2  Sectoral structure 

The US forest-based sector shows many similarities to the European forest sector. For example, both 
regions  have  experienced  a  similar  decline  in  the  demand  and  production  of  wood  pulp  (as  well  as 
certain categories of paper) during the last decade, which is as in Europe primarily linked to a similar 
decline  in  demand  for  newsprint,  printing  and  writing  paper,  etc.  (UNECE/FAO,  2012).  However, 
overall wood demand in Europe has been bolstered by sustained demand for wood-based panels and, 
above all, bio-energy. 

Employment in the forest-related segment of the US economy (forestry and logging, wood and paper 
manufacturing,  furniture  manufacturing  and  wood-related  construction)  comprise  over  2.5  million 
jobs,  of  which  only  50 000  are  in  the  forestry  and  logging  segment.  The  broader  “forest-related” 
category comprises 4-6% of US GDP (FAO, 2015). 

In  terms  of  employment,  the  North  American  forest-based  sector  has,  as  in  Europe,  seen  static  or 
falling employment levels in both sawnwood and wood products, as well as in paper and paper-based 
products. Labour productivity in the wood products and paper manufacturing industries in the United 
States is amongst the highest in the world (FAO, 2014). In the US and Europe, labour productivity has 
been  generated  mainly  by  closing  small  and  not  efficient  mills100,  or  through  employment  cuts. 
Continued  improvements  in  labour  productivity,  with  modest  output  growth  or  no  output  growth  in 
the  country  imply  that,  employment  would  only  grow  slightly  or  continue  to  decline  (UNECE/FAO, 
2012). 

Table  57  presents  the  number  and  size  of  businesses  (by  number  of  employees)  in  2012  for:  1)  the 
wood  products  manufacturing  industry  (NAICS101  321);  and  2)  the  paper  manufacturing  industry 
(NAICS 322) (US Census Bureau, 2016). The data from the US Census Bureau differ significantly, both 
in  absolute  and  relative  terms,  from  the  data  published  by  Euromonitor  International  for  the  ISIC 
Division  20  (manufacture  of  wood  and  of  products  of  wood  and  cork;  ISIC  Rev.  3)  for  the  United 
States  for  the  period  2007-2012  (Euromonitor  International,  2012).  Most  of  the  four-digit  NAICS 
codes for the NAICS 321 subsector are contained within ISIC Division 20 of the International Standard 
Industrial  Classification  of  all  Economic  Activities  (ISIC,  Revision  3)  of  the  United  Nations  (NTIS, 
1995).  The  definitional  differences  in  the  ISIC  and  NAICS  classifications  are  relatively  small  and 
cannot explain the substantial differences in the data.  

100 Indufor, 2013, Op. CIt. 

101 NAICS: North American Industry Classification System. For more info, visit: http://www.census.gov/eos/www/naics/  

186 

 
 
 
 
 
 
 
                                                             
Table 56 Average monthly employment for the wood products manufacturing and paper manufacturing sectors 
in the US (2006-2015) 

Average monthly employment (thousands FTE) 

Wood products 
manufacturing 

2006 

2007 

2008 

2009 

2010 

2011 

2012 

2013 

2014 

2015 

560,7 

517,0 

457,8 

360,4 

341,9 

336,8 

339,2 

353,4 

371,8 

379,6 

Paper manufacturing 

470,5 

458,1 

444,9 

407,0 

394,5 

387,2 

379,9 

378,1 

373,5 

372,6 

Source: US BLS 2015b 

Table 57 Number and size of US businesses in wood products and paper manufacturing sub-sectors in 2012  

Size of business (number of employees) 

Sector 

1-4 

5-9 

10-19 

20-49 

50-99 

100-
249 

250-
499 

500-
999 

≥1000 

Total 

Sawmills and wood 
preservation  

Veneer, plywood, and 
engineered wood product 
manufacturing 

Other wood product 
manufacturing 

Total wood products 
manufacturing 
(NAICS321) 

Pulp, paper, and paperboard 
mills 

Converted paper product 
manufacturing (1)  

Total Paper 
manufacturing 

(NAICS322) 

1172 

642 

561 

540 

258 

159 

15 

289 

239 

266 

328 

151 

135 

30 

3295 

1669 

1558 

1437 

573 

336 

53 

0 

5 

8 

4756 

2550 

2385 

2305 

982 

630 

98 

13 

0 

0 

4 

4 

3347 

1443 

8933 

13723 

38 

18 

22 

49 

69 

101 

85 

54 

12 

448 

601 

388 

546 

937 

703 

715 

100 

24 

3 

4017 

639 

406 

568 

986 

772 

816 

185 

78 

15 

4465 

(1): This category is not included in the comparison with the EU. Source: US Census Bureau, 2016 

Between  2005  and  2009,  218 677  jobs  were  lost  in  wood  products  manufacturing  (NAICS  321)  and 
89 507  jobs  were  lost  in  paper  manufacturing  (NAICS  322)  according  to  Woodall  et  al.  (2011). 
Employment in the wood manufacturing sector  (NAICS321) peaked in January-March 2006 at about 
574 000 and declined to 332 000 in July 2011, after which there has been a slight recovering to about 
385 000 at the end of 2015 (US BLS, 2015a).  

Employment in the paper manufacturing sector (NAICS322) has been in decline since 2005 when the 
sector employed more than 490 000 people. There was a sharp decline in employment in the sector in 
2008-2009 after which the decline has continued but at a slower rate. At the end of 2015 employment 
in the sector was about 373 000 (Table 56) (US BLS, 2015b). 

187 

 
 
 
 
 
 
 
Table 58 Woodworking sector – Number of companies by employment size 2007-2012  

Number of companies 

2007 

2008 

2009 

2010 

2011 

2012 

micro (1-9 employees) 

12,153 

12,060 

11,681 

11,395 

11,108 

10,814 

extra small (10-19 employees) 

3,234 

3,217 

2,946 

2,893 

2,783 

2,795 

small (20-99 employees) 

3,587 

3,491 

2,873 

2,823 

2,700 

2,692 

medium (100-499 employees) 

882 

large (500+ employees) 

409 

834 

398 

687 

329 

677 

325 

652 

314 

647 

314 

Total 

20,265 

20,000 

18,516 

18,113 

17,557 

17,262 

Source: Euromonitor International 2012 

6.4.1.3  Production, trade and consumption 

In 2014, the United States was the world’s largest consumer of industrial roundwood, accounting for 
19%  (343.8  million  m3)  of  the  global  consumption,  and  25%  (45.4  million  tonnes)  of  pulp  for  paper 
consumption.  It  was  also  the  second  largest  consumer  of  sawnwood  (21%;  90.1  million  m3),),  wood-
based  panels  (11%;  41.4  million  m3),  recovered  paper  (13%;  28.1  million  tonnes),  and  paper  and 
paperboard  (18%;  71.1  million).  102  In  addition  to  this,  the  United  States  is  also  the  world’s  largest 
producer of industrial roundwood (19%; 356.8 million m3), sawnwood (17%; 74.8 million m3) and pulp 
for paper (26%; 45.4 million tonnes) and the second largest producer of wood-based panels (9%; 34.0 
million m3), recovered paper (21%; 46.4 million tonnes) and paper and paperboard (18%; 73.1 million 
tonnes).   

In 1961 the total production of industrial roundwood in the United States was 248 million m3. There 
was a long-term  increase to 1989, after  which production was relatively stable (at above 400  million 
m3) until 2005. There was a sharp decline in production from 2005 to 2009 (to slightly more than 300 
million m3). This pattern since 1989 has followed the trends in the US housing market (UNECE/FAO, 
2012). Since 2009 there  has been an  increase, and in 2011 total production of  industrial roundwood 
was 335 million m3. There has been also been a long-term, structural reduction in paper consumption. 
To some extent, wood consumption may be increased in the near future – though still below historical 
peaks, due to wood pellet exports and possibly in the long term by their domestic consumption for bio-
energy. In addition to being a major player on the global arena, the United States also has one of the 
world’s 
in  terms  of 
competitiveness, the recent FAO outlook study (using revealed comparative advantage (RCA) 103 ratios) 
suggests that the United States will increasingly become a net importer (UNECE/FAO, 2012).  

largest  bilateral  trade  flows  (with  Canada) 

in  forest  products.  Also, 

Table  59,  based  on  FAOSTAT  data,  gives  an  overview  of  the  production  and  trade  for  sawmilling, 
wood-based panels, furniture sectors as well as for wood pulp, paper and paperboard. 

102 Apparent consumption is the production (or removals) plus imports minus exports. 

103  RCA  index  is  the  ratio  of  a  country’s  (region’s)  value  of  net  exports  to  the  value  of  a  country’s  (region’s)  total  domestic 
production at local prices (UNECE NAFSOS, 2011) 

188 

 
 
 
 
 
 
                                                             
Table 59 Overview of the USA F-BI production and trade in 2014 

   Sawnwood:  In  2014,  the  United  States  produced  74.8  million  m3of  sawnwood.  Imports  of 
sawnwood  were  worth  $US  5.7  billion  (22.2  million  m3)  and  exports  $US  3.5  billion  (6.9 
million m3) (FAOSTAT, 2015). 

   Wood-based  panels:  In  2014,  the  United  States  produced  34  million  m3  of  wood-based 
panels; imports were worth $US 5.2 billion (9.6 million m3) and exports were worth $US 1.2 
billion (2.3 million m3) (FAOSTAT, 2015). 

   Furniture:  US  imports  of  furniture  were  worth  $55.8  billion  and  exports  were  worth 

$US11.8 billion, in 2014. 

   Wood  pulp:  the  United  States  produced  about  47.8  million  tonnes  of  wood  pulp  in  2014; 
imports were worth $US 3.6  billion (5.8  million tonnes), and exports were  worth $US 5.8 
billion (7.9 million tonnes) (FAOSTAT, 2015).  

   Paper: the United States produced about 73.1 million tonnes of  paper  in  2014; its imports 
were worth $US 9.7 billion (10 million tonnes) and exports were worth $US 10.1 billion (12.1 
million tonnes)  (FAOSTAT, 2015).Printing:  In  2014,  US imports of  printed materials were 
worth $US 4.4 billion and exports were worth $5.2 billion. 

Source:  production  and  trade  for  wood  and  pulp,  paper  and  paperboard  products  –  FAOSTAT  2015;  trade  for 
furniture and printing – ITC 2015. 

Figure 77 to Figure 84 present the evolution of the production quantity, and trade (value and quantity) 
of wood and pulp, paper and paperboard products for the United States for the period 2005-2014 

189 

 
 
 
Figure 77 Production of wood products – United States 

Figure  78  Production  of  pulp,  paper  and  paperboard  
products – United States 

3
m
n
o
i
l
l
i

M

450

400

350

300

250

200

150

100

50

0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Industrial Roundwood - Production - m3
Sawnwood - Production - m3
Wood-based panels - Production - m3

s
e
n
n
o
t
n
o
i
l
l
i

M

90

80

70

60

50

40

30

20

10

0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Wood Pulp - Production - tonnes

Source: FAOSTAT, 2015 

Source: FAOSTAT, 2015 

Figure 79 Imports of wood and paper products – United 
States  [currency  in  US$  as  international  reporting 
standard] 

Figure 80 Import quantity of wood products  – United 
States 

$
S
U
n
o
i
l
l
i

B

14

12

10

8

6

4

2

0

3
m
n
o
i
l
l
i

M

50

45

40

35

30

25

20

15

10

5

0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Industrial Roundwood - Import Value
Wood Pulp - Import Value
Paper and paperboard - Import Value
Sawnwood - Import Value
Wood-based panels - Import Value

Industrial roundwood

Sawnwood

Wood-based panels

Source: FAOSTAT, 2015 

Source: FAOSTAT, 2015 

190 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Figure  81  Import  quantity  of  paper  products  –  United 
States 

Figure  82  Exports  of  wood  and  paper  products  – 
United  States  [currency  in  US$  as  international 
reporting standard] 

s
e
n
n
o
t
n
o
i
l
l
i

M

18

16

14

12

10

8

6

4

2

0

$
S
U
n
o
i
l
l
i

B

12

10

8

6

4

2

0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Wood Pulp

Paper and paperboard

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Industrial Roundwood - Export Value
Wood Pulp - Export Value
Paper and paperboard - Export Value
Sawnwood - Export Value
Wood-based panels - Export Value

Source: FAOSTAT, 2015 

Source: FAOSTAT, 2015 

Figure  83  Export  quantity  of  wood  products  –  United 
States 

Figure 84 Export quantity of paper products – United 
States 

3
m
n
o
i
l
l
i

M

16

14

12

10

8

6

4

2

0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Industrial roundwood

Sawnwood

Wood-based panels

s
e
n
n
o
t
n
o
i
l
l
i

M

14

12

10

8

6

4

2

0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Wood Pulp

Paper and paperboard

Source: FAOSTAT, 2015 

Source: FAOSTAT, 2015 

When  presented  with  this  larger  picture,  it  is  clear  that  the  United  States,  as  both  producer  and 
consumer of forest-based products, is a main competitor to Europe. However, principally, the interest 
in this case is that the country competes to some extent in the EU market and also for the same third-
country markets as do EU exporters (e.g., increased demand for lumber in China), not necessarily as 
competitors on their own respective markets.  

The  US  forest  sector  has  experienced  a  major  downturn  in  the  last  decade  with  production  and 
consumption  of  roundwood,  sawnwood,  wood-based  panels,  wood  pulp,  paper  and  paperboard  and 
paperboard  all  experiencing  a  decline  in  the  period  2005-2014.  This  was  due  to  long-term  trends 
compounded  by  the  impact  of  the  sub-prime  mortgage  crisis  from  2008,  which  drastically  reduced 
sawnwood and panels consumption in the short term. The ensuing financial and economic crises keep 
housebuilding low and caused a temporary low point in the long-term decline of paper consumption. 
The sector had lagged behind growth in other sectors before the crises. Globalisation of manufacturing 
and  increasing  use  of  electronic  media  have  contributed  to  the  decline  in  the  US  pulp,  paper  and 
paperboard  production,  and  the  collapse  of  the  construction  industry  after  2007  and  off-shoring  of 
furniture production have contributed to the decline in US wood-products production (Woodall et al., 

191 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2011). Increased use of on-line shopping has however boosted consumption of some paper packaging 
grades. The housing and construction industry has shown a recovery since 2011 and there are signs of 
partial recovery and stabilisation  for the forest  products sector, albeit at lower levels than  before the 
crises. (Howard and McKeever, 2015).   

The  North  American  Forest  Sector  Outlook  Study  (UNECE/FAO,  2012)  projected  that  sawnwood 
production  will  continue  its  recent  upward  growth  trend  in  the  United  States,  for  example  in 
innovative  construction  products,  such  as  glued-laminated  (glu-lam)  beams  and  cross-laminated 
timber  (CLT).  In  wood-based  panels,  rates  of  production  were  projected  to  continue  gently  rising, 
reflecting  continuing  demand  for  products  (for  example,  structural  wood  panels  in  other  engineered 
wood products (EWP) such as I-beams) that can partially substitute for solid lumber in some building 
applications like flooring and ceilings, especially in the United States. 

The  pulp,  paper  and  paperboard  sector  faces  rapid  changes:  new  production  capacity  outside  the 
United  States  and  Canada,  rapidly  rising  consumption  in  Asia,  declining  uses  of  newsprint  and 
printing  and  writing  paper  in  communications,  and  continued  growth  in  the  use  of  recycled  fibre  in 
manufacture  (UNECE/FAO,  2012).  The  net  effect  of  these  changes  is  to  keep  the  US  wood  pulp 
production from recovering much from the recently low levels (UNECE/FAO, 2012). 

6.4.2  Production cost structures of the selected F-BI sub-sectors 

6.4.2.1  Production cost structure in the woodworking sub-sector 

In 2012, raw materials (7%) plus intermediate wood and wood products (28.3%) accounted for 35.3% 
of  total  costs  (the  least  of  the  three  countries  selected  for  the  international  comparison)  (Table  60). 
Labour costs accounted for 22% of total costs, which was the highest of the three countries selected for 
the international comparison. Labour costs have remained relatively stable increasing from $US 23.95 
per hour in 2008 to $US 25.1 per hour in 2013 (The Conference Board, 2014), despite the number of 
people  employed  falling  by  about  34%  in  this  period  (Euromonitor  International,  2012).  Transport 
costs, energy costs, and other costs (taxes, financial services, consultancy) accounted for 4.1%, 10.2% 
and 11.8% of total costs, respectively. 

During  the  period  2008-2012,  manufacturers  have  cut  expenses  significantly  in  all  cost  categories 
except for refined petroleum products (Euromonitor International, 2012). 

192 

 
 
 
 
 
 
 
 
 
 
 
 
Table  60  Cost  structure  for  the  woodworking  sub-sector  in  the  United  States  in  2012  (see  Table  42  for  an 
explanation of the categories) 

Main cost category 

Cost sub-category 

Cost items 

$US 
million 

€ 
million104 

% 

Raw material 

Forestry (wood mainly) 

5441 

4235 

Other 

355 

276 

Raw materials and 
processed materials 

Intermediate materials 

Capital costs 

Wood and wood 
products 

23502 

18292 

Plastics 

1248 

971 

Plastic in primary forms 
and synthetic rubber 

816 

635 

Other intermediate 

7001 

5449 

Tools and general 
hardware 

551 

429 

Other durable goods 

3247 

2527 

Clothing 

248 

Other non-durable goods 

428 

193 

333 

7.0% 

39.2% 

4.6% 

0.8% 

Labour 

18279 

14227 

22.0% 

Transport and logistics 

Energy 

Road, passenger and 
freight transport 

Other transport and 
communication 

Refined petroleum 
products 

2123 

1652 

1551 

1207 

5523 

4299 

Other (including utilities 
and recycling) 

2913 

2267 

Business and 
management 
consultancies 

1599 

1245 

Other costs 

Services (part of OPEX) 

Monetary intermediation 

1136 

884 

Other 

6897 

5368 

4.4% 

10.2% 

11.6% 

Source: Euromonitor International (Reference and publication year: 2012) 

 Taxes less subsidies 

 Taxes less subsidies 

188 

146 

0.2% 

The following figure allows to compare cost structures from US and EU, in relative terms: 

104 $US to € currency conversion based on the European Central Bank reference exchange rate for 2012. 

193 

 
 
 
 
  
 
 
 
 
                                                             
Figure 85 Cost structures for the woodworking sub-sector US and EU in relative terms, as % of production costs, 
2005 

Source: Eurmonitor International 2012 for US and ToSIA data, 2005 for EU. 

6.4.2.2  Comparison of the EU and US production cost structures in the pulp, paper and 

paperboard sub-sector 

As  can  be  seen  from  Figure  86  and  Figure  87  below,  the  manufacturing  costs  for  the  production  of 
pulp are similar, but slightly higher in Europe than in the US, the production costs for the making of 
paper  and  paperboard  are  notably  higher  in  Europe  than  in  the  US  (a  positive  difference  of  85 
EUR/Tonne).  

A more detailed look at Figure 86, displaying the cost structure for the manufacture of pulp, suggests 
that the most marked difference between Europe and the US are higher raw material costs for wood. 
This  statistic  is  only  partially  counterbalanced  by  lower  European  costs  for  another  raw  material, 
recovered paper, and labour.  

Conversely to the picture for pulp-making, wood costs for paper and paperboard making are higher in 
the US than in Europe, however, higher costs for recovered paper, market pulp and chemicals makes 
up  for  higher  total  costs  for  papermaking  in  Europe  than  in  the  US.  Focusing  on  the  production  of 
paper, also energy components (electricity and fuels) are cheaper in the US than in Europe: electricity 
costs in Europe were always higher than in the US in the period 2005-2013. However, since 2009, the 
prices started to progressively converge, to invert the trend between 2013 and 2014, and set higher in 
the US for the last available year (2014), Europe at 276 EUR/Tonne, and the US at 316 EUR/Tonne. In 
the period 2008-2014, on the other hand, prices for fuels were steadily higher in Europe than in the 
US.  

194 

0%10%20%30%40%50%60%70%80%90%100%USEURaw materialsEnergyLabourOther costs 
 
Figure 86 Manufacture of pulp, Europe vs. US, EUR/tonne, 2014 

Source: Authors’ elaboration based on RISI data 

195 

0100200300400500EUUSWoodRecovered PaperMarket PulpChemicalsFuelsElectricityLabourMaintenanceCapital CostOther costsRaw materialsEnergyOther costsRaw materialsEnergy 
 
 
Figure 87 Manufacture of paper and paperboard, Europe vs. US, EUR/tonne, 2014 

Source: Authors’ elaboration based on RISI data 

The view of the cost structure by cost category and products indicates that Europe bears a consistently 
higher  cost  for  energy  (differences  in  the  ranges  of  5  to  38  EUR/tonne),  for  all  products  except 
newsprint  paper  (34  EUR/tonne  cheaper  in  Europe)  and  market  pulp  (8  EUR/tonne  cheaper).  In 
terms of labour, capital and maintenance costs, manufacturing costs in Europe are always lower than 
in the US (differences in the order of 1 to 37 EUR/tonne).  

196 

118530100200300400500600EUUSWoodRecovered PaperMarket PulpChemicalsFuelsElectricityLabourMaintenanceCapital CostRaw materialEnergyOther costsRaw materialsOther costsEnergy 
 
 
Figure  88  Cost  structure  of  inputs  to  pulp,  paper  and  paperboard  sector  by  product,  Europe  versus  the  US, 
average EUR/tonne, 2014 

Source: Authors’ elaboration based on RISI data 

6.4.3  Policy framework 

6.4.3.1  Forest-related and environmental policy 

Much US forest policy is regulated by a series of forest and environmental laws  that, to a significant 
degree,  originate  from  the  era  of  rising  environmentalism  (and  a  related  intend  to  either 
institutionalise  or  control  this  new  movement)  in  the  1970s.  The  Endangered  Species  Act  (1973) 

197 

0100200300400500600700800900EUUSEUUSEUUSEUUSEUUSEUUSEUUSEUUSEUUSEUUSNewsprintUncoated MechanicalCoated MechanicalUncoated WoodfreeCoated WoodfreeTissueWrapping PapersCartonboardContainerboardMarket PulpRaw materialsEnergyLabourOther costs 
 
 
 
requires protection of endangered species and habitats. The National Forest Management Act (1976) 
also requires that National Forests (protected and managed federal forest land) are managed in a way 
that gives due consideration to forest ecosystem services other than wood production. It is important 
to  note  that  besides  federal  laws,  also  states  issue  their  own  legislation,  which  may  have  more 
significance for forest management and forest industries. 

An important series of environmental acts and amendments for the United States is the Clean Air Act. 
The  CAA  of  1970  initiated  four  important  regulatory  programmes:  the  National  Ambient  Air  Quality 
Standards  (NAAQS);  State  Implementation  Plans  (SIPS;  state  plans  to  comply  with  the  CAA);  New 
Source  Performance  Standards  (NSPS);  and  National  Emission  Standards  for  Hazardous  Air 
Pollutants  (NESHAPs).  The  NAAQS  establish  standards  designed  to  protect  human  health  for  major 
air pollutants. NESHAPS are emissions standards for air pollutants not covered by NAAQS. In 1990, 
the  CAA  was  extended  to  cover  a  much  wider  range  of  pollutants.  Pollution  and  disposal  of  waste  is 
also  regulated  by  other  legislation:  the  Clean  Water  Act  (1972)  covers  pollution  control  in  streams, 
rivers,  lakes  and  oceans;  and  the  Safe  Drinking  Water  Act  (1974),  the  Resource  Conservation  and 
Recovery  Act  (1976)  and  the  Comprehensive  Environmental  Response,  Compensation,  and  Liability 
Act  (Superfund  -  1980)  cover  contamination  of  groundwater.  Broadly  these  acts  match  with 
requirements from EU legislation that EU-based forest industries have to comply with (see section 4.4 
in  this  report:  “Package  3:  Environment  legislation”),  with  stringent  requirements  on  air,  water,  soil 
and  groundwater  pollution,  waste  management,  resource  use,  resource  protection  and  management 
restrictions.  Costs  implied  by  these  legislations  could  not  be  comprehensively  quantified,  however 
compliance costs are highly significant. 

Table 61 presents a summary of forest-related and environmental policies for the United States, with 
their likely cost impact. 

Table 61 - Summary table of forest-related and environmental policies for the United States 
Policy area 
Environment 

Date 
1973 

Policy name 
Endangered 
Species Act  
Clean Air Act 

1970 -  

Cost area 
Cost/Availability of 
raw material  
Capital and 
Operational costs 

Notes 
protection of endangered species 
and habitats 
The CAA of 1970 initiated four 
important regulatory programmes: 
the National Ambient Air Quality 
Standards (NAAQS); State 
Implementation Plans (SIPS ); 
New Source Performance 
Standards (NSPS); and National 
Emission Standards for Hazardous 
Air Pollutants (NESHAPs) 
Affecting disposal of waste 
products 
Affecting disposal of waste 
products 
Affecting disposal of waste 
products 

Capital and 
Operational costs 
Capital and 
Operational costs 
Capital and 
Operational costs 

Affecting disposal of waste 
products 

Capital and 
Operational costs 

NFMA requires that publicly 
owned (federal and state) forests  
are managed in a way that gives 
due consideration to forest 
ecosystem services other than 
wood production 

Cost/Availability of 
raw material 

Cost implication 
↗ 

↗ 

↗ 

↗ 

↗ 

↗ 

↗ 

Clean Water Act  

1972 

Safe Drinking 
Water Act 
Resource 
Conservation 
and Recovery 
Act 
Comprehensive 
Environmental 
Response, 
Compensation, 
and Liability Act 
Forest-related  National Forest 

1974 

1976 

1980 

1976 

Management 
Act  

Legend: ↗ : cost increase ; ↘ : cost decrease ; → : no significant cost implication ; ? : cost impact uncertain 

198 

 
 
 
6.4.3.2  Third party certification  

Third-party  certification  of  sustainable  forest  management  is  conducted  by  FSC,  the  American  Tree 
Farm  System  (ATFS)  and  the  Sustainable  Forestry  initiative  (SFI).  ATFS  (aimed  at  small  woodland 
owners) and SFI are schemes endorsed by PEFC. The latest figures from FSC state that there are 2906 
Chain  of  Custody  certificates  and  a  certified  forest  area  of  13.8  million  ha  (116  certificates)  (FSC 
International,  2016).  The  latest  figures  from  PEFC  state  that  there  are  260  Chain  of  Custody 
certificates and a certified forest area of 33.1 million ha (8.5 million ha through ATFS, and 24.6 million 
ha  through  SFI)  (PEFC,  2015).  FSC  and  PEFC  have  globally  updated  their  standards  to  address  due 
diligence requirements of legislation such as EUTR, Lacey Act. In a study by Moore et al. (2012) forest 
managers  indicated  that  they  believed  that  the  benefits  of  forest  certification  were  greater  than  the 
disadvantages.  Third  party  certification  while  not  directly  required  by  legislation  as  such,  it  can  de 
facto be a requirement in public procurement policy, even though equivalent means are acceptable. 

6.4.3.3  Climate policy 

The  implications  of  climate  policy  on  the  US  forest-based  sector  (and  the  sectors  role  in  mitigating 
climate  change)  remain  subject  to  controversial  debates.  The  Forest  Policy  Forum,  an  industry 
initiative  comprising  US-based  forest  industry  and  trade  groups,  developed  (with  the  counsel  of 
conservation organisations) a set of principles for ensuring that the forest sector – from landowners to 
manufacturers  –  can  contribute  meaningfully  to  mitigating  climate  change  (and  is  perceived  and 
incentivised in this way). The principles focus on the positive carbon contributions of managed forests 
to GHG saving; the steps the sector can take to maintain and grow productive and managed forests in 
the United States to sustain forest carbon; understanding public  policy and market mechanisms and 
their  effects  on  forests;  and  supporting  innovation  in  the  forest  products  sector  that  provides  long-
term benefits in addressing the carbon challenge (Forest Policy Forum, 2015 in UNECE/FAO, 2015). 
Yet, environmental science and groups rather emphasise the climate change mitigation contribution of 
unmanaged forest lands with high carbon stocks (Winkel, 2014).  

The  Clean  Power  Plan  (CPP)  is  a  policy  aiming  to  reduce  carbon  pollution  from  power  plants  in  the 
United States. It was first proposed by the Environmental Protection Agency  (EPA) in 2014. The CPP 
requires  states  to  meet  certain  standards  concerning  carbon  emissions;  states  are  free  to  plan  to 
achieve these standards by various means. 

Table 62 presents a summary of climate and energy policies for the United States, with their likely cost 
impact. 

Table 62 - Summary table of climate and energy policies for the United States 
Policy area 
Climate and 
Energy 

Policy name 
Clean Power 
Plan 

Date 
2015 

Notes 
Cut harmful pollution from the 
power sector by 32% below 2005 
levels and smog-and soot-forming 
emissions that threaten public 
health by 20%. States are free to 
reduce emissions by various means 
and must present their plans to do 
so to the Environmental Protection 
Agency by September 2016 (with 
possible extension to September 
2018). If they do not do so, the 
EPA will impose a plan for the 
state. 

Cost area 
Energy costs 

Cost implication 
Energy costs ↗ 
Potential for F-BI 
industries to make 
money from 
production of 
renewable energy ? 

Legend: ↗ : cost increase ; ↘ : cost decrease ; → : no significant cost implication ; ? : cost impact uncertain 

6.4.3.4  Energy policy 

There have been and continue to be a number of subsidies, both at federal and state levels, that target 
the  development  of  alternative  fuels.  US  pulp,  paper  and  paperboard  companies  had  benefited  from 

199 

 
 
 
 
payments  through  the  Alternative  Fuel  Mixtures  Tax  Credit  (AFMTC),  to  the  tune  of  around  $US 8 
billion by the end of 2009. US companies were eligible for the Cellulosic Biofuel Producer Credit until 
the  end  of  2012.  This  credit  was  extended  for  one  year  and  effectively  companies  can  carry  forward 
unused  credits  from  previous  years  through  to  2016.  The  value  of  such  unclaimed  credits  has  been 
estimated by the Congressional Budget Office to be in the range of $US1.5-2.3 billion (CEPI, 2016). 

6.4.3.5  Trade policy and business environment 

The Lacey Act (1900) is a US law that bans the import into the United States of illegally traded wildlife. 
It  was  amended  in  2008  through  the  Legal  Timber  Protection  Act.  This  was  a  milestone  in  global 
forest (and forest product trade policy), aiming to close-off the US market for forest products of illegal 
origin (Leipold and Winkel, 2016).  

The Trans-Pacific Partnership (TPP) is a trade agreement between 12 Pacific Rim countries (including 
the United States) – some of which already had bilateral trade agreements with the United States. The 
full  text  of  the  TPP  was  released  on  26  January  2016,  and  signed  by  country  representatives  on  4 
February  2016.  The  agreement  would  reduce  18 000  tariffs.  Tariffs  on  all  US  manufactured  goods 
would be eliminated. China is not a signatory although it  has expressed interest in TPP and is paying 
attention  to  its  development  (New  Zealand  Foreign  Affairs  &  Trade,  2016;  USTR,  2016a).  All 
signatories  of  the  North  American  Free  Trade  Agreement  (NAFTA)  (Canada,  Mexico  and  the  United 
States) are also signatories to the TPP.  

The  Transatlantic  Trade  and  Investment  Partnership  (TTIP)  is  a  proposed  trade  and  investment 
agreement under negotiation between the United States and the EU, with the aim of liberalising trade 
and promoting economic growth (European Commission, 2016; USTR, 2016b).  

As  part  of  efforts  to  increase  the  participation  of  SMEs  in  the  negotiations  for  TTIP,  the  US  Trade 
Representative requested that the International Trade Commission of the US (USITC) catalogue trade 
barriers  perceived  by  US  SMEs  as  disproportionately  affecting  their  exports  to  the  EU.  USITC 
conducted  a  survey  of  small-  and  medium-sized  enterprises  (active  companies  with  up  to  500 
employees  that  were  not  subsidiaries  of  larger  companies)  in  2013.  Table  63  presents  a  summary  of 
the  general  issues  highlighted  by  US  SMEs  concerning  trade  with  the  EU.  It  is  underlined  that  this 
quite comprehensive list identifies most of the main types of impediments to trade without necessarily 
ascribing  blame  as  to  an  intentional  trade  barrier  to  one  or  other  trade  partner.  For  example,  a 
difference in legislation and/or standards between the USA and the EU is neither partner’s fault but 
may impede trade for an SME. 

200 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table 63 Cross-cutting issues raised by US SMEs concerning trade with the EU  

Subject area 

Trade issue 

Specific challenges reported by US SMEs and others 

Standards and 
regulation 

Standards and technical 
regulations 

Different regulatory approaches in the United States and the EU; US SMEs’ 
lack of participation in development of EU standards; compliance with 
standards costly and time-intensive for US SMEs 

Conformity assessment 
procedures 

Lack of national treatment of US certification bodies; high cost of 
procedures, including testing for Conformité Européenne (CE) marking 

IP rights issues  Trade secrets 

Inadequate protection of US SMEs’ trade secrets, particularly in the 
regulatory and marketing approval process 

Patent protection 

High cost of obtaining patent protection in each member state; member 
states’ divergent standards 

Logistical 
issues 

Harmonized System (HS) 
classification 

Challenges in determining correct classification for exports, given that HS 
codes vary between the US and the EU, and for certain products HS codes 
vary among EU members; reclassifications result in higher duties and taxes; 
and incorrect classifications may lead to customs delays 

EU’s value-added tax 
(VAT) 

Complexity of VAT and difficulties with providing criteria (documentation 
and residency) for receiving credits, rendering compliance difficult 

Shipping/distributing 
products in the EU 

Unreliable international deliveries by some domestic postal services in the 
EU; challenges in distributing products; added costs of working with private 
couriers and distributors complexity of VAT and difficulties with providing 
criteria (documentation and residency) for receiving credits, rendering 
compliance difficult 

Finance-
related issues 

Payment terms 

Longer typical payment terms in the EU versus the US; added costs from 
financing receivables for longer periods 

Protection against non-
payment by customers 

Higher sales costs due to need to protect against nonpayment (e.g., through 
export credit insurance) 

Payment transaction fees 

Higher transaction costs for payments from the EU to the US than for 
domestic payments because of higher bank fees (for currency conversion and 
wire transfers) 

Regulatory and legal 
framework 

Various differences in regulatory and legal framework between the EU and 
the US pose obstacles to exporting 

Source:  USITC,  2014  and  compilation  from  roundtable  transcripts,  hearing  transcripts,  written  submissions,  and  e-mail 
responses 

The  United  States  and  Canada  have  been  involved  in  a  long-running  trade  dispute  concerning 
softwood  lumber.  In  the  1980s  US  producers  complained  that  the  Canadian  federal  and  provincial 
governments  had  subsidised  sales  to  lumber  producers  and  this  was  anti-competitive,  and  that  this 
placed US producers at an unfair disadvantage. The United States threatened to impose a 15% import 
tariff on all softwood lumber imported from Canada. The issue has gone back and forth with a number 
of  rulings  in  NAFTA  and  the  WTO.  An  agreement  (the  Softwood  Lumber  Agreement  -  SLA)  was 
reached in 2006 under which the United States agreed to lift anti-dumping duties provided that prices 
stayed within a certain range. If prices dropped then export tariffs and quotas could be imposed, and 
compensation for duties that had been collected by the United States were paid back to Canada. The 
agreement expired in 2015 with no new agreement being reached, and Canada wanting the conditions 
to  be  continued  and  the  United  States  wanting  the  conditions  to  be  renegotiated  (US  Lumber 
Coalition).  The  SLA  allows  up  to  two  years  for  the  United  States  and  Canada  to  negotiate  a  revised 
agreement.  In  2014  and  the  first  quarter  of  2015,  the  effective  export  tax  on  western  Canadian 
shipments to the United States was zero. An export tax of 5% was imposed in April and May 2015 for 
the first time since October 2013 (UNECE/FAO,  2015). Negotiations are ongoing in May-June 2016; 
current commentaries indicate that little progress has been made and that the issue is likely to return 
to  the  courts  (Ljunggren,  2016).  The  softwood  lumber  dispute  with  Canada  was  mentioned  by  one 

201 

 
 
 
 
 
 
 
 
 
 
company as having had a negative effect on business (of importing wood from Canada). In general, the 
regulatory burden has been increasing over the last decade and this trend is expected to continue. 

The Global Enabling Trade Report assesses countries with regard to the Enabling Trade Index (ETI). 
ETI  captures  various  dimensions  of  enabling  trade:  market  access;  border  administration; 
infrastructure; and operating environment. With regard to market access the US was ranked 27th out 
of  138  countries  in  terms  of  the  barriers  to  the  domestic  market  (an  assessment  of  the  level  and 
complexity  of  a  country’s  tariff  protection  as  a  result  of  its  trade  policy)  –  meaning  that  the  US  was 
assessed  as  presenting  relatively  few  barriers  to  imports  into  the  United  States.  Vice-versa  it  was 
ranked 128th out of 138 countries in terms of foreign market access (an assessment of the barriers its 
exporters  faced)  –  meaning  that  US  exporters  were  considered  to  be  facing  considerable  barriers 
(WEF, 2014a).  

The  average  duty  on  imports  from  countries  with  most-favoured-nation  (MFN)  status  imposed  on 
imports  is  1.3%  (range  0-10.7%)  on  wood  products  (HS44).  Import  duties  are  not  imposed  on  pulp 
products  (HS47)  and  paper  (HS48)  (WTO,  2016).  Wood,  pulp,  paper  and  paperboard  products 
accounted for 3.5% of imports in 2015. 

The United States has  imposed anti-dumping duties  on a number of  wood products and  pulp,  paper 
and  paperboard  products.  These  include  certain  types  of  coated  and  uncoated  paper  from  China, 
Indonesia,  Brazil,  Portugal  and  Germany,  and  wooden  flooring  and  wooden  furniture  from  China 
(USITC, 2014a).  

Table 64 presents a summary of trade policies for the United States, with their likely cost impact. 

Table 64 - Summary table of trade  policies for the United States 

Policy area  Policy name 

Date 

Notes 

Trade 

Trans-Pacific 
Partnership 
(TPP) 

2016 

Not yet in 
force 

Transatlantic 
Trade and 
Investment 
Partnership 
(TTIP) 

TPP is a trade agreement between 
12 Pacific Rim countries (including 
the United States) – some of which 
already had bilateral trade 
agreements with the United States 
TTIP is a proposed trade and 
investment agreement under 
negotiation between the United 
States and the EU, with the aim of 
liberalizing liberalising trade and 
promoting economic growth 

Cost area 

Reduced tariffs on 
raw materials and 
products 

Cost 
implication 
↘? 

Reduced tariffs on 
raw materials and 
products 

↘? 

Legend: ↗ : cost increase ; ↘ : cost decrease ; → : no significant cost implication ; ? : cost impact uncertain 

6.4.3.6  Analysis of the likely cost impacts of national and EU legislation 

Business challenges relate mostly to general economic trends, lumber price fluctuation, availability of 
qualified labour, and increasing regulatory burden (see also section 6.6.5). 

Environmental,  employment,  safety,  taxation  and  trade  legislation  were  specifically  mentioned  by  a 
company  contact.  The  respondent  mentioned  they  would  not  be  able  to  indicate compliance  costs  of 
specific  legislative  acts.  One  expert  mentioned  that  Health  and  Safety  regulations,  Labour  rights 
legislation, and insurance costs are expected to result in increased labour costs. Full compliance with 
International  Labour  Organization  (ILO)  standards  is  also  becoming  a  factor  as  a  result  of 
procurement demands for FSC and PEFC certification. The latter is not a legal requirement as such but 
rather part of corporate social responsibility. 

One  company  reported  that  the  changes  to  medical  insurance  have  been  a  significant  addition  to 
labour  costs  recently.  Occupational  safety  and  health  is  taken  very  seriously,  but  the  administrative 
burden  is  significant.  An  expert  indicated  also  that  labour  safety  compliance  and  labour  health  care 
compliance  place  a  significant  cost  burden  on  firms.  The  Patient  Protection  and  Affordable  Care  Act 

202 

 
 
 
 
(PPACA,  ‘Obamacare’)  was  signed  into  law  in  2010,  and  aims  to  increase  the  availability  and 
affordability of health insurance (i.e. to the public at large and not for the F-BI specifically). Businesses 
employing  100  or  more  full-time  equivalent  employees  had  to  provide  insurance  for  at  least  70%  of 
their full-time workers by 2015, and 95% by 2016. Insurance premiums have increased but the long-
term effects remain to be seen.  

Forest-related and environmental policy 

The  effect  of  the  Endangered  Species  Act  (ESA;  1973)  and  of  the  National  Forest  Management  Act 
(1976) on the production of wood has been the subject of a number of studies. Sun and Ning (2014) 
and Wear and Murray (2004) looked at the effect of the wood harvesting restrictions placed on federal 
forests  different  regions  of  the  United  States:  the  West  (including  the  Pacific  Northwest,  the  Pacific 
Southwest  and  the  Rocky  Mountain  states);  the  South  (12  states  in  the  south-eastern  United  States 
from Texas to Virginia); and the North. The western United States region used to dominate supply of 
softwood  (supplying  about  60%  of  the  softwood  used  in  the  United  States),  but  since  the  late  1980s 
production  in  the  region  dropped,  and  the  West  the  South  and  Canada  have  contributed  roughly 
equally to the softwood consumption in the United States since the early 1990s (Sun and Ning, 2014). 

In relation to ESA an expert consultant mentioned that “new endangered species seem to be added to 
the list every week, with resulting land management restrictions: the most recent was the listing of the 
Northern  Long-eared  Bat  which  has  a  37  state  range.  The  original  proposal  would  have  eliminated 
wood harvesting throughout the bat's range. The forest-based sector was able to preclude that proposal 
from  becoming  final,  however  the  Endangered  Species  Act  is  an  ongoing  concern”.  ESA  requires 
protection of endangered species and habitats and restricts commercial operations on affected land. 

An  expert  consultant,  representing  clients  in  both  the  wood  products  manufacturing  and  the  pulp, 
paper  and  paperboard  sectors  in  the  United  States,  indicated  that  compliance  with  environmental 
regulations  is  a  considerable  cost  driver  and  that  overregulation  has  a  very  negative  impact  on  cost 
competitiveness.  “New  requirements  for  biomass  boilers  threatened  to  impose  $US 8  billion  in 
additional  costs  on  the  pulp,  paper  and  paperboard  sector  a  couple  of  years  ago.  We  were  able  to 
modify the rulemaking to trim those costs, but that was a major concern. Currently, biomass and the 
carbon impacts of biomass energy are a very big issue.”   

The  American  Forest  and  Paper  Association  (AFANDPA)  highlighted  that  the  paper  and  wood 
products manufacturing industry has met many costly regulatory challenges over the years, spending 
billions  of  dollars  as  part  of  its  environmental  stewardship.  Those  investments  have  led  to  major 
improvements in air quality, including a 23% reduction in emissions of nitrogen oxide (NOx) and 42% 
for sulphur dioxide (SO2)  by the association’s  pulp, paper and paperboard  facilities since  2000. The 
industry faces challenges from new and existing regulations  – driven by lawsuits under the Clean Air 
Act — that together could impose more than $US 10 billion in new capital obligations on the industry 
over  the  next  10  years.  The  2013  National  Ambient  Air  Quality  Standard  for  particulate  matter  and 
other NAAQS threaten to create permitting gridlock.” 

From 1973 to 1994 and then from 1999 to 2005 the United States carried out a survey of the Pollution 
Abatement Costs and Expenditures (PACE). The survey provided information on US industries’ capital 
expenditure  and  operating  costs  associated  with  pollution  abatement  efforts.  The  PACE  survey  was 
discontinued  in  2008  (for  the  year  2005).  The  survey  for  2005  covered  approximately  20 000 
manufacturing businesses with 20 or more employees (US Census Bureau, 2008). The survey aimed to 
answer questions such as: What has been the economic cost of the Clean Air Act (CAA)? and What has 
been the impact of the Act on productivity growth or international trade? (Ross et al., 2004).  

The  wood  product  manufacturing  sector  (NAICS  321)  and  the  paper  manufacturing  sector  (NAICS 
322)  had  total  abatement  capital  expenditures  of  $US 142.2  million  and  $US 573.3  million, 
respectively  (Table  65).  The  industries  with  the  highest  capital  expenditure  abatement  costs  in  2005 
were petroleum and coal products manufacturing (NAICS 324), with costs of $US 1743.0 million, and 
Chemical manufacturing (NAICS 325), with costs of $US 1271.6 million. For comparison, in 2006 the 
turnover of the petroleum and coal products manufacturing (NAICS 324) and Chemical manufacturing 

203 

 
 
(NAICS 325) were $US546.8 billion and $US657.1  billion, respectively (US  Census Bureau,  2016) 105. 
With  regard  to  operating  expenditures  in  2005,  the  wood  product  manufacturing  sector  and  the 
paper  manufacturing  sector  had  total  abatement  costs  of  $US  388.2  million  and  $1796.2  million, 
respectively  (Table  66).  The  industries  with  the  highest  operating  costs  in  2005  were  Chemical 
manufacturing,  with  $US 5217.2  million  and  Petroleum  and  coal  products  manufacturing,  with 
$US 3746.1  million.  Abatement  of  air  pollution  accounted  for  much  more  of  the  capital  expenditure 
than the abatement of water and solid waste pollution for both the wood product manufacturing and 
paper  manufacturing  (Table  65).  Abatement  of  air  pollution  accounted  for  more  of  the  operating 
expenses  for  the  wood  product  manufacturing,  but  for  paper  manufacturing,  abatement  of  water 
pollution  accounted  for  most  of  the  operating  expenses  (Table  66).  The  operating  expenditure  costs 
were  attributed  to  various  cost  categories  (Table  67).  For  wood  product  manufacturing,  Energy 
abatement. 
accounted 

operating 

pollution 

expenses 

47.3% 

the 

for 

of 

of 

105 Figures are not readily available for 2005. 

204 

 
 
                                                             
Table 65 Pollution abatement capital expenditures – $US million (Pollution Abatement Costs and Expenditures).  
Activity 
Prevention  Recycling 

Total pollution abatement 
capital expenditure 

Total capital 
expenditure (ASM) 

Treatment 

Disposal 

Air 

water 

solid waste 

Media 

3018.1 

5597.9 

Wood product 
manufacturing  
NAICS 321 
Paper and paper 
products manufacturing 
NAICS 322 

Pulp, paper and 
paperboard mills 
(NAICS 3221) 

Pulp mills (NAICS 
32211) 
Paper mills 
(NAICS 32212) 
Paperboard mills 
(NAICS 32213) 

Converted paper 
product 
manufacturing 
(NAICS 3222) 

142.2 

573.3 

541.0 

50.9 

309.3 

180.8 

32.3 

83.0 

25.0 

23.8 

10.3 

104.2 

5.3 

32.7 

294.6 

238.3 

20.6 

19.9 

379.9 

146.0 

47.5 

274.1 

233.8 

16.0 

17.1 

359.6 

141.7 

39.7 

15.4 

135.7 

123.0 

32.7 

157.5 

43.5 

20.5 

4.5 

1.8 

7.4 

6.8 

4.6 

0.9 

8.7 

7.5 

35.2 

182.4 

14.6 

99.1 

142.0 

28.0 

1.1 

27.8 

10.8 

2.8 

20.2 

4.3 

7.7 

Source: US Census Bureau 2008, Annual Survey of Manufactures, 2008 

205 

 
 
 
 
 
 
 
 
 
 
 
Table 66 Pollution abatement operating costs - $US million (Pollution Abatement Costs and Expenditures).  

Total value of 
shipments (ASM) 

Total pollution 
abatement operating cost 

Treatment 

Activity 
Prevention  Recycling 

Disposal 

Air 

water 

solid waste 

Media 

Wood product 
manufacturing 
NAICS 321 
Paper and paper 
products manufacturing 
NAICS 322 

Pulp, paper and 
paperboard mills 
(NAICS 3221) 

Pulp mills (NAICS 
32211) 
Paper mills 
(NAICS 32212) 
Paperboard mills 
(NAICS 32213) 

Converted paper 
product 
manufacturing 
(NAICS 3222) 

112 017.5 

566.6 

310.3 

128.3 

31.3 

96.7 

388.2 

47.2 

131.2 

162 848.2 

1796.2 

1072.0 

189.4 

118.6 

416.2 

571.7 

757.9 

466.6 

1576.1 

156.5 

878.7 

540.8 

968.2 

169.3 

84.6 

354.0 

488.5 

699.9 

387.7 

108.9 

545.8 

313.5 

15.3 

79.7 

74.3 

7.4 

46.2 

31.0 

24.8 

48.1 

77.2 

31.2 

207 

267.4 

410.2 

201.2 

122.1 

173.0 

212.5 

155.3 

220.1 

103.8 

20.1 

34.0 

62.2 

83.3 

58.0 

78.9 

Source: US Census Bureau 2008, Annual Survey of Manufactures, 2008 

206 

 
 
 
 
 
 
 
 
 
 
 
Table 67 Pollution abatement operating costs by cost category –  $US million – cost category (Pollution Abatement Costs and Expenditures ) 

Pollution abatement 
operating cost 

Labour 

Energy 

Materials and supplies 

Contract work 

Depreciation 

Cost category 

$ million 

% 

$ million 

% 

$ million 

% 

$ million 

% 

$ million 

% 

Wood product 
manufacturing 
NAICS 321 
Paper and paper 
products manufacturing 
NAICS 322 

Pulp, paper and 
paperboard mills 
(NAICS 3221) 

Pulp mills (NAICS 
32211) 
Paper mills 
(NAICS 32212) 
Paperboard mills 
(NAICS 32213) 

Converted paper 
product 
manufacturing 
(NAICS 3222) 

566.6 

79.7 

14.1% 

268.2 

47.3% 

47.0 

8.3% 

77.3 

13.6% 

94.3 

16.6% 

1796.2 

289.6 

16.1% 

357.6 

19.9% 

328.4 

18.3% 

475.5 

26.5% 

345.0 

19.2% 

1576.1 

242.6 

15.4% 

293.6 

18.6% 

308.2 

19.6% 

416.4 

26.4% 

315.3 

20.0% 

156.5 

878.7 

540.8 

26.4 

16.9% 

37.1 

23.7% 

32.7 

20.9% 

26.6 

17.0% 

33.6 

21.5% 

144.7 

16.5% 

147.7 

16.8% 

180.2 

20.5% 

250.0 

28.5% 

156.1 

17.8% 

71.5 

13.2% 

108.8 

20.1% 

95.2 

17.6% 

139.7 

25.8% 

125.6 

23.2% 

220.1 

47.0 

21.4% 

64.0 

29.1% 

20.3 

9.2% 

59.2 

26.9% 

29.7 

13.5% 

Source: US Census Bureau 2008, Annual Survey of Manufactures, 2008

207 

 
 
 
 
Climate and Energy policies 

An  analysis  of  the  relation  between  energy  prices  and  exports  for  different  manufacturing  sectors  in 
the United States was carried out by Riker in 2012. In a comparison of all  three-digit NAIC industrial 
sectors, the study demonstrated that wood products industries have among the highest product price 
elasticity,  while  paper  manufacturing  and  wood  products  industries  have  among  the  highest  energy 
price  elasticities.  The  study  demonstrated  that  changes  in  energy  price  (through  markets  or  through 
energy policy) had a significant effect on export performance (Riker, 2012). 

An  expert  consultant  stated  that  energy  is  a  “divisive  political  issue”  at  the  moment.  “CO 2  is  now 
classified as a pollutant” and “the Clean Power Plan is keeping electricity and transport costs high even 
as prices of oil and natural gas fall”.  

“EU  demand  for  biomass,  i.e.  by  the  EU  pellet  market,  to  fulfil  member-state  obligations  under  the 
Renewable Energy Directive in response to climate change policy is altering forestry practices in parts 
of  the  United  States,  especially  in  the  South  East,  in  particular  replacing  some  of  the  rapidly  falling 
demand for small roundwood caused by shrinkage of the USA pulp industry”. 

Trade policy 

A consulted expert stated that “the Lacey Act generally helps US domestic producers, especially in the 
hardwood lumber and hardwood plywood industries, by decreasing competing imports from countries 
using  wood  from  illegal  production.  While  from  US  point  of  view,  the  EUTR  acts  to  increase  costs 
slightly for export to European markets.”.  

Analysis by Bridegam and Eastin (2014) showed no significant differences in post-policy US imports of 
wood  products  possibly  not  of  legalorigins.  However,  they  assumed  the  policy  may  be  affecting  the 
suspicious imports of major exporters of finished products to the United  States. A study by Lu  et al. 
(2014) revealed that Chinese companies’ awareness of the Lacey Act has played an important role in 
their decision to export to the US over the last five years. The companies who are less familiar with the 
Lacey Act tend to withdraw from the US market and focus on  their domestic market. In practice, the 
smaller Chinese companies were more likely to withdraw from the US market in the aftermath of the 
Lacey Act as compared to their larger counterparts. According to the authors, this points to a lack of 
information catered for small and medium companies, as well as a level of compliance costs that such 
companies  cannot  bear.  Finally,  the  Chinese  companies  that  have  increased  their  imports  of  raw 
materials  from  the  US  were  found  to  have  increased  their  sales  to  the  US  market  over  the  last  five 
years. (Lu et al., 2014) 

Research  indicates  that  the  supply  made  available  to  the  United  States  for  its  imports  has  declined, 
likely as a result of the Lacey Act Amendment (Jonson et al., 2015). Masiero et al. (2015) demonstrated 
that  imports  of  tropical  wood  (logs;  sawnwood;  veneers  and  plywood)  by  Australia,  the  EU,  and  the 
United States halved in the period 2001-2013, while those by emerging economies such as China and 
India initially remained stable and later increased.  

Table 68 Tropical wood product imports by selected countries 2001 and 2013  
Country 

2001 

2013 

Volume (m3) 

Value 
(1000 US$) 

Volume (m3) 

Value 
(1000 US$) 

2001-2013 % variation 

Volume 

Value 

Australia 

EU–28 

USA 

China 

India 

74 539 

5 273 893 

1 458 811 

3 496 595 

489 585 

36 432 

1 783 

631 438 

741 297 

152 420 

36 056 

- 

2 690 886 

1 088 960 

641 192 

586 832 

2 457 090 

1 033 272 

2 015 226 

925 283 

–51.6 

–49.0 

–56.0 

–29.7 

311.6 

18.1 

–38.9 

–7.1 

39.4 

507.1 

Source: Masiero et al. 2015. 

208 

 
 
The Lacey Act Amendment is the US counterpart of the EU Timber Regulation. An  AHEC consultant 
reported that: “So far sensible interpretation of the risk-based provisions of the EUTR has meant it has 
not been an obstacle for US hardwood. The assurance of negligible risk of illegality in the US hardwood 
sector  contained  in  the  independent  Seneca  Creek  study  commissioned  by  AHEC  in  2008  (Seneca 
Creek Associates, 2008) seems to have been widely accepted by EUTR Competent Authorities and the 
EU importing trade. AHEC is currently in the process of commissioning an update of this study. AHEC 
is  concerned  that  EUTR  is  sometimes  portrayed  [by  unspecified  actors]  as  a  requirement  for 
traceability to specific forest source irrespective of the quality of forest governance and level of risk in 
the country or region of supply. Traceability to specific forest management units is not possible in the 
case of US hardwoods due to the complex supply chains and the need to mix material from numerous 
small  non-industrial  owners  to  ensure  efficient  and  cost-effective  supply  of  graded  US  hardwood 
lumber into the EU.” 

The AHEC consultant further stated that EU “public sector procurement policy (one of the instruments 
encouraged in the EU FLEGT Action Plan) in some EU member states (notably UK, Germany, France, 
and  the  Netherlands)  do  in  practice  require  forest  certification,  which  is  much  costlier)  [than 
complying  with  due  diligence  requirements].”  According  to  the  AHEC  consultant’s  view,  some 
procurement  policies  in  the  EU  are  likely  in  conflict  with  both  the  WTO  and  EU  rules  for  non-
discrimination  in  public  procurement.  The  expert  consultant  further  stated  that:  “Government 
procurement  policies  limiting  trade  to  FSC  and  PEFC  are  having  a  longer  term  corrosive  effect, 
imposing standards which are not appropriate to the non-industrial forest sector in the United States 
(and  many  other  non-EU  supply  countries),  which  are  not  matched  by  equivalent  sourcing 
requirements  imposed  on  non-wood  materials  (with  likely  significantly  higher  environmental 
impacts), and which are not matched by willingness to pay.” 

One  specific  issue  concerning  the  forest-based  sector  was  raised  by  the  US  Hardwood  Federation106. 
This  concerned  phytosanitary  regulations  restricting  the  import  of  North  American  ash  into  the 
European Union (USITC, 2014b). No other specific issues concerning the forest-based sector, or raised 
by associations representing the forest-based industries were found in the report. This issue was also 
raised by an AHEC consultant– “the cost of implementing the EU requirement is so high to individual 
operators  that  it  seriously  impedes  exports  into  the  EU  of  ash  from  any  EAB  [emerald  ash  borer] 
affected area in the US (i.e. nearly all main supply regions). Before the controls, this trade was worth 
around  US$  30  million  a  year.  Meanwhile  US  ash  can  be  shipped  to  other  destinations  without 
difficulty, so trade is increasingly diverted to emerging markets, notably China.” AHEC are monitoring 
just  how  far  [trade]  falls  since  introduction  of  the  controls  from  1  January  [2016].  It  is  unfortunate 
timing,  because  EAB  has  led  to  higher  ash  supply  in  the  short  term  for  which  there  is  now  a 
significantly more restricted market. EC Plant Health Authorities are aware of this problem and there 
has been a lengthy exchange between those authorities and [the Animal and Plant Health Inspection 
Service] APHIS in an effort to resolve it.”  

106 The US Hardwoods Federation represents and advocates on behalf of thousands of hardwood businesses from every state in 
the  U.S..  It  is  an  umbrella  organization  representing  the  majority  of  trade  associations  engaged  in  the  manufacturing, 
wholesaling, or distribution of North American hardwood lumber, veneer, plywood, flooring and related products. 

209 

 
 
 
 
                                                             
6.5 

International comparative analysis of regulatory cost impacts 

6.5.1  Comparative forest sector data for EU, Brazil, China and USA 

In  Table  69  an  overview  is  presented  of  forest  resources,  industrial  production  by  sub-sectors 
(woodworking  and  pulp,  paper  and  paperboard),  and  apparent  consumption  for  their  corresponding 
product groups for the EU28, Brazil, China and USA. 

Looking at forest resources, Brazil has the biggest forest area and correspondingly also the biggest 
growing  stock.  The  EU28  while  having  the  smallest  area  of  forest,  has  the  highest  net  annual 
increment per  hectare and  the highest wood removals per annum. Over the past 15 years,  China  has 
increased its forest area annually about as much as Brazil has seen its forest  area reduced. Brazil has 
managed  to  significantly  improve  wood  productivity  in  forest  plantations,  thereby  reducing  its 
dependency of wood from natural forests. 

The US has by far the highest production of pulp; however, it consumes nearly as much as it produces. 
China consumes nearly twice as much it produces, taking up surplus production from Brazil and the 
EU. The biggest surplus production is by Brazil. 

The biggest surplus of paper and paperboard production (i.e. the fraction that is left from apparent 
consumption) is by the EU28, whereas Brazil, China and US have a production surplus from less than 
a million tonnes to about 2 million tonnes. 

The EU28 is by far the biggest producer of sawnwood, also with the biggest apparent surplus. China 
and also US rely on imports to fulfil domestic demand. 

The  EU28  is  the  biggest  producer  and  consumer  of  OSB  panels.  However,  China  outperforms  the 
EU28, US and Brazil in the production and consumption of MDF, plywood and veneer. 

Table 69 Forest resources, industrial production by woodworking and pulp, paper and paperboard sub-sectors, 
and apparent consumption for the corresponding product groups by EU28, Brazil, China and USA. Data in each 
row are colour-coded as follows: cell with lowest number is white, cell with highest number has darkest shade of 
red colour.  For reference years, please see footnote to this table. 
Forest Resources 

EU28 

Unit 

CN 

BR 

US 

- Forest Area (2015) 

million ha 

- Forest Area change (1990-2015) 

thousand ha/yr 

161 

519 

494 

208 

-2,127 

2,047 

310 

306 

- Growing Stock on forest (2015) 

million m3 

26,526 

96,745 

16,002 

40,699 

- Net Annual Increment on forest  million m3/yr 

- Net Annual Increment on forest 

- Fellings per annum 

m3/ha/yr 

million m3 

- Wood removals per annum 

million m3 ub. 

720 

4.5 

522 

356 

n.a.  

n.a.  

n.a.  

229 

748.8 

3.6 

n.a.  

86 

899 

2.9 

n.a.  

324 

210 

 
 
 
 
  
 
 
 
Unit 

EU28 

BR 

CN 

US 

- Industrial Production 

----- Pulp 

million tonnes 

36.64 

16.47 

17.54  46.88 

----- Paper and Paperboard 

million tonnes 

92.35 

10.37  108.75  73.09 

----- Sawnwood 

----- Panels - OSB 

----- Panels - MDF 

----- Panels - Plywood 

----- Panels - Veneer sheets 

- Apparent consumption 

----- Pulp 

----- Paper and Paperboard 

----- Sawnwood 

----- Panels - OSB 

----- Panels - MDF 

----- Panels - Plywood 

----- Panels - Veneer sheets 

million m3 

million m3 

million m3 

million m3 

million m3 

103.95 

15.23 

68.41  74.80 

36.81 

11.38 

4.36 

1.17 

3.43 

20.61  15.91 

4.43 

56.83 

3.00 

2.40  104.15 

9.45 

1.23 

3.03 

0.40 

million tonnes 

million tonnes 

41.66 

81.09 

6.28 

33.91  45.36 

9.79  106.00  71.05 

million m3 

million m3 

million m3 

million m3 

million m3 

87.00 

13.76 

95.35  90.10 

34.39 

3.32 

21.12  19.81 

9.77 

6.89 

1.56 

4.29 

54.06 

4.10 

0.82 

93.89  11.50 

1.16 

3.89 

0.66 

Sources:  EU28  forest  resource  data  from  Forest  Europe,  2015;  BR,  CN  and  US  forest  resource  data  from 
respective  country  reports  for  FAO  Forest  Resource  Assessment,  2015;  Industrial  production  and  apparent 
consumption  data  compiled  from  FAOSTAT,  2016  Reference  years:      Forest  Area:  2015;  Forest  Area  –  average 
annual change between:  1990-2015; Growing Stock on forest: 2015; Net Annual Increment on  forest: 2010; Net 
Annual  Increment  on  forest:  2010  (EU28),  2015  (BR,  CN,  US);  Fellings  per  annum:  2010;  Wood  removals  per 
annum: 2010 (EU28), 2011 (BR, CN, US); Industrial production and apparent consumption: 2014 

In  terms  of  trade  of  pulp,  paper  and  paperboard,  the  following  tables  provides  a  comparison  of  the 
imports from  EU and exports to EU together with the proportion of imports/exports from/to EU on 
total  imports/exports.  The  first  table  clearly  highlights  the  dependency  of  China  in  terms  of  raw 
materials (pulp) as  it imports up to 48.4% of its consumption if  2014 and  China’s imports represent 
about 44% of total EU exports of pulp.  

211 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table 70 Imports and exports of pulp 

Brazil 

China 

US 

Imports/Consumption 

6.70% 

2000 

2014 

6.70% 

2000 

2014 

2000 

2014 

16.30% 

48.40% 

11.30% 

11.60% 

Imports 
(000) 

from 

EU 

Imports 
Total Imports 

from  EU  / 

Imports 
Total Exports EU 

from  EU  / 

3,632 

31,795 

54,758 

865,212 

54,665 

37,339 

1.20% 

12.90% 

2.70% 

10.40% 

1.20% 

1% 

0.4%% 

1.5%% 

7.9%% 

43.9%% 

7.10% 

1.50% 

Exports to EU (000) 

857,650 

1,725,820 

2,637 

21,572 

1,569,643 

1,036,020 

Exports  to  EU  /  Total 
Production 

Exports  to  EU  /  Total 
EU Imports 

16,7% 

24.10% 

13.70% 

46.90% 

0% 

0% 

Source: DG Trade Market Access Database, RISI and IMF. 

0.20% 

3.60% 

3.20% 

0.30% 

22.50% 

18% 

Table 71 Imports and exports of paper 

Brazil 

China 

US 

2000 

2014 

2000 

2014 

2000 

2014 

Imports/Consumption 

12.30% 

11.50% 

18.30% 

2.80% 

16.80% 

14.30% 

Imports 
(000) 

from 

EU 

Imports 
Total Imports 

from  EU  / 

Imports 
Total Exports EU 

from  EU  / 

300,118 

412,300 

364,610 

809,658 

2,607,666 

2,035,651 

30.80% 

36.10% 

5.60% 

25.20% 

13.00% 

18% 

2.00% 

2.20% 

2.90% 

3.70% 

15.40% 

9.30% 

Exports to EU (000) 

126,907 

206,449 

337,398 

1,772,893 

1,539,682 

1,294,973 

Exports  to  EU  /  Total 
Production 

Exports  to  EU  /  Total 
EU Imports 

2% 

3% 

0.3% 

0.70% 

1.70% 

1.90% 

2.30% 

4.40% 

1.3% 

11.60% 

19.90% 

21% 

Source: DG Trade Market Access Database, RISI and IMF. 

Overall,  only  Brazil  still  have  tariff  barriers  with  EU  (about  4%)  for  pulp  products,  while  both  Brazil 
and  China  have  tariff  barriers  for  paper  products  (namely  12%  for  Brazil  and  7.5%  for  China  are  the 
most  applied  tariff  barriers).    EU  and  US  have  suppressed  all  import  tariffs  from  January  2004, 
following the 1994 Uruguay Round sectoral agreement.  

6.5.2  Comparative analysis of company structures 

A  comparative  analysis  of  company  distribution  per  employment  size  class  as  a  percentage  of  total 
number  of  companies  per  country  is  shown,  based  on  Euromonitor  International  data  re-structured 
into three categories: 1-19 employees “micro and extra small”, 20-49 employees “small” and more than 
50 employees “medium and large” (Figure 89). The figure also includes data on the EU28 which was 

212 

 
 
 
 
 
 
 
constructed from Eurostat industry statistics for NACE Rev.  2,  where for  2007  Croatia was added to 
data for EU27. In case totals were missing then they were calculated on the basis of country data, with 
missing data filled with the data for the closest year. 

In  the  same  figure  the  similarity  in  relative  company  size  structure  between  the  EU28  and  Brazil  is 
striking.  Micro  and  extra  small  companies  have  a  very  high  share  in  the  Brazilian  company  size 
structure, being above 90% of the Brazilian total number of companies. Yet for the EU28 this share is 
still higher, and while the number of micro and extra small companies has decreased from 98% to 95% 
between 2007-2012, this reflects an actual decrease by 4 thousand to about 170 thousand companies in 
2012.    The  EU28  number  of  small  companies  has  grown  in  the  same  period,  from  1,670  to  5,384 
companies, while the number of medium and large companies also had significant growth, from 1393 
to 2655 companies. In China, the relative importance of micro and extra small companies has declined 
more than 5% over the past 5 years, however in absolute terms there was a growth in number from 28 
to 35 thousand companies. The number of Chinese small companies increased from 18 to 28 thousand 
and the number of medium and large companies grew from 10 to 16 thousand. This very much reflects 
the  enormous  boom  in  forest  products  production  in  China.  In  the  USA  there  were  significant 
reductions in the numbers of companies in all size classes, due to the economic downturn. Meanwhile, 
numbers of company by size changed less dramatically in Brazil. 

An expert consultant commented on the extremely fragmented nature of forest holdings in hardwood 
producing  states  in  the  United  States  (there  are  approximately  four  million  non-industrial  forest 
owners) and the small size of companies (the largest company accounts for less than 5% of total sales). 
“This  is  both  an  opportunity  and  an  obstacle  [for  the  sawmilling  sector].”  However  considering  the 
extent  of  the  US  forest  area,  the  number  of  private  forest  owners  can  be  considered  rather  small, 
especially comparing with the EU’s approximately 15 million private forest owners107. There has been 
some consolidation in parts of the sector, but increased specialisation in other parts, so there is no real 
change  in  the  overall  dominance  of  small-  and  medium-sized  enterprises.  “There  has  been 
concentration of sawmilling activity in larger, better equipped and more efficient mills, but there has 
been  more specialisation in the secondary processing sector and smaller more  customised  secondary 
manufacturers are generally increasing.” 

Figure 89 Relative evolution of company distribution in the woodworking sub-sector, per employment size class 
as percentage of total number of companies for the EU Brazil, China and USA  

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

2007

2012

2007

2012

2007

2012

2007

2012

EU

Brazil

China

USA

micro and extra small (1-19 employees)

small (20-49 employees)

medium and large (50+ employees)

Source: Authors’ elaboration based on Euromonitor International data 

107 Approximately 16 million private forest owners according to the Confederation of European Private Forest owners (CEPF). 
See http://www.cepf-eu.org/welcome.cfm  

213 

 
 
                                                             
6.5.3  Comparative analysis of cost structures 

A comparison of cost structures for the woodworking sub-sectors in  the EU,  Brazil, China 
and  USA  shows  significant  differences  in  the  relative  importance  of  particularly  raw  materials  costs, 
energy  costs,  labour  costs  and  service  costs  (Table  72).  Unfortunately,  the  available  data  did  not 
include those  which  would allow the calculation of costs relative to  production unit (metric tonne or 
cubic meter). 

Table 72 Cost structure by main cost categories and cost sub-categories for the woodworking sub-sector in EU, 
Brazil, China and USA (% of total production costs) 

Cost categories 

% 

Main cost 
category 

Materials 
and 
equipment 

Operating 
costs 

Taxes less 
subsidies 

Totals 

Cost sub-category 

Brazil 

China 

Raw materials 

Intermediate materials 

Durable goods 

Non-durable goods 

Labour 

Services 

Transport and communications 

Energy, utilities and recycling 

Taxes less subsidies 

14.4% 

39.7% 

2.0% 

0.1% 

27.3% 

4.8% 

4.6% 

5.9% 

1.2% 

28.6% 

43.8% 

3.3% 

1.3% 

10.2% 

3.0% 

2.7% 

5.2% 

1.8% 

USA 

7.0% 

39.2% 

4.6% 

0.8% 

22.0% 

11.6% 

4.4% 

10.2% 

0.2% 

100.0% 

100.0% 

100.0% 

Source: Euromonitor Passport reports on the woodworking industries, for Brazil (2014), China (2013), US (2014) 

Raw material costs’ relative share of costs is four times higher in China than in the USA, and double 
that  in  Brazil.  Prices  of  wood  raw  material  as  a  global  commodity  are  expected  to  increase  due  to 
increasing  demand  for  wood  and  wood-based  products  of  verified  legal  origin.  Costs  for  measures 
related to legality verification, including FLEGT and the EUTR, could not be explicitly identified in the 
cost  structure  data.  Yet,  under  the  assumption  of  increasing  effectiveness  of  legality  verification 
policies, the related costs may be increasing.  Brazil, China and the USA each have each put their own 
legal  requirements  for  due  diligence  in  response  to  global  efforts  against  illegal  logging  and  trade  in 
related  products.  Related  costs  are  affected  by  e.g.  1)  increased  administrative  and  monitoring 
requirements,  2)  upward  pressure  on  prices  for  legal  wood  and  3)  modification  or  development  of 
compliance  systems.    This  is  expected  to  have  the  biggest  effect  on  the  costs  for  Chinese  producers, 
which do not yet have stringent domestic due diligence requirements and monitoring systems in place 
like  Brazilian,  US  and  EU  forest-based  industries  already  do.  Yet  notably,  the  costs  for  legality 
verification  compliance  and  related  measures  are  critically  dependent  on  the  effectiveness  of  the 
implementation  of  the  related  policies  and  their  geographical  scale,  e.g.,  it  will  be  critical  in  how  far 
China is going to develop stringent legality requirements domestically and how effectively the EU-TR 
and related legislation in Australia and the US will be implemented (see Section 1.5.4.3). Particularly 
in China but, presumably also for Brazilian and US producers, the EUTR requirements were seen as an 
issue for smallest producers which, with due diligence requirements, are inclined on the one hand to 
import less risky species and/or from less risky sources, or on the other hand, they may be less inclined 
to export to markets with stringent legality requirements, seeking to supply to other markets instead, 
depending  on  the  origin  and  tree  species.  Each  operator  addressing  due  diligence  will  choose  the 
approach that with available means will lead to the optimal market result.  

214 

 
 
Employment costs are relatively highest in Brazil (27%), followed by the USA (22%). In China and in 
the EU, the employment costs form  respectively only 10% and 11% of total costs. In monetary terms, 
average  employment  costs  are  much  lower  in  China  than  in  Brazil  and  the  USA.  Increasing  living 
standards particularly in China, but also in Brazil, and corresponding employment cost increases are 
set to reduce the competitive advantage of these countries on this cost category.   

Services costs represent a relatively high proportion of costs in the USA, particularly due to high costs 
of  business  and  management  consulting,  which  were  not  reported  as  a  separate  category  as  such  for 
Brazil and  China. Service costs in the  EU are not discernible as a separate category in the respective 
dataset and hence a comparison could not be compared.  

The following picture shows the comparison between the four geographic zones, in relative terms, as % 
of  production  costs.  Cost  categories  have  been  aggregated  compared  to  the  previous  table,  to  enable 
the comparison with the dataset for EU.  

Figure 90 Cost structure by main cost categories for the woodworking sub-sector in EU, Brazil, China and USA 
(% of country total production costs) 

Source: Euromonitor for US, China and Brazil (2012, 2013, 2014) and ToSIA for EU (2005)  

For  the  overall  pulp,  paper  and  paperboard  sector  (Figure  91),  the  main  differences  between 
costs in EUR/tonne produced lies mainly in wood costs, labour, capital costs and maintenance costs. 
Electricity costs do not display large differences, except for the case of Brazil, where the negative share 
is to be attributed to the increasing self-generation capacity through the use of bioenergy (black liquor) 
to the detriment of oil and gas. The Chinese wood raw-material costs stand out for being the highest of 
the  four  global  regions.    This  may  be  at  least  partially  an  effect  of  lower  other  costs,  e.g.  labour.  In 
addition,  the  explanation  for  this  can  be  traced  back  to  the  large  amount  of  wood  that  China  has  to 
import from abroad due to the high internal demand  and, as a consequence, the exposure to market 
exchange rate fluctuations (i.e. the appreciation of the RMB in the last years contributed substantially 
to this effect). Labour costs are the highest in the US and in Europe,  but these are statistics that need 
to be interpreted in a context of high labour productivity accompanied by diminishing labour inputs in 
the two areas: as a matter of fact, despite high labour costs, the two areas can stay productive due to 
high labour productivity.  

215 

0%10%20%30%40%50%60%70%80%90%100%EUCNBRUSRaw materialsEnergyLabourOther costs 
 
 
Figure 91 Cost structures by main cost categories for the pulp, paper and paperboard sub-sector in EU, Brazil, 
China and USA (% of production costs as included in RISI database) 

100%

80%

60%

40%

20%

0%

-20%

EU

CN

BR

US

Wood

Recovered Paper Market Pulp

Chemicals

Fuels

Electricity

Labour

Maintenance

Capital Cost

Source: RISI database  

6.5.4  Comparative analysis of the impact of legislation 

6.5.4.1  Forest policy 

The  EU,  Brazil,  China  and  USA,  all  have  basic  forestry  related  policy  (such  as  the  Forestry  Code  in 
Brazil, the Forestry Law in China and the National Forest Management Act in USA) in place that result 
in a likely upward impact on cost or availability of raw materials. In particular restrictions imposed on 
forests’ availability for wood supply increase resource costs.  

However, during the same  time, particularly  in  China  huge  efforts  have  been made in  increasing the 
forest  area  (e.g.  China  National  Action  Programme  To  Combat  Desertification;  Key  Shelterbelts 
Programme),  to  decrease  its  dependency  on  wood  resources  from  abroad.  In  Brazil  progressive 
increases  of  the  forest  wood  productivity  on  plantation  forests  with  improved  tree-breeding  material 
means  an  ever  reducing  dependency  on  natural  forests  and  opportunities  for  its  forest-based 
industries.  

In  all  four  regions,  forest  legislation  sets  the  basic  regulatory  requirements  for  forest  management 
which  is,  in  turn,  crucially  important  (however  to  different  degrees,  depending  on  the  import 
orientation) for the possibility of the forest based industries to achieve a continuous and cost-efficient 
supply  of  forest  products.  Given  this  importance,  it  is  still  hardly  possible  to  assess  the  impacts  of 
forest legislation on the cost structures in the four regions in a satisfactorily manner.  

Firstly, in the US as well as in the  EU, forest legislation shows  great regional diversity  with rules  for 
sustainable  forest  management  being  very  diverse  depending  on  the  country/state.  Secondly,  in 
several  cases,  ordinances,  programmes  or  plans  have  great  effects  on  forest  management  practices 
despite  being  not  codified  law  (e.g.,  the  Pacific  Northwest  Forest  Plan  decreased  logging  on  federal 
forest lands by more than 90% in the US Pacific Northwest region, but has not been codified as a law, 
and  National  Forest  Programmes  or  plans/strategies  might  have  significant  effects  on  forest 

216 

 
 
 
 
management despite not being legally approved), and provisions made by national legislation may be 
subject  to  notable  discretion  by  the  implementing  authorities.  Given  these  factors,  our  limited 
information  does  not  allow  substantial  assessment  of  the  effects  of  forest  legislation  on  the  cost 
structures of the forest based industries.  

Even  so,  four  factors  may  be  pointed  to  for  further  consideration:  firstly,  the  regulation  for  public 
forest  lands  may  have  a  crucial  effect  for  the  forest-based  industry:  more  specifically,  public  forestry 
companies  can  build  an  essential  forest  biomass  supply  pillar  for  a  targeted  industrial  policy  (e.g.  in 
some  EU  countries),  while  in  other  regions  (for  instance,  in  parts  of  the  US)  public  forest  lands  are 
mostly managed  in view of recreation and  protection. This may  give a considerable advantage to the 
industry in regions/countries where public forest lands are managed for industrial development.  

Secondly, private forest lands (in so far existing) are subject to different degrees of (state) regulation 
and control as well as support schemes through subsidies and (public) advice, which might, together 
with  the  economic  interests  and  forest  related  beliefs,  greatly  affect  the  possibilities  and  interests  of 
private forest owners to supply forest biomass.  

Thirdly,  forest  legislation  in  all  regions  is  subject  to  a  diversity  of  societal  demands,  and  aims  to 
balance them. Social and environmental demands have, and will likely continue to, restrict options for 
low  cost  industrial  forest  management  in  large  forest  areas  in  all  four  regions.  It  will  be  critical  to 
investigate in how far approaches of “integrated” forest management (mostly in Europe) will perform 
economically  compared  to  approaches  the  split  the  forest  land  base  into  plantations  and  strictly 
protected areas (mostly in the US; China and Brazil).  

Fourthly, a tendency in forest law to increase societal participation in forest management planning in 
all  regions  might,  on  the  one  hand,  negatively  impact  the  possibility  to  use  forests  for  cost  effective 
biomass  supply,  but  will,  in  turn,  possibly  provide  the  social  licence  to  operate  for  the  forest  based 
industries  in  the  future.  Concluding,  while  it  is  impossible  to  assess  the  impacts  of  forest  legislation 
(and policy) on the cost structure of the forest industry in a comprehensive manner,  some key factor 
can be made out that could be analysed in more depths on a narrower scale in the future. 

6.5.4.2  Environmental policy 

Forest  related  environmental  policy  has,  in  all  four  regions,  been  a  major  impacting  factor  for  forest 
management  in  the  last  decades.  First,  environmentally  motivated  (forest  and  environmental) 
legislation has resulted in substantial set-asides of (specifically) public forest lands in all four regions, 
thus  reducing  the  land  base  available  for  forest  biomass  supply  (but  in  turn  partially  increasing  the 
social acceptability of forest management on the remaining areas). Regulation related to endangered 
species  and  habitats  has,  in  addition,  had  substantial  impacts  on  forest  management  outside  strictly 
protected forest areas, partially also on privately owned forest lands, specifically in the EU and US.  

Again,  comparing  the  cost  impact  of  these  regulations  across  the  four  regions  is  not  possible  at  the 
general  level  as:  a)  these  regulations  are  regionally  diverse,  and  subject  to  regionally  diverse 
implementation  practices  and  b)  a  thorough  assessment  would  require  in-depth-knowledge  about 
ecological  aspects  of  forest  management,  forest  economics  and  implementation  practices  (and  the 
costs of species and habitats protection are even subject to contested debates within single regions and 
countries).  Yet  as  stated  above,  environmental  regulation  for  forest  management,  and  related  major 
strategic decisions to either integrate species protection and forest production, or separate them, has 
potentially significant impacts on the both the raw material costs of the forest based industry and its 
social license to operate – with both aspects having potentially major/decisive impacts on the cost of 
the forest-based industry. 

Environmental  policy  has  been  increasing  a  lot  and  affecting  compliance  costs  of  the  forest-based 
industries themselves as well in Brazil, China and the USA. However particularly in the USA there was 
reference  of  high  cost  impacts  on  capital  and  operational  costs  in  the  pulp,  paper  and  paperboard 
sectors.  

217 

 
 
 
6.5.4.3  Trade related legislation 

Brazilian forest-based industry is expected to benefit from the national export strategy. In US context, 
the  Trans-Pacific  Partnership  (TPP)  and  Transatlantic  Trade  and  Investment  Partnership  (TTIP)  are 
expected to reduce tariffs on raw materials and products and hence to reduce costs and enhance trade. 
CEPI has stated in this context that "If the negotiations end in agreement, the TTIP would put an end 
to disproportionate subsidies    and secure access to US energy” (CEPI, 2016). 

Of  all  EU  legislation,  the  EU  Timber  Regulation  comes  forward  as  having  an  important  impact  on 
businesses and their production costs for particularly products destined to the EU market, in the three 
studied  countries.  The  effect  on  costs  is  most  profound  in  China,  as  the  forest-based  industries  in 
Brazil and the United States had already taken measures to tackle illegally sourced domestic wood as 
in the case of Brazil, or imported wood through the Lacey Act Amendment in the case of the United 
States. Also the Australian Illegal Logging Prohibition Act has helped increase pressure on producers 
to  rely  on  legally  sourced  wood.  A  comparison  of  the  US  Lacey  Act  amendment,  the  EU  Timber 
Regulation  and  the  Australian  Illegal  Logging  Prohibition  Act  is  presented  in  Appendix  J.    China 
meanwhile is taking steps to implement due diligence systems for its forest products industries. Taking 
into account the bilateral trade relations between the four regions, legality requirements for trade with 
the EU are mostly an issue for China due to its massive trade with EU while its national due diligence 
requirements are a set system not yet fully developed, then followed by USA and Brazil. 

Li et al. (2008) predicted that world prices would rise due to policies countering illegal logging, by 1.5 
to  3.5%  for  industrial  roundwood  and  by  0.5  to  2%  for  processed  products,  depending  on  the 
assumption  on  illegal  logging  rates.  World  consumer  expenditures  for  wood  products  and  producer 
revenues would rise  by 1 to 2% without illegal logging. World added value in forest industries  would 
remain  the  same.  However,  in  countries  dependent  on  illegally  logged  wood  (such  as  Indonesia),  or 
those dependent on imported wood (such as China), the changes in consumer country expenditures108 
would  be  more  than  double  the  changes  in  producer  country  revenues.  Similarly,  in  countries  with 
little illegal logging and efficient industries, such as Canada, Germany and the United States, changes 
in producer country revenues would be almost twice  the changes  in consumer country expenditures. 
Added value in forest industries would decrease most in countries with  heavy illegal logging (12% in 
Indonesia and up to 9% in Brazil). (Li et al., 2008) 

The  low  number  of  responses  from  company  representatives  and  experts  representing  F-BI  sectoral 
associations of Brazil, China and the United States should be noted when considering results from the 
survey of these countries. Representatives of two Brazilian exporting companies did not consider EU 
regulation (in their case the EUTR being of relevance) harder (costlier and/or more administratively 
burdensome) to comply with than regulation from other countries (e.g. the US Lacey Act Amendment).  

Conversely,  some  experts  considered  that  EU  legislation  was  harder  to  comply  with  than  domestic 
legislation.  For  example,  an  expert  answering  from  the  point  of  view  of  a  woodworking  sub-sector 
stated for China stated EU regulation is “definitely harder [to comply with].” A consultant commented 
that  for  the  United  States  domestic  regulatory  impacts  are  expected  to  “increase  a  bit”  in  the  future, 
but  that  this  “would  depend  on  the  outcomes  of  the  elections.  There  is  a  tendency  for  government 
authorities to progressively extend reach. Processes of deregulation, however desirable, are rare. The 
current trend is for environment (particularly climate change) and trade (particularly populist appeals 
for  protectionism)”.  On  the  one  hand,  the  expert  stated  that  “many  EU  policies  offer  long-term 
opportunities for US hardwood sector, which is being marketed as a natural, organic, carbon-neutral, 
and resource efficient material.” On the other hand, the expert stated, “the pioneering work of the EU 
to  develop  tools  –  such  as  supplier  due  diligence,  product  environmental  footprints  (PEFs), 
environmental  product  declarations  (EPDs),  and  strategies  to  move  towards  a  green  economy  and 
resource efficiency  – are expected to offer rewards  in the form of higher market share and prices for 
suppliers of legal and sustainable wood products.”   

108  Producer  revenues are  the  sum of  the  value  of  production  of all  the  14  products  considered  in  the  referred  study  (Li  et al., 
2008),  at  local  prices.  Consumer  expenditures  are  the  sum  of  the  value  of  consumption  (production  plus  imports,  minus 
exports), for the same products and prices. Value added is the value of all products, minus the cost of wood or fibre input. 

218 

 
 
                                                             
An element that is deemed to have an effect on the transport costs in  maritime transportation is the 
Marine Fuels Regulation (2005/33/EC) as regards the sulphur content of marine fuels. The regulation 
serves  as  the  EU  legal  instrument  to  incorporate  the  sulphur  provisions  of  International  Convention 
for  the  Prevention  of  Pollution  from  Ships  (MARPOL)109  Annex  VI.  In  2015,  CEPI  claimed  the  main 
effect would be a shipping cost increase in the range of 20 to 45%, further to a 50 to 80% price increase 
for marine fuels. The estimated price increase effect in Euro per tonne for the paper industry was up to 
10 EUR/tonne for the final products110. However, due to the current low marine fuel prices compared 
to  before  the  entry-into-force  of  the  low  sulphur  requirements  on  1st  January  2015,  estimated  price 
increase effect in Euro per tonne for the paper industry remains limited. In a survey carried out among 
ship  owners  by  the  European  Community  Ship  Owners’  Association  (ESCA)  in  2015,  53.8%  of 
respondents  indicated  that  the  increase  of  freight  rates  resulting  from  the  low  sulphur  content  in 
marine fuel obligation varied between 1-10%111. Nevertheless, if marine fuel prices increase again in the 
future, prices per tonne paper transported by ship may however go up. 

6.5.4.4  Labour policy 

Salary  increases  have  put  labour  costs  up  in  Brazil,  China  and  US  as  well  as  the  EU,  but  most 
significantly  in  China  where  labour  costs  in  the  woodworking  sector  increased  nearly  three-fold 
between 2007-2012. This will possibly affect its competitiveness with lower wage countries in the near-
to-medium future, and some companies might relocate to countries with still lower salaries. Particular 
mention  in  the  US  was  given  to  the  Affordable  Care  Act  as  having  an  increasing  labour  cost  impact. 
While there was a reduction of the US workforce in woodworking activities, yet the labour cost share of 
total costs has remained stable. 

6.5.4.5  Climate and energy policy 

Climate and energy  policy has huge  potential to be of critical impact on the costs of the forest-based 
industries  in  the  future.  While  our  assessment  does  not  provide  data  that  is  detailed  enough  for  a 
thorough assessment and comparison, some general factors can be identified: first, whilst it was clear 
from the study that EU Climate Policy has a significant cost impact on the pulp, paper and paperboard 
sectors  operating  in  the  EU,  concerns  about  the  likely  impact  of  comparable  legislation  in  the 
competing countries was not so evident from the interviews and surveys. Second, it will be critical for 
the forest-based industry in how far political priorities for forest biomass production are set towards 
(renewable)  energy  or  (first)  material  use  of  forest  biomass.  The  respective  regulations  are  under 
continuous political debates in all regions. Second, it will be critical how the mitigation potential of the 
forest  based  industries  is  accounted  and  politically  incentivised  or  not.  Climate-smart  forestry  holds 
great potential as contribution to an overall (global) climate change mitigation policy, but the political 
and  academic  debates  relating  to  the  mitigation  potential  of  forests,  forestry  and  the  forest-based 
industries  could  result  in  quite  distinct  future  policies  that  will,  in  turn,  possibly  greatly  impact  the 
competitiveness of the forest based industries a) in comparison to other (competing) sectors and b) in 
a regional perspective. 

Of  particular  significance  in  the  US,  the  Clean  Power  Plan  is  assumed  to  increase  energy  costs.  
However, taking into account the potential of forest-based industries to make money from renewable 
energy production, there may be a potential gain. EU renewable energy targets have given comparable 
impetus  to  forest-based  industries  to  increase  resource  use  efficiency  and  invest  in  green  energy 
production. 

109  International Convention  for  the  Prevention  of  Pollution  from Ships  (MARPOL): Adoption:  1973  (Convention), 1978  (1978 
Protocol), 1997 (Protocol -  Annex VI); Entry into force: 2 October 1983 (Annexes I and II). Further info: http://www.imo.org  

110 CEPI position paper on marine fuels (2010) 

111 European Sustainable Shipping Forum (March 2015), Report on on-line survey for ship operators, Brussels 

219 

 
 
 
                                                             
6.5.4.6  Monetary policies 

Identified in the Brazil country section, yet not considered in detail as part of this study, concerns the 
impact of monetary policies on currency exchange rates (impact on particularly export goods but also 
on  imported  intermediate  goods)  and  interest  rates  (impact  on  cost  of  lending).  Monetary  policy 
however  has  a  profound  impact  on  the  market  environment  and  cost  structures  of  the  forest-based 
industries.  Nevertheless,  the  impacts  of  interest  rates  and  currency  exchange  rates  on  the  forest 
industry investments have a very complex nature. Capital investments into the Chinese and Brazilian 
forest-based  sectors  has  mainly  been  driven  by  inflows  of  foreign  public  and  private  capital,  and  the 
state  was  often  subsidising  the  full  costs  of  infrastructure.  QE  (Quantitative  Easing)  programmes  in 
the USA, the EU and in China since 2015 have been affecting money supplies by effectively serving to 
depress the interest and currency exchange rates. The US QE programme was phased out in 2014, and 
since then the US dollar exchange rate started to rise. In addition, the USA started to increase interest 
rates  from  December  2015,  which  had  some  additional  impact  on  the  rising  US$  currency  exchange 
rate.  A  rising  US$  currency  exchange  rate  will  reduce  US  forest-based  sector  export  competiveness, 
and  this  in  turn  will  increase  other  regions  export  opportunities  with  declining  currencies.  Bolkesjo 
and  Buongiornio  (2006)  demonstrated  for  a  range  of  US  forest  products  exports  and  imports  that 
“appreciation  of  the  US  dollar  tended  to  matter  more  than  depreciation,  but  the  hypothesis  that  the 
effect of exchange rate was symmetric [for appreciation and depreciation] could not be rejected”. The 
study  showed  that  the  effect  also  varied  through  time  and  was  stronger  in  the  first  12  to  18  months, 
and reduced afterwards while still remaining significant. Forest products are global commodities and 
as such they are often priced and traded in US$, sometimes under contracts that keep prices fixed (in 
US$) over a long period of time. In such cases, non-US traders can face initial windfall profits, while in 
the longer term they may suffer reduced demand. 

However,  currency  exchange  rates  alone  do  not  decide  competiveness  of  the  industry,  and  currency 
rates  are  often  volatile  and  they  can’t  decide  long-term  capital  investments  behaviour.  They  are  just 
one more factor, which condition (dampen or accentuate) the overall impacts of policies.   

220 

 
 
 
 
 
 
 
 
7  Conclusions 

Regulatory costs differ considerably within and across F-BI sub-sectors 

The  variability  of  costs  across  the  different  F-BI  sub-sectors  is  significant  and  reflects 
differences in product groups and their production chains. The highest cost  by far as a percentage of 
added  value  is  observed  in  wooden  containers  and  packaging,  amounting  to  16.4%  (average  annual 
figure over 2005-2014), and the lowest in builders’ carpentry and joinery, at 1.3%. The cost for wood-
based panels represents 10.8% of the sub-sector’s added value, for pulp 5%, for paper and paperboard 
4.2% and for sawnwood 2.6%.  

Figure 92 Cumulative direct regulatory costs and its composition by legislation package – average annual share 
of added value 2005-2014 

 Source:  Authors’  elaboration  based  on  cost  data  from  companies’  books  and  online  survey;  comparators  of 
turnover, AV and GOS from Eurostat, Structural Business Statistics 

Woodworking sub-sector 

When all legislation relevant to woodworking companies is cumulated, the estimated average annual 
total  direct  cost  borne  by  its  sub-sectors  covered  during  the  period  2005-2014  approaches  4.7%  of 
added value, representing around 1.3% of their turnover and 13.7% of their gross operating surplus.  

Two legislative packages clearly stand out as the main causes of the EU legislative burden, namely the 
environmental and the climate and energy packages, generating respectively 41.5% and 36.3% of direct 
regulatory costs for the overall woodworking sub-sector.  

Major  milestones  of  the  evolution  of  costs  have  been  the  establishment  of  EU  climate  and  energy 
targets, known as “20-20-20” targets for a low-carbon economy, the revision of the Renewable Energy 
Directive in 2009, the adoption of the Integrated Pollution Prevention and Control (IPPC) in 2008 and 
the transposition of the Industrial Emissions Directive in 2013. Other legislative acts such as the Waste 
Framework Directive or the EU Eco-Label Directive also contribute to regulatory costs in the sector. 

221 

 
 
Overall,  costs  generated  by  the  EU  legislation  related  to  the  manufacture  of  woodworking  are 
operating  costs  and  monetary  obligations,  both  amounting  to  1.7%  of  added  value  (35%  each  of  the 
total regulatory costs for the woodworking sector).  

Pulp, paper & paperboard sub-sector 

When  all  legislation  relevant  to  pulp,  paper  and  paperboard  companies  is  cumulated,  the 
estimated average annual total direct costs borne  by the subsectors covered during the  period 2005-
2014 approaches 4.3% of added value, representing around 0.9% of their turnover, 10.8% of the gross 
operating surplus, 7.6% of EBITDA and 21.9% of EBIT.  

The same two legislative packages as for woodworking clearly stand out as the main cause of legislative 
burden,  namely  the  climate  and  energy  package  and  the  environmental  package,  generating 
respectively 41.5% and 32% of direct regulatory costs for pulp, paper and paperboard sectors.  

Major milestones of the evolution of costs are the establishment of EU ETS, covering  pulp, paper and 
paperboard since its start in 2005. The second increase in 2012-2013 may also be linked to the ETS’s 
second phase, e.g. from 2013 the ETS requires a reduction of 21% of carbon emissions compared  with 
2005. The Energy Efficiency Directive was also implemented during this period and it would also have 
been preceded by investments to meet new legal requirements.  

Regulatory  costs  for  the  manufacture  of  pulp,  paper  and  paperboard  are  monetary  obligations, 
amounting  to  1.5%  of  added  value  (35%  of  the  total  regulatory  costs  for  the  sector),  and  capital 
expenditures,  reaching  1.4%  of  added  value  (33%  of  the  total  regulatory  costs),  closely  followed  by 
operating expenditures, representing 1.1% of added value (26% of the total regulatory costs).  

Costs depend on the company profile  

Within the two main sub-sectors woodworking and pulp, paper & paperboard, variability reflects the 
size  of  companies  and  their  organisational  structure,  efficiency,  level  of  integration  and  product 
portfolio. For instance, regulatory costs represent a larger burden for SMEs (i.e. a larger share of their 
turnover or profitability) than for large firms because the costs to comply with legislation are not linear 
and cannot be amortised by SMEs on a large volume of products.  

Main findings on direct costs 

Direct  costs  include  monetary  obligations,  capital  and  operating  expenditures  and  administrative 
burden.  

Monetary  obligations  include  regulatory  charges  such  as  fees,  levies  or  taxes  on  certain 
stakeholders  that  are  straightforward  to  identify,  as  the  amounts  are  usually  known  by  companies. 
From all sectors in the forest-based industries, the highest monetary obligations cost is observed in the 
manufacture  of  wood-based  panels,  reaching  6.9%  of  the  added  value.  Monetary  obligations  are 
mainly driven by the climate and energy package and the environment package.  

The pieces of legislation generating them are the Renewable Energy Directive, the Emissions Trading 
System and the Energy Taxation Directive. The Energy Renewable Directive applies larger fees directly 
to energy bills from energy-intensive companies, added to each unit of gas and electricity purchased. 
ETS  net  costs  for  CO2  emission  allowances  also  represent  significant  monetary  obligations  and  all 
sectors not covered by ETS are covered by the Energy Taxation Directive,  which imposes a minimum 
tax  rate,  based  on  the  CO2  and  energy  content  of  the  energy  consumed.  The  Industrial  Emission 
Directive also introduces monetary obligations to the business sector, as it requires fees for permits.  

Capital  expenditures  include  any  acquisition  or  upgrading  of  physical  assets  (land,  building  or 
equipment), usually “fixed costs”, but also investment costs from investments necessary to meet legal 
obligations. The highest capital expenditure cost is observed in the manufacture of wooden containers 
and packaging (2% of added value), and closely followed by wood-based panels (1.8% of added value), 

222 

 
 
 
pulp (1.6% of added value) and paper and paperboard (1.4% of added value). Capital expenditures are 
also  mainly  driven  by  the  environment  and  climate  and  energy  packages.  The  pieces  of  legislation 
generating them are the ETS, requiring emission abatement equipment, energy and process efficiency 
equipment,  that  go  beyond  business-as-usual  expenditures,  and  phytosanitary  regulations  as 
significant  investments  are  necessary  for  companies  to  collect  and  process  returned  products  and 
waste  in  accordance  with  the  principle  of  extended  producer  responsibility.  Additional  costs  occur 
related  to  the  disposal  of  waste  under  the  Waste  Incineration  Directive  and  to  reducing  volatile 
compounds  emissions  under  the  VOC  Directive.  Overall,  costs  may  rise  from  investments  in  new 
technologies to comply with the required standards under Best Available Techniques, (BAT). 

Operating  expenditures  include  additional  expenses  for  personnel  (wages),  energy  inputs, 
materials,  consumables  associated  with  legal  acts,  and  are  usually  “variable  costs”.  The  highest 
operating  cost  is  observed  in  the  manufacture  of  wooden  containers  and  packaging  (11.4%  of  added 
value), followed by wood-based panels (2% of added value), pulp (1.5% of added value) and paper and 
paperboard  (1%  of  added  value).  Operating  expenditures  are  mainly  driven  by  the  environmental 
legislative package, but also by the product-specific package. The main pieces of legislation which have 
generated  these  costs  have  been  the  phytosanitary  regulations,  that  introduce  personnel  and 
maintenance  costs  to  support  the  collection  and  process  of  returned  products  and  wastes,  and  the 
IPPC Regulation and  VOC  Directive  which required companies to invest in  non-standard production 
processes to reduce volatile organic compounds. Operating expenditures  have also been incurred due 
to  maintenance  efforts  in  new  installations  and,  more  recently,  supplies  for  compliance  with  the 
Industrial Emissions Directive and its  Best Available Techniques, as well as for training of personnel 
under the Eco-Label Directive (although not mandatory, if a company chooses to use the eco-label and 
hence to meet its requirements, compliance with the specifications must be proven), in order to fulfil 
eco-design requirements, obligations connected to distribution and labelling, etc.  

Administrative  burden  includes  the  additional  cost  of  fulfilling  the  information  obligations  to 
public authorities or other third parties as required by legislation. The highest administrative burden is 
observed in the manufacture of wooden containers and packaging (1,2% of added value), followed by 
sawnwood  (0.7%  of  added  value),  builder’s  carpentry  and  joinery  (0.6%  of  added  value)  and  pulp 
production  (0.5%  of  added  value).  Administrative  burdens  are  mainly  driven  by  the  product-specific 
legislative  package,  and  is  mostly  generated  by  reporting  obligations  linked  to  inspections  and 
compliance  as  regards  to  permits,  labelling,  safety  and  provisions  for  ensuring  traceability  and 
authorisation of substances.  

Indirect costs also matter 

In  addition  to  the  direct  legislative  costs,  companies  also  bear  indirect  legislative  costs.  Indirect 
costs were consistently reported in the wood-based panels sub-sector, related to the Renewable Energy 
Directive  by apparently  contributing to increase the raw material costs (e.g.  wood) and progressively 
led to the substitution of wood-based panels by less expensive materials in some cases. The scarcity of 
and upward pressure on the price of wood, as initiated by the incentives (including subsidies as state 
aids)  to  burn  wood  for  fuel,  may  well  have  triggered  a  strong  competition  for  companies  processing 
wood  for  material  use  against  those  using  wood-based  fuels  for  bioenergy,  a  particularly  strong 
competition was recorded by wood-based panel producers who compete with bioenergy companies for 
wood,  in  particular  in  the  form  of  industrial  residues  and  recovered  post-consumer  material.  This  is 
likely to also be an issue for the pulp, paper and paperboard sectors, since they use the same types of 
fresh wood as part of their raw material intake.  

Moreover, most  pulp,  paper and paperboard companies undergoing the interview process, as well as 
stakeholders taking the online survey, have reported the significant impact of the ETS’s indirect costs 
of regulation, which occur when utility companies pass-on some of their ETS-related costs to the F-BI. 
Such  indirect  costs  from  electricity  providers  become  particularly  substantial  for  pulp,  paper  and 
paperboard  production,  which  are  energy-intensive  sectors.  Indirect  costs  from  the  ETS  are  close  to 
four  times  as  much  as  direct  costs  from  the  climate  and  energy  package,  which  contains,  inter  alia, 
direct costs from the ETS. 

223 

 
 
The future role of existing and prospective regulation  

Existing legislation and prospective legislative acts (i.e. those new acts already identified but 
only  likely  to  have  their  cost  impacts  during  the  coming  years)  will  be  likely  to  generate  additional 
compliance costs for the forest-based industries to meet new objectives and standards.  

Legislation  likely  to  bring  more  costs  to  both  sub-sectors  emanates  from  the  climate  and  energy 
package, and from the environmental legislation package. For the climate and energy package, 
such  acts  will  probably  include  the  Clean  Air  Policy  Package  and/or  the  roadmap  for  moving  to  a 
competitive  low-carbon  economy  in  2050,  the  2030  climate  &  energy  framework  and  the  energy 
roadmap 2050- although they do not present quantifiable direct costs, they all aim to reduce carbon 
emission and energy consumption by improving efficiency. Effects from the Third Energy package are 
not clear-cut though. The woodworking sector is particularly concerned with the enshrinement of the 
cascading  principle in a detailed legislation  and with  the revision of the Renewable  Energy  Directive 
that may lead to an increase is wood price (i.e. raw material). On the other hand, a new proposal for 
the  LULUCF  legislation  has  been  published  in  July  2016,  which  should  potentially  limit  the 
administrative burden on businesses. There is also a high degree of uncertainty for the pulp, paper and 
paperboard sub-sector,  relating to  increased administrative  burden and lack of  harmonisation under 
the revision of the ETS. 

Further  costs  from  the  other  legislation  package  are  likely  to  impact  both  sub-sectors  as  well,  to  a 
lesser  extent.  Under  the  forest-related  package,  businesses  encourage  further  coordination  and 
enforcement  of  the  EU  Timber  Regulation  to  prevent  the  increasing  administrative  burden  arising 
from  different  national  transposition  regimes.  Regarding  the  employment  package,  both 
woodworking  and  pulp,  paper  and  paperboard  sub-sectors  may  be  impacted  by  the  amendments  on 
better  workers’  protection  against  cancer  causing  chemicals,  now  under  proposal,  as  adding  13  new 
substances to the original list could increase administrative burden for hazard identification and risk 
assessments, capital expenditure for equipment and operating costs of training.  

Regulation trigger costs for forest-based industries in all the studied regions 

The comparative synthesis of the competitors’ likely cost impacts of the national and EU legislation 
put the climate and energy legislation as a critical component of the regulatory framework: a common 
agenda on the international scene will be essential to contribute to a global climate change mitigation 
policy and to avoid the establishment of disparate future policies worldwide.  

Other major  impacts on the forest-based  industries also emanate from the  environmental legislation 
and the forest-relate legislation,  both  very  present in all four regions. Regional  disparities  have been 
observed  in  US  and  EU  with  respect  to  forest  policies.  On  a  positive  note,  non-binding  acts  and  not 
codified law have appeared to trigger great effects on forest management practices.  

The  EU  Timber  Regulation,  while  being  considered  as  forest  policy  for  EU,  mostly  affects  trade 
between the analysed countries, and the respective production costs for products aimed to be traded 
on the EU market. Legality requirements under the EU Timber Regulation mostly impact China. 

Lastly,  the  employment  policies  in  the  four  regions  appear  to  face  similar  patterns,  namely  salary 
increases  that  have  put  labour  costs  up  in  Brazil,  China  and  US  as  well  as  the  EU,  but  most 
significantly  in  China  where  labour  costs  in  the  woodworking  sector  increased  nearly  three-fold 
between 2007-2012. 

224 

 
 
 
 
 
 
 
225 

 
 
 
 
 
 
 
Appendix A

 Estimation of direct costs 

The quantification of direct regulatory costs followed the following procedure: 

  

Initial cost figures per year were calculated based on data from pilot and in-depth interviews; 

   These figures were adjusted based on the on-line survey results; 

   Different comparators were used to produce different types of final costs ratios. 

7.1.1.1 

Calculation of cost ratios based on the interviews 

Based on the data provided by the companies via the pilot interviews and in-depth interviews, average 
cost ratios were calculated as follows (i being an index for firm) for direct regulatory costs: 

𝐶𝑜𝑠𝑡/𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑟𝑎𝑡𝑖𝑜 =  

𝑖

∑ 𝑐𝑜𝑠𝑡𝑖
∑ 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟𝑖

𝑖

, where i is a plant 

This ratio corresponds to a weighted average of the costs/turnover ratios of the companies. The idea is 
to  combine  the  cost  figures  of  the  companies  by  using  a  procedure  that  transforms  the  figures  into 
relative  terms  in  order  to  make  them  more  comparable  (see  section  on  compliance  efficiency  and 
comparability of companies) and less sensitive to the selection of companies than in absolute values. 
The turnover used for the calculations corresponds to the turnover provided by the companies in the 
company  information  form.  The  numerator  of  this  cost  ratio  refers  to  the  same  level  of  activity  (i.e. 
plant)  than  the  denominator.  This  cost  ratio  was  calculated  for  each  cost  category  (i.e.  monetary 
obligations,  capital  expenditure,  operating  expenses  and  administrative  burden),  each  year  (over  the 
period 2005-2014) and each legislative package. 

Choosing turnover to rescale costs at the company level is based on the following considerations: 

   Turnover is consistently reported across respondents; 

   Turnover  values  are  easy  to  cross-validate  using  secondary  data  (i.e.  annual  reports  of  the 

companies); 

   Turnover  is  readily  available  for  respondents  and  follows  a  harmonised  and  straightforward 

definition; 

   Turnover correlates with both volume and value of activities (while production only represents 

volume); 

   Like costs, turnover corresponds to a flow of money, not a stock, unlike number of employees; 

   Turnover  is  non  negative,  while  negative  values  for  profitability  indicators  like  EBITDA  are 
likely  to  occur  at  the  individual  company  level  and  thus  a  positive  legislative  cost  as  a 
proportion of a negative EBITDA value would not make sense. 

7.1.1.2  Variation in time 

The  above  cost  ratio  was  calculated  for  each  year  between  2005  and  2014  by  using  the  turnover 
reported  by  the  companies  in  the  company  information  forms.  However,  the  turnover  reported  in 
those  forms  corresponds  only  to  the  last  year  available,  which  is  2014.  Thus,  in  order  to  reflect  the 
evolution of turnover over the last decade, turnover statistics at the product group level were used to 
implement an adjustment factor as follows: 

𝐴𝑑𝑗𝑢𝑠𝑡𝑒𝑑 𝐶𝑜𝑠𝑡/𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑟𝑎𝑡𝑖𝑜𝑡 =   𝐶𝑜𝑠𝑡/𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑟𝑎𝑡𝑖𝑜𝑡

𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑠𝑒𝑐𝑡𝑜𝑟2014
𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑠𝑒𝑐𝑡𝑜𝑟𝑡

226 

 
 
 
 
 
 
7.1.1.3  Adjustment of cost figures with data from the online survey 

In addition to cost figures collected via pilot and in-depth interviews, data on 103 companies collected 
from  the  online  survey  were  used  as  another  source  of  information  to  quantify  regulatory  costs.  The 
idea  here  was  to  use  the  larger  number  of  observations  to  recalibrate  the  initial  (and  more  detailed) 
costs  which  are  based  on  fewer  companies.  The  survey  collected  information  on  cost  ranges  as  a 
percentage  of  turnover  for  each  legislative  package  and  cost  category.  Results  from  the  survey  were 
used to adjust the initial estimates of cost figures as follows: 

𝐴𝑑𝑗𝑢𝑠𝑡𝑒𝑑 𝑐𝑜𝑠𝑡 = 𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝑐𝑜𝑠𝑡 + 𝑎𝑑𝑗𝑢𝑠𝑡𝑚𝑒𝑛𝑡 𝑡𝑒𝑟𝑚 

= 𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝑐𝑜𝑠𝑡 + 𝑤(𝑆𝑢𝑟𝑣𝑒𝑦 𝑟𝑒𝑠𝑢𝑙𝑡 − 𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝑐𝑜𝑠𝑡) 

where  w  is  a  weight  for  the  adjustment  of  the  initial  cost.  The  adjustment  term  can  be  positive  or 
negative and is based on the difference between the cost observed in the survey results and the initial 
cost. This calculation was performed by legislative package, product group and size category (i.e. SMEs 
and large firms). The above expression is equivalent to calculating the weighted average between the 
initial cost and the survey result, with corresponding weights being (1-w) and w.  

The  cost  value  used  from  the  survey  data  corresponds  to  the  middle  of  the  cost  range  of  the  50th 
percentile of the respondents. This is a median approach that removes the impact of outliers from the 
calculations. 

The weights for the adjustment term that were tested are the following:  50%, 35%, 25% and 15%. The 
weights are not a direct reflection of the number of companies, but they correspond to the fact that the 
validation procedures conducted via interviews and workshops on the initial cost figures should weigh 
at least as much as the survey in the calculation process. We also acknowledge that data collected via 
the interviews are likely to be more precise than the cost ranges reported in the online survey.  

For each product group, cost category and legislative package, figures for SMEs and large companies 
were then combined by calculating the weighted average of the costs ratios between the two categories, 
with  the  weighting  being  the  turnover  of  the  product  group  (from  Eurostat)  in  the  corresponding 
category.  

The adjustment of the initial cost figures (from pilot and in-depth interviews) with the on-line survey 
data was applied to the average cost over the 2005-2014 period.  

The  adjustment  with  the  survey  results  does  not  significantly  impact  the  initial  costs  for  the  pulp, 
paper and paperboard industries. Initial costs related to capital expenditure for sawnwood and wood-
based  panel firms appear to be underestimated according to the survey results,  which  is in line  with 
the analysis performed in section 3.4. Total costs for other product groups are slightly affected by the 
adjustment. The direction of the adjustment is not systematic. Some costs are revised upwards, others 
downwards. 

227 

 
 
Figure  93  Sensitivity  analysis  of  adjusted  figures  (as  a  %  of  turnover)  based  on  different  weights  for  the 
adjustment (0, 0.15, 0.25, 0.35 and 0.5) 

Source: Authors’ elaboration 

The  final  cost  of  phytosanitary  treatment  for  pallet  producers  was  calculated  separately  in  order  to 
avoid extrapolating this specific cost to other products in the product group 16.24 Wooden pallets and 
other  wooden  packaging.  The  average  cost  for  a  single  pallet  was  calculated  based  on  the  detailed 
information provided by the pallet producers during the in-depth interviews. This cost was multiplied 
by the number of pallets observed in Prodcom (Eurostat). As a consequence, the average cost related to 
the environmental legislative package was reduced from 3.5% to 2.8% of turnover. 

7.1.1.4 

Comparators 

In order to compare costs with other indicators, statistics for the product groups were collected: added 
value and gross operating surplus for both main product groups, and Euros/tonne, EBITDA and EBIT 
for pulp,  paper and paperboard product groups112. Additional cost ratios using different comparators 
from  turnover  were  computed,  based  on  the  cost/turnover  ratio  calculated  previously  and  can  be 
obtained as follows for each of the comparator (added value, EBITDA, etc.): 

𝐶𝑜𝑠𝑡/𝑐𝑜𝑚𝑝𝑎𝑟𝑎𝑡𝑜𝑟 𝑟𝑎𝑡𝑖𝑜𝑡 =   𝐴𝑑𝑗𝑢𝑠𝑡𝑒𝑑 𝐶𝑜𝑠𝑡/𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑟𝑎𝑡𝑖𝑜𝑡

𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑠𝑒𝑐𝑡𝑜𝑟𝑡
𝐶𝑜𝑚𝑝𝑎𝑟𝑎𝑡𝑜𝑟 𝑠𝑒𝑐𝑡𝑜𝑟𝑡

7.1.1.5  Main assumptions to assess direct costs 

Hypotheses to perform the cumulative cost assessment are summed up in Table 73. 

Table 73 Hypothesis for cumulative cost assessment 

Hypotheses 

Explanation 

112 Data on sector turnover, value added and production were collected from the Historic Statistics Report. EBITDA was collected 

228 

0.00%1.00%2.00%3.00%4.00%5.00%6.00%00.150.250.350.500.150.250.350.500.150.250.350.500.150.250.350.500.150.250.350.500.150.250.350.516.1 Sawnwood16.21 Wood-based panels16.23 Other builders' carpentry and joinery16.24 Wooden containers & packaging17.11 Pulp production17.12 Manufacture of paper & paperboardFees/taxes/chargesCAPEXOPEXAdministrative burden 
 
 
 
                                                             
Time scope 

All costs before 2005 and after 2014 included in questionnaires have been 
withdrawn from our computation. 

Cost across time 

Outliers 

Ranges 

Administrative 
burden 

Most  respondents  have  indicated  a  starting  year  for  costs  and  their 
related  frequency,  or  the  period  of  investment  for  which  capital 
expenditures were annualised. For cases where no indication of time was 
provided, we used a working assumption that the cost impact started one 
year after the introduction of the piece of legislation causing it. 

The final cost ratios should be robust in dealing with outliers and should 
not  be  the  reflection  of  only  one  single  marginal  firm  with  abnormal 
costs.  These  outliers  should  be  verified  and  their  affect  should  not  be 
extrapolated to other firms if they do not reflect the situation of the rest of 
the product group according to the other companies.113 In order to detect 
outliers,  costs  were  compared  between  years  and  between  companies. 
Overall,  it  appeared  that  costs  were  consistent  over  time  and  across 
companies by following this process. Only three large amounts of capital 
expenditures  were  identified  as  outliers.  After  investigation,  these  costs, 
related  to  equipment  with  long  service  life  (e.g.  boilers),  were  smoothed 
out  over  the  period  by  dividing  the  values  by  the  service  life  of  the 
corresponding  equipment  in  the  mill  (based  on  additional  data  on  the 
mill  provided  by  the  companies).  This  allows  to  acknowledge  the 
existence of these costs without extrapolating unreasonable values to the 
rest of the product group for specific years. 

If  respondents  have  provided  ranges  of  costs  for  a  cost  category  (e.g. 
between 1 and 2 days of training), we have used the mid range (e.g. in this 
case 1.5 day). 

If respondents refer to the question on OPEX personnel when filling the 
Administrative Burden question (e.g. “for administrative burden, see Q4, 
already  included”),  we  used  the  answers  for  administrative  personnel 
(FTE) to estimate administrative burden. 

Estimation of 
salaries 

If respondents have not provided salaries for each package, we have used 
the average of other companies in the sample. 

Source: Authors’ elaboration 

113  This  follows  a  methodology  similar  to  http://ec.europa.eu/eurostat/documents/64157/4374310/11-STANDARD-COST-
MODEL-DK-SE-NO-BE-UK-NL-2004-EN-1.pdf/e703a6d8-42b8-48c8-bdd9-572ab4484dd3. 

229 

 
 
 
 
 
                                                             
 Literature  review  relating  to  the  indirect  costs  due  to  ETS 
Appendix B
and  carbon  pass-on  of  electricity  to  the  pulp,  paper  and  paperboard 
sector 

Electricity  is  the  most  important  energy  sector  covered  by  the  European  Union  Emissions 
Trading System (ETS). This section is concerned with the impact of ETS on electricity prices, and 
more  specifically  on  the  extent  that  this  effect  is  passed  on  to  the  price  that  the  pulp,  paper  and 
paperboard sector pays for electricity. This section opens with an explanation of the main effect of the 
ETS  on  electricity  prices  and  on  pass-on  rate.  It  then  reviews  the  literature  on  pass-on  rates  and  it 
concludes with an assessment of the pass-on rates to be used for the calculation of pass-on rate for the 
pulp, paper and paperboard sector.  

For  energy-intensive  industries,  like  pulp,  paper  and  paperboard,  electricity  prices  can  be  a 
determinant  factor  in  influencing  competitiveness.  The  introduction  of  the  ETS  in  2005,  has 
developed a market around carbon emission allowances (EUAs), which are issues free to companies, 
based on a threshold which is calculated according to the best performance in their sector, but traded 
as  a  commodity  between  firms  which  respectively  under  or  over-perform.  This  has  triggered  other 
industrial mechanisms of response and adaptation; one of these is the extent to which the price paid 
for carbon allowances can be passed-on to industrial and final consumers (i.e. pass through rates). 

The effect of the ETS on electricity prices and on pass-on rate depends largely on two factors: The first 
is the impact of the allocation of allowances on electricity prices. The EU Emission Trading 
system is a ‘cap and trade’ system. The system allows trading the free emission allowances received by 
the  installation  of  electricity  producers.  By  allowing  trading,  it  aims  at  ensuring  that  the  least  cost 
alternative  to  comply  with  the  assigned  cap  is  implemented  either  by  reducing  emissions  or  buying 
allowances114. There are three implementation phases: The Pilot First Phase (2005-2007), the Second 
Phase (2008-2012) and the Third Phase (2013-2020). During the First Phase and the Second Phase 
most  of  the  allowances  were  given  for  free,  based  on  historical  GHG  emissions.  During  the  Third 
Phase a benchmarking principle based on product-related GHG emission benchmarks is applied115. In 
the  Third  ETS  Phase,  with  some  exception  for  member  countries  in  need  of  support  to  modernise 
their power sector116, electricity operators will not receive any free allowance. The main explanation is 
that  the  experience  during  the  first  two  phases  showed  that  they  were  able  to  pass-on  the  cost  of 
allowances  to  customers,  even  when  received  for  free117.  In  other  words,  free  allocation  lead  to  a 
distortion  in  the  way  the  opportunity  cost  of  the  allowances  is  internalised  by  the  power  generator. 
Power  generators  considered  (free)  emission  allowances  in  terms  of  the  cost  of  having  to  use  them, 
instead of trading them at their market price and realise profits (i.e. its opportunity cost). The ‘missed 
profit’ was charged on the electricity prices and passed-through the users. This, in turn, has generated 
windfall profits for electricity providers. Within a system of auctioning (more similar to Phase Three), 
the  opportunity  cost  of  traded  emissions  will  be  still  reflected  in  the  price  of  electricity,  but  the 
allocation of the economic rents generated is different; in the case of auctioning the producer surplus 
for  electricity  providers  should  be  smaller,  because  the  effect  of  windfall  profits  generated  by  free 
allocation should not occur118. It is important to understand that the allocation system does not affect 
the  pass-on  rate:  pass-on  rate  can  be  the  same  with  or  without  free  allocation,  but  the  allocation 

114 Instead of, for example, forcing companies to directly invest heavily in abatement technologies.  

115 European Commission EU ETS Handbook.  This progressive change in is also in  line with the increase in the 
share  of  auctioned  allowances;  between  2008  and  2012  no  more  than  4%  of  the  allowances  were  auctioned,  in 
2013  over  40%  of  the  allowances  were,  and  the  estimation  for  the  period  2013-2020  is  of  50%  or  more, 
http://ec.europa.eu/clima/policies/ets/cap/auctioning/index_en.htm.  

116 http://ec.europa.eu/clima/policies/ets/cap/auctioning/index_en.htm and EU ETS Handbook, Op.Cit  

117 European Commission EU ETS Handbook.  This progressive change in is also in  line with the increase in the 
share  of  auctioned  allowances;  between  2008  and  2012  no  more  than  4%  of  the  allowances  were  auctioned,  in 
2013  over  40%  of  the  allowances  were,  and  the  estimation  for  the  period  2013-2020  is  of  50%  or  more, 
http://ec.europa.eu/clima/policies/ets/cap/auctioning/index_en.htm.  

118 Sijm, J., Hers, S, Lise, W. and Wetzelaer, B. (2008), The impact of EU ETS on electricity prices, Final report to 
DG Environment and the European Commission, Energy Research Centre of the Netherlands 

230 

 
 
                                                             
system  explains  one  of  the  mechanisms  by  which  the  pass-on  occurs,  and  also  paves  the  way  for 
justifying  possible  compensation  schemes  for  electricity  prices  increases  when  quantified  effects  are 
proven119.  However,  differences  in  the  rate  of  pass-on  rate  are  also  expected  to  materialise  between 
phases, due to the fact that higher costs are expected in the Third Phase (given less or inexistent free 
allocation)120.  

The  second  factor  that  explains  more  specifically  the  pass-on  rate  is  the  impact  of  the  market 
structure on electricity prices, and includes, among others, the number of players in the market, 
the  market  power  and  concentration,  and  the  elasticity  of  the  demand  curve  for  electricity  (how 
customers  are  sensible  to  changes  in  prices).  Other  factors,  such  as  the  production  constraints, 
changing technologies and market regulation are also deemed to affect the pass-on rate121.  

The choice of the pass-on rate(s) to calculate the pass-on rate to electricity prices and its effect on the 
pulp,  paper  and  paperboard  sector  is  not  trivial,  and  depends  on  a  number  of  contingent  elements, 
often acting at national level. As Gully and Chernyavs’ka (2013) explain, the assumption of full  pass-
on is generally made in simulation models of emission trading performances122. Full pass-on derives 
from  the  assumption  that  the  carbon  cost  of  the  less  efficient  technology  used  by  the  electricity 
provider is charged in the price, regardless of the allocation mechanism of the allowances (auction or 
benchmark). The theoretical basis set on carbon pass-on by Sijm at al. (2006) 123 and by Bonacina and 
Gullì (2007)124 also confirms that perfect competition is the market condition for full pass-on.  

Yet,  Gullì  and  Chernyavs’ka  (2013)  point  out  that  full  pass  through  is  not  confirmed  by  empirical 
analyses of wholesale electricity spot market prices: pass-on rates can be much lower, or much higher, 
and  they  can  substantially  vary  over  time  and  between  markets.  In  several  cases  they  are  not 
significantly different from zero. For the authors, the main explanation for missed full pass-on is to be 
found  in  imperfectly  competitive  markets  and  the  different  energy  markets  (i.e.  organisation,  firm 
strategy, etc.). Gullì and Chernyavs’ka (2013) is one of the most detailed overview of average  pass-on 
rates,  and  it  contains  references  to  other  literature  that  investigated  the  subject,  reporting  country 
differences  for  Finland,  France,  Germany,  Italy,  Spain,  the  Netherlands  and  the  UK.  Table  74 
summarises these results125. 

119 In 2012, the European Commission has adopted under State Aid measures a framework under which Member 
States  may  compensate  some  electro-intensive  users,  such  as  steel  and  aluminum  producers,  for  part  of  the 
higher  electricity  costs  expected  to  result  from  a  change  to  the  EU  Emissions  Trading  Scheme  (ETS)  as  from 
2013. The rules allow subsidies of up to 85% of the increase faced by the most efficient companies in each sector 
from 2013 to 2015, a cap that will gradually fall to 75% in 2019-2020. Moreover, the construction of new highly 
efficient power plants which will implement an environmentally safe capture and geological storage of CO2 (CCS-
ready) by 2020 may receive support of up to 15% of the investment costs.  

120  PointCarbon  Advisory  Services  (2008),  EU  ETS  Phase  II  –  The  potential  and  scale  of  windfall  profits  in  the 
power sector, a report to the WWF 

121 A peculiar case is the one of the UK. The UK Government has introduced the so called “carbon price floor” to be 
paid starting from April 2013 out to March 2031, which aims at determining an ‘all in’ price for carbon. To reach 
this goal, the Government has introduced a tax, ‘Climate Change Levy (CCL) carbon price support rate’ that will 
concern power generators using fossil  fuels. This  will be paid in addition to the EUA price. The sum of the two 
should not overpass the targeted all-in carbon price. The effects can be multiple. It is expected that such tax will 
reduce the demand for EUAs, and then lower its price. As a second consequence, if EUA price falls, revenues from 
auctioning allowances can also fall. This example makes clear how national measures in the context of renewable 
energy can have parallel effects on the ETS system and allowances prices, in turn affecting the price of electricity 
and power generation.  

122 Gullì, F. and Chernyavs’ka, L. (2013), Theory and Empirical Evidence for Carbon Cost Pass-Through to Energy 
Prices, The Annual Review of Resource Economics 

123  Sijm,  J.,  Neuhoff,  K.  and  Chen,  Y.  (2006),  Cost  pass-through  and  windfall  profits  in  the  power  sector,  Clim. 
Policy 6 (1), 49-72 

124  Bocacina,  M.  and  Gulli,  F.  (2007),  Electricity  pricing  under  carbon  emission  trading:  a  dominant  firm  with 
competitive fringe model, Energy Policy, 35, 4200-4220 

125 The Table also includes other results found for Portugal and Poland, as well as the results of the PointCarbon 
2008 study.  

231 

 
 
                                                             
Sijm at al. (2008)126 estimated pass-on rates of carbon cost on the forward market in 2005 and 2006, 
for five countries: Germany, France, the Netherlands, Sweden and the UK. They found that 17 out of 
22  estimates  were  between  38  and  83%,  four  were  slightly  above  one  (103%  to  134%)  and  one  was 
significantly larger than one (182%).  

About the estimation of carbon pass-through rates in the power market in the Second Phase, Jouvet 
and  Solier  (2013)127  considered  ten  European  countries  between  2005  and  2012.  Interestingly,  the 
authors  found  that  pass-on  were  high  during  the  First  Phase,  and  that  the  rate  declined  during  the 
economic crisis. In 2009 no significant pass-on rate was found for the countries investigated. Jouvet 
and Solier attributed very low or negative pass-on to allowances over-allocation, in the Fist Phase, and 
to market instability with negative impact on power demand in the Second Phase.  

Another  explanation  of  low  or  negative  pass-on  could  be  linked  to  imperfect  competition,  and  more 
specifically  to  cases  in  which  firms  do  not  maximise  profits  due  to  regulatory  pressures.  In  other 
words, they do not externalise the full cost of emission allowances128.  

PointCarbon (2008)129 built estimates of the pass-on rates for the Second Phase in the UK, Germany, 
Spain,  Italy  and  Poland  looking  at  out-turn  power  spreads.  The  pass-on  levels  were  then  used  to 
calculate the windfall profits for ETS Phase Two. Pass-on rates between 75% and 100% were used for 
countries for which the analysis gave a high level of pass-on (Germany, the UK and Spain), for Poland 
a  rate  between  45  and  60%  was  applied  (spot  spreads  showed  a  good  level  of  response  to 
developments  in  the  carbon  price).  PointCarbon  used  the  lowest  pass-on  in  the  case  of  Italy  (0%  - 
70%),  where  the  level  of  spot  spreads  showed  no  consistent  pattern  to  the  level  of  the  carbon  price, 
although this was expected given the market structure130.  

Finally,  estimates  of  pass-on  rates  for  Portugal  were  run  using  a  vector  error  correction  model 
(VECM) approach by Pereira Freitas and Pereira da Silva (2012)131. The authors estimated the pass-on 
in the Portuguese electricity market to range between 33 and 51%.  

The  ranges  of  the  estimates  are  quite  broad,  and  it  must  be  noted  that  the  results  reported  above 
derive  from  the  application  of  many  empirical  methods.  While  some  methods  (like  the  econometric 
approach) allow calculating precise pass-on rates, they cannot justify its value, because they assume a 
single marginal technology and generic fuel efficiency. Differently, non-econometric approaches allow 
calculation  of  pass-on  rate  hour  by  hour,  providing  a  more  precise  description  of  pass-on  over  time 
and accounting for market structure factors that econometric models do not include, however, they do 
not  provide  specific  pass-on  rate  but  only  ranges  of  variability132;  the  two  can  be  used 
complementarily for the pass-on rate analysis.  

Despite the literature on the calculation of pass-on rates of carbon price is vast, in agreement with the 
IEA (2007)133, it must be noted that a precise estimation of pass-on rates is not possible. This is due to 
several  factors.  Further  than  the  ones  already  mentioned,  there  is  also  the  fact  that  not  in  all  EU28 
countries electricity prices are set by pool-like bidding procedures, but rather by a limited number of 
trader  and  generators,  or  that,  different  types  of  contracts  (long-term,  short-term  day-ahead)  can 
influence the capacity of pass-on.  

126 Sijm, J. P. M., Hers, S. J., Lise, W., Wetzelaer, B.J.H.W., (2008), The impact of EU ETS on electricity prices, 
final report to DG Environment and the European Commission 

127  Jouvet,  P-A.  Solier,  B.,  (2013),  An  overview  of  CO2  cost  pass-through  to  electricity  prices  in  Europe,  Energy 
Policy, 61, 1370-1376 

128 Gullì, F. and Chernyavs’ka, L., (2013), Op. Cit 

129 PointCarbon Advisory Services, (2008), Op. Cit.  

130 PointCarbon (2008), Ibidem.  

131  Pereira  Freitas,  C.  and  Pereira  da  Silva,  P.,  (2012),  Phase  II  CO2  cost  pass-through  in  MIBEL:a  cointegrated 
VECM approach 

132 Gullì, F. and Chernyavs’ka, L. (2013), Op. Cit. 

133 IEA (2007), Op. Cit.  

232 

 
 
 
                                                             
To conclude, the capacity of pass-on rather relies on the electricity provider strategy of charging in its 
bill the opportunity cost, or the actual cost (no pass-on) of the carbon purchased.  

Factors such as the presence of compensation schemes for the effect of higher electricity prices due to 
the  ETS,  and  the  level  of  dependency  of  the  sector  on  electricity,  as  expressed  by  its  cost  structure, 
must be also taken into account to interpret the results of a pass-on calculation on the pulp, paper and 
paperboard sector. Looking at the DG Competition database on State Aid notifications of the Member 
states134, only three compensation measures for indirect EU ETS costs were approved (by decision of 
not raising objections) in the  pulp, paper and paperboard sector (NACE codes 17.11 and 17.12), since 
2013135, respectively for, Greece (which is, however out of our sample panel of companies); Slovakia, 
and the Netherlands. Expenditure information for 2014 was available only for the Netherlands136.   

134http://ec.europa.eu/competition/elojade/isef/index.cfm?clear=1&policy_area_id=3 

135  Year  of  first  applications  after  the  decision  of  2012:  http://europa.eu/rapid/press-release_IP-12-
498_en.htm?locale=en 

136  A  compensation  for  indirect  costs  of  carbon  price  floor  has  been  approved  for  energy  intensive  industries  in 
2014, however no specific information was found on sectoral coverage  in details (http://europa.eu/rapid/press-
release_IP-14-577_en.htm).  A  support  scheme  for  energy  intensive  industries  was  also  approved  in  2013  for 
Germany, 
found  
pulp 
on 
(http://ec.europa.eu/competition/sectors/energy/news_en.html)  

information 

coverage 

specific 

paper 

and 

was 

but 

no 

233 

 
 
 
                                                             
Table 74 Carbon cost pass-on rates, results from the literature137 138 139 140 141 

Country  and 
study 

Methodology 

Price 

Period 

Average 
min 

Average 
max 

Peak min  

Peak 
max 

Off-peak 
min 

Off-
peak 
max 

Finland 
(Honkatukia  et 
al. 2008) 

Econometric 
VEAC  and  AR-
GARCH 

Wholesale 
spot 

2005-2006 

0.50  

1.00 

France 
(Solier 
& Jouvet 2011) 

Econometric 
autoregressive 

Wholesale 
spot 

2005-2006 

France 
(Solier 
& Jouvet 2011) 

Econometric 
autoregressive 

Wholesale 
spot  

2008-2010 

Germny  (Bunn 
& Fezzi 2008) 

Econometric 
VEAC  

Germany  (Sijm 
et al. 2008) 

Germany  (Sijm 
et al. 2008) 

Econometric OLS 

Econometric OLS 

Wholesale 
spot 

Wholesale 
forward 

Wholesale 
forward 

2005-2006 

0.52 

2005 

2006 

Germany 
(Solier 

Econometric 
autoregressive 

& 

Wholesale 
spot 

2005-2006 

0.17 

1.75 

0.65 

1.05 

-0.49 

0.27 

- 0.46 

-0.21 

0.60 

0.57 

0.41 

0.64 

-0.34 

1.18 

0.47 

1.03 

137  Bunn  D,  Fezzi  C.  2008.  A  vector  error  correction  model  of  the  interaction  among  gas,  electricity  and  carbon  prices:  an  application  to  the  case  of  Germany  and  the 
United Kingdom 

138 Chernyavs’ka L, Gullì F. 2008b. Marginal CO2 cost pass-through under imperfect competition. Ecol. Econ. 68:408–21 

139 Honkatukia J, Mälkönen V, Perrels A. 2008. The impact of the European Emissions Trading Scheme on Finnish wholesale electricity prices 

140 Sijm S, Hers S, Wetzelaer B. 2008b. Options to address concerns regarding EU ETS–induced increases in power prices and generators’ profits: the case of carbon cost 
pass-through in Germany and the Netherlands. 

141 Solier B, Jouvet P. 2011. An overview of CO2 cost pass-through to electricity process in Europe.Work. Pap. Ser. 2011-08, Cahier Chaire Econ. Clim. 

234 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                             
Country  and 
study 

Methodology 

Price 

Period 

Average 
min 

Average 
max 

Peak min  

Peak 
max 

Off-peak 
min 

Off-
peak 
max 

Jouvet 2011) 

Germany 
(Solier 
Jouvet 2011) 

& 

Econometric 
autoregressive 

Wholesale 
spot 

2008-2010 

-0.66 

0.84 

-1.29 

0.15 

Germany 
(PointCarbon 
2008) 

Italy 
(Chernyavs’ka 
& Gulli 2008) 

Out-turn  power 
spreads scenarios 

2008-2012 

0.75 

1.00 

Load 
curve approach  

duration 

Wholesale 
spot 

2006 

1.15 

1.5 

0.9 

1.5 

Italy  (Solier  & 
Jouvet 2011) 

Econometric 
autoregressive 

Wholesale 
spot 

2005-2006 

Italy  (Solier  & 
Jouvet 2011) 

Econometric 
autoregressive 

Wholesale 
spot 

2008-2010 

-0.64 

1.05 

-3.56 

-0.03 

-6.39 

-1.23 

-5.43 

1.01 

Italy 
(PointCarbon 
2008) 

Out-turn  power 
spreads scenarios 

2008-2012 

0.00 

0.70 

Spain  (Solier  & 
Jouvet 2011) 

Econometric 
autoregressive 

Wholesale 
spot 

2005-2006 

Spain  (Solier  & 
Jouvet 2011) 

Econometric 
autoregressive 

Wholesale 
spot 

2008-2010 

1.29 

2.03 

-0.18 

0.67 

-2.98 

3.43 

-0.76 

4.24 

Spain 
(PointCarbon 
2008) 

Out-turn  power 
spreads scenarios 

2008-2012 

0.75 

1.00 

235 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Country  and 
study 

Methodology 

Price 

Period 

Average 
min 

Average 
max 

Peak min  

Peak 
max 

Off-peak 
min 

Off-
peak 
max 

The 
Netherlands 
(Solier 
Jouvet 2011) 

The 
Netherlands 
(Solier 
Jouvet 2011) 

Econometric 
autoregressive 

& 

Wholesale 
spot 

2005-2006 

0.33 

0.79 

-0.30 

0.99 

Econometric 
autoregressive 

& 

Wholesale 
spot 

2008-2010 

-4.36 

4.56 

-0.74 

0.53 

The 
Netherlands 
(Sijm 
2008) 

et 

al. 

The 
Netherlands 
(Sijm 
2008) 

et 

al. 

Econometric OLS 

Wholesale 
forward 

2005 

1.34 

0.40 

Econometric OLS 

Wholesale 
forward 

2006 

1.10 

0.38 

The  UK  (Solier 
& Jouvet 2011) 

Econometric 
autoregressive 

Wholesale 
spot 

2005-2006 

The  UK  (Solier 
& Jouvet 2011) 

Econometric 
autoregressive 

Wholesale 
spot 

2008-2010 

The  UK  (Bunn 
& Fezzi 2008) 

Econometric 
VEAC 

Wholesale 
spot 

2005-2006 

0.30 

UK 

The 
(PointCarbon 
2008) 

Out-turn  power 
spreads scenarios 

2008-2012 

0.75 

1.00 

Poland 

Out-turn  power 

2008-2012 

0.45 

0.60 

0.83 

1.12 

0.57 

1.66 

2.83 

3.69 

-0.97 

0.37 

236 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Country  and 
study 

Methodology 

Price 

Period 

Average 
min 

Average 
max 

Peak min  

Peak 
max 

Off-peak 
min 

Off-
peak 
max 

(PointCarbon 
2008) 

spreads scenarios 

Portugal 
(Pereira  Freitas 
&  Pereira  da 
Silva 2012) 

Econometric 
Vector 
error 
correction  model 
(VECM) 

2008-2012 

0.33 

0.51 

237 

 
 
 
 
 
 
 
 
 
 
 
 
Appendix C

 Detailed explanation on RISI data for cost structures 

According  to  RISI  definitions,  wood  is  considered  solid  pulpwood  excluding  bark;  recovered  paper 
means recovered paper as raw material for pulping; market pulp includes chemical, mechanical, semi-
chemical, de-inked and other pulps, which are sold in open competition with that of other producers; 
chemicals  mean  all  the  chemicals  used  in  pulping  and/or  papermaking  processes  (these  include,  for 
example,  pulping  and  bleaching  chemicals,  fillers,  pigments,  binders  and  additives).  Wood  fibre 
consumption is based on typical and/or known yields for the pulping process used at the mill. Several 
variables are considered when wood consumptions are calculated for pulp mills: amount of purchased 
chips;  wood  species  used;  debarking  method;  type  of  digester;  cooking  process;  and  bleaching 
sequence.  Chemical  consumption  estimates  are  modelled  for  various  processes  involved  in  the 
manufacturing  of  pulp  or  paper  such  as:  mechanical  pulping,  deinking,  papermaking,  chemical 
pulping, bleaching, drying, and water/wastewater treatment. 

Energy costs comprise either purchased bark/waste, biofuels, coal, natural gas or oil. Energy costs are 
determined by the energy balance of the mill. The balance is made up of the consumption of the energy 
and co-generation capacity of the mill. Estimates for  both fuel and electrical power consumption are 
based on the grade(s)  produced and the process equipment used at the  mill. The level of technology 
and technical age of the machines are also evaluated and the impact on energy efficiency is modelled. 
Each benchmarked mill is compared against external public references on an annual basis to validate 
the consumption values of the energy model. 

Labour includes the work related costs of operators, maintenance, exempt and non-exempt personnel. 
Labour cost estimates for each pulp mill include hourly labour costs and salaried labour costs. There 
are  two  components  for  hourly  labour  costs:  operations  labour  cost  and  maintenance  labour  cost. 
Three  variables  determine  the  level  of  cost  for  operations  and  maintenance  labour:  average  regional 
wage rate, number of hours worked per year and number of days of operation per year. There are also 
two  components  for  salaried  labour  costs:  exempt  labour  cost  and  non-exempt  labour  cost.  RISI 
breaks  out  salaried  overtime-exempt  labour  and  salaried  non-exempt  labour  that  is  eligible  for 
overtime  because  each  employee  type  is  paid  differently,  impacting  the  total  cost  to  the  mill.  These 
costs have been developed  on a  per ton  basis and then proportioned  based on the  product and fibre 
furnish at each mill.  

Maintenance  includes  maintenance  materials,  operating  supplies,  contract  maintenance  and  waste 
disposal. Material costs are estimated from benchmark data collected year-over-year which combines 
maintenance  material  costs,  maintenance  labour  costs,  and  direct  costs  specific  to  the  grades  being 
produced.  Materials  include  maintenance  parts,  contract  maintenance,  supplies,  shipping  materials, 
felts,  wires  and  other  incidental  costs  not  included  in  other  natural  expense  categories.  RISI  uses 
regional benchmark data on maintenance man-hours per ton to estimate maintenance costs for each 
mill. If a mill’s actual maintenance man-hours per ton are above or below the benchmark average, an 
adjustment is made to the maintenance materials calculation to reflect the variance.142 

RISI  uses  the  existing  macroeconomic  and  industry  models,  databases,  surveys,  and  in-house 
expertise  to  evaluate  major  pulp,  paper  and  paperboard  grades  capacity.143  Grades  include 
newsprint/directory,  wood  containing  uncoated  and  coated  papers,  wood-free  uncoated  and  coated 
papers,  wrapping  papers,  tissue,  cartonboard,  containerboard  and  market  pulp.  Capacity  indicates 
average annual production. Regional cash manufacturing cost average multiplied by regional capacity 
is considered the total value of the pulp, paper and paperboard production:  

Value (€/Y) = Cash manufacturing cost (€/Tn) * Capacity (Tn/Y) 

142 For more details on RISI cost calculation methodology see: http://www.risiinfo.com/approach/methodology/benchmarking-
methodology/ 

143 For more details, please refer to RISI (2015) Methodology Business Impact Assessment Tool 

239 

 
 
 
 
                                                             
Appendix D

 International comparison: Key data sources 

D.1  

 Brazil 

D.1.1  

 National trade data sources 

Instituto Brasileiro de Geografia e Estatística (IBGE) http://www.ibge.gov.br/  

System Of Analysis of Foreign Trade Information AliceWeb - Bureau of Foreign Trade, of the Ministry 
of Development, Industry and Foreign Trade http://aliceweb.desenvolvimento.gov.br/  

D.1.2  

 Legislation 

Government of Brazil – Legislation portal http://www4.planalto.gov.br/legislacao/legislacao-1/ 

D.1.3  

 Trade Associations and Federations 

Brazilian Pulp and Paper Association (BRACELPA) http://bracelpa.org.br/ 

Founded in 1997 as the successor of the National Association of Pulp and Paper Manufacturers.  The 
association  is  responsible  for  the  institutional  representation  of  the  sector  nationally  and  globally. 
BRACELPA’s headquarters are in Sao Paulo, Brazil. BRACELPA members account for all the Brazilian 
pulp  production  and  approximately  80%  of  the  Brazilian  paper  production.  Internationally, 
BRACELPA  participates  in  the  CICEPLA  –  Latin  America  Pulp  and  Paper  Industrial  Confederation, 
ICFPA and Advisory Committee on Paper and Wood Products from FAO/UN 

Indústria Brasileira de Árvores (Ibá) http://iba.org/  

The  Brazilian  Tree  Industry  (Ibá)  is  the  association  responsible  for  institutionally  representing  the 
planted  tree  production  chain,  from  the  field  to  the  industry  with  its  main  stakeholders.  The 
association  was  established  in  April/2014  and  represents  61  companies  and  nine  state  entities  that 
provide  products  obtained  from  planted  trees,  with  special  mention  to  wood  panels  and  laminate 
flooring, pulp, paper, energy forests and biomass. The association also represents independent planted 
tree producers and institutional investors. Ibá unites the member-companies of the Association of the 
Wood  Panels  Industry  (Abipa),  the  Brazilian  Association  of  Manufacturers  of  Laminate  Flooring 
(Abiplar), the Brazilian Association of Forests Plantation Producers (Abraf) and the Brazilian Pulp and 
Paper Association (Bracelpa). 

Associação  Brasileira  da  Indústria  de  Madeira  Processadamecanicamente  (ABIMCI). 
Brazilian Association for Mechanically Processed Timber  http://www.abimci.com.br/  

Founded in 1972, the Brazilian Association for Mechanically Processed Timber – ABIMCI unifies and 
represents  companies  linked  to  several  segments  and  phases  of  the  wood  supply  chain,  such  as 
reforestation  (forestry)  companies;  wood  industries  (manufacturers  of  plywood,  veneer,  lumber, 
flooring,  frames,  doors  and  other  products);  suppliers  of  raw  materials  and  machinery  for  the  wood 
industry;  agents  and  importers  of  wood  products,  distributors  and  retailers  of  wood  products 
manufactured  by  associated  companies  in  the  logistics  and  customs  clearance  industry  sector  in 
addition to specialist press. 

D.2  

 China 

D.2.1  

 State and Trade Associations and Federations 

State Forestry Administration: http://www.forestry.gov.cn/ 

Responsible for the protection, development, supervision and management of forest resources. 

Chinese Academy of Forestry – Forest Research Institute. http://www.caf.ac.cn/ 

China Paper Association http://en.chinappi.org/  

240 

 
 
The  China  Paper  Association  (CPA)  was  formed  in  1992  and  is  located  in  Beijing,  China.  CPA  is  a 
nationwide association of the paper industry. The association has more than 620 members, including 
companies,  corporations,  groups  of  companies,  research  institutes,  colleges  and  universities  and 
manufacturing organizations. 

China  Timber  and  Wood  Products  Distribution  Association  (CTWPDA)  [formerly  China 
Timber Distribution Association ] http://www.cnwood.org/ 

China National Forest Product Industry Association (CNFPIA) http://www.cnfpia.org/ 

D.3  

 United States of America 

D.3.1  

 Data sources 

US Census Bureau http://www.census.gov/en.html  

The  Census  Bureau  is  responsible  for  the  Annual  Survey  on  Manufactures  (ASM);  Statistics  of  US 
Businesses; Nonemployer statistics; and a large amount of other data. ASM provides information  by 
manufacturing sector on value of shipments, cost of materials,  employment, payroll for industries by 
state; more statistics at national level. The ASM provides estimates of statistics for all manufacturing 
establishments  with 
via 
paid 
one 
http://factfinder.census.gov/  

employee.  Results 

or  more 

available 

are 

US Bureau of Labour Statistics http://www.bls.gov/home.htm  

The  Bureau  of  Labor  Statistics  of  the  US  Department  of  Labor  is  the  principal  Federal  agency 
responsible  for  measuring  labour  market  activity,  working  conditions,  and  price  changes  in  the 
economy. Its mission is to collect, analyze, and disseminate essential economic information to support 
public and private decision-making.  

International Trade Association TradeStatsExpress http://tse.export.gov/tse/TSEHome.aspx  

National  trade  data  for  the  US.  Data  can  be  presented  according  to  different  classification  systems: 
Harmonized  System  (HS);  Standard  International  Trade  Classification  (SITC);  North  American 
Industry Classification System (NAICS). 

D.3.2  

 Trade Associations and Federations 

American Forest and Paper Association (AF&PA) http://www.afandpa.org/  

The American Forest and Paper Association (AF&PA) is the nationwide trade association of the forest 
products  industry  and  enhances  public  policies  that  promote  a  strong  and  sustainable  US  forest 
products industry in the global arena. AF&PA’s member enterprises account for more than 75% of the 
US’s pulp, paper-based packaging and wood building materials. 

Technical Association of Pulp and Paper Industry (TAPPI) http://www.tappi.org/ 

As  an  ANSI-Certified  Standards  development  organization,  TAPPI’s  peer-reviewed  standards  ensure 
that products meet industry recognized best practices. 

Economic, Statistics and Life Cycle Analysis (ESLCA) Research Unit of Forest Products 
Laboratory (FPL), USDA Forest Service http://www.fpl.fs.fed.us/index.php  

The ESLCA Research Unit of the FPL provide analysis of the national economic outlook and statistics 
for the forest products sector. 

241 

 
 
Appendix E
classifications 

 Cross-correspondence  between  NACE  Rev.  2  and  ISIC  3.1 

ISIC 3.1 Title 

ISIC 
3.1 
Code 
NACE Rev. 2 Division 16 / ISIC Rev. 3.1 Division 20: Manufacture of wood and of products of wood and cork, 
exceptfurniture; manufacture of articles of straw and plaiting materials 
2010 
2021 

NACE 
Rev. 2 
Class 

NACE 2 Title 

16.10 
16.21 

Notes 

Sawmilling and planing of wood 
Manufacture of veneer sheets 
and wood-based panels 
Manufacture of builders' 
carpentry and joinery 

Manufacture of wooden 
containers 
Manufacture of other products of 
wood; manufacture of articles of 
cork, straw and plaiting 
materials 
Manufacture of footwear 

16.22 

16.23 

16.24 

16.29 

2022 

2023 

2029 

1920 

Sawmilling and planing of wood 
Manufacture of veneer sheets and 
wood-based panels 
Manufacture of assembled parquet 
floors 
Manufacture of other builders’ 
carpentry and joinery 
Manufacture of wooden containers 

Manufacture of other products of 
wood; manufacture of articles of cork, 
straw and plaiting materials 

Manufacture of various 
wood products, fire logs 
etc. 

Manufacture of wooden 
shoe parts (e.g. heels) 

NACE Rev. 2 Division 17 / ISIC Rev. 3.1 Division 21: Manufacture of paper and paper products 
2101 

Manufacture of pulp, paper and 
paperboard 

17.11 
17.12 

2102 

2109 

Manufacture of corrugated paper 
and paperboard and of 
containers of paper and 
paperboard 
Manufacture of other articles of 
paper and paperboard 

1729 

Manufacture of other textiles 
n.e.c. 

17.21 

17.22 

17.23 
17.24 
17.29 

17.22 

Manufacture of pulp 
Manufacture of paper and 
paperboard 
Manufacture of corrugated paper and 
paperboard and of containers of 
paper and paperboard 

Manufacture of household and 
sanitary goods and of toilet requisites 
Manufacture of paper stationery 
Manufacture of wallpaper 
Manufacture of other articles of 
paper and paperboard 
Manufacture of household and 
sanitary goods and of toilet requisites 

2221 

Printing 

17.23 

Manufacture of paper stationery 

3699 

Other manufacturing n.e.c. 

17.29 

Manufacture of other articles of 
paper and paperboard 

Manufacture of textile 
wadding and articles of 
wadding: sanitary towels, 
tampons etc. 
Printed registers, 
accounting books, albums 
etc. 
Manufacture of paper 
novelties 

242 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Appendix F

 Differences between North American Industry Classification System (NAICS) and ISIC Rev. 3.1 

Appendix  C  Table  1.  Differences  between  NAICS  class  321  (Wood  product  manufacturing)  and  ISIC  Rev.  3.1  Division  20  (Manufacture  of  wood  and  of  products  of 
wood and cork, except furniture; manufacture of articles of straw and plaiting materials) (n.e.c.: not elsewhere classified). 
ISIC 3.1 
2002 
NAICS US 
Code 
Codes from other than NAICS 321 included in ISIC Division 20  

2002 NAICS US Title 

ISIC 3.1 Title 

Notes 

113310 

Logging 

2010 

Sawmilling and planing of wood 

All Other Petroleum and Coal Products 
Manufacturing 

2029 

Manufacture of other products of wood; manufacture 
of articles of cork, straw and plaiting materials 

production of wood chips in the forest, portable 
chipper mills 
fire logs made of pressed wood and purchased refined 
petroleum binders 

Showcase, Partition, Shelving, and Locker 
Manufacturing 
Blind and Shade Manufacturing 

Surgical Appliance and Supplies 
Manufacturing 

2022 

Manufacture of builders' carpentry and joinery 

wood partitions (except free-standing) 

2029 

2029 

Manufacture of other products of wood; manufacture 
of articles of cork, straw and plaiting materials 

wooden window blinds and curtain and drapery rods 
and fixtures 

Manufacture of other products of wood; manufacture 
of articles of cork, straw and plaiting materials 

cork life preservers 

324199 

337215 

337920 

339113 

339942 

Lead Pencil and Art Good Manufacturing 

2029 

339950 

Sign Manufacturing 

339991 

339999 

811310 

Gasket, Packing, and Sealing Device 
Manufacturing 
All Other Miscellaneous Manufacturing 

Commercial and Industrial Machinery and 
Equipment (except Automotive and Electronic) 
Repair and Maintenance 

Codes from other than ISIC 20 included in NAICS 321 

321912 

Cut Stock, Resawing Lumber, and Planing 

321999 

321999 

All Other Miscellaneous Wood Product 
Manufacturing 
All Other Miscellaneous Wood Product 
Manufacturing 
All Other Miscellaneous Wood Product 
Manufacturing 
Source: UN Statistics Division 

321999 

2029 

2029 

2029 

Manufacture of other products of wood; manufacture 
of articles of cork, straw and plaiting materials 
Manufacture of other products of wood; manufacture 
of articles of cork, straw and plaiting materials 

Manufacture of other products of wood; manufacture 
of articles of cork, straw and plaiting materials 
Manufacture of other products of wood; manufacture 
of articles of cork, straw and plaiting materials 

frames for artists' canvases 

wooden signs 

cork gaskets 

wooden mirror and picture frames 

2023 

Manufacture of wooden containers 

repairing or reconditioning wooden pallets, shipping 
drums or barrels, and similar items 

3699 

1920 

Other manufacturing n.e.c. 

Manufacture of footwear 

blocks for the manufacture of smoking pipes  

wood heels 

2520 

Manufacture of plastics products 

plastic shoe lasts 

3699 

Other manufacturing n.e.c. 

handles for umbrellas, canes and similar  

243 

 
 
 
Appendix C Table 2. Differences between NAICS class 322 (Paper manufacturing) and ISIC Rev. 3.1 Division 21 (Manufacture of wood and of products of wood and 
cork, except furniture; manufacture of articles of straw and plaiting materials) (n.e.c.: not elsewhere classified). 
2002 
NAICS US 
Code 
Codes from other than NAICS 322 included in ISIC Division 21  

2002 NAICS US Title 

ISIC 3.1 Title 

ISIC 3.1 

Notes 

2101 

Manufacture of pulp, paper and paperboard 

bulk carbon paper or stencil paper in rolls or large sheets 

339944 

323110 

Carbon Paper and Inked Ribbon 
Manufacturing 
Commercial Lithographic Printing 

323111 

Commercial Gravure Printing 

323112 

Commercial Flexographic Printing 

323113 

Commercial Screen Printing 

323119 

Other Commercial Printing 

339944 

339991 

Carbon Paper and Inked Ribbon 
Manufacturing 

Gasket, Packing, and Sealing Device 
Manufacturing 

Codes other than ISIC 21 included in NAICS 322 

322222 

322291 

Coated and Laminated Paper Manufacturing 

Sanitary Paper Product Manufacturing 

2109 

2109 

2109 

2109 

2109 

2109 

2109 

1729 

1729 

Manufacture of other articles of paper and 
paperboard 
Manufacture of other articles of paper and 
paperboard 
Manufacture of other articles of paper and 
paperboard 
Manufacture of other articles of paper and 
paperboard 
Manufacture of other articles of paper and 
paperboard 

Manufacture of other articles of paper and 
paperboard 

lithographic printing on purchased labels or tags 

gravure printing on purchased labels or tags 

flexographic printing on purchased labels or tags 

screen printing on purchased labels and tags 

other printing on purchased labels and tags 

ready to use carbon paper, duplicator stencils, etc. 

Manufacture of other articles of paper and 
paperboard 

paper or paperboard gaskets made from purchased 
paper 

Manufacture of other textiles n.e.c. 

pressure-sensitive cloth tape 

Manufacture of other textiles n.e.c. 

322222 

Coated and Laminated Paper Manufacturing 

2520 

Manufacture of plastics products 

322121 

Paper (except Newsprint) Mills 

322221 

322222 

322225 

Coated and Laminated Packaging Paper and 
Plastics Film Manufacturing 
Coated and Laminated Paper Manufacturing 

Laminated Aluminum Foil Manufacturing for 
Flexible Packaging Uses 

322223 

322299 

Plastics, Foil, and Coated Paper Bag 
Manufacturing 
All Other Converted Paper Product 
Manufacturing 
Source: UN Statistics Division 

2699 

2720 

2720 

2720 

2899 

3699 

Manufacture of other non-metallic mineral 
products n.e.c. 
Manufacture of basic precious and non-
ferrous metals 
Manufacture of basic precious and non-
ferrous metals 

Manufacture of basic precious and non-
ferrous metals 

Manufacture of other fabricated metal 
products n.e.c. 
Other manufacturing n.e.c. 

manufacturing sanitary paper products, such as tampons 
and napkins, from purchased textile fibers 
plastic wallpaper made from purchased plastic, plastics 
self-adhesive tapes and similar 
tar paper made in paper mills 

laminating purchased foil and paper for packaging uses, 
foil as primary component 
precious metal foil laminates made from purchased foil, 
aluminum foil laminates made from purchased 
aluminum foil as primary component 
aluminum foil packaging laminates made from 
purchased foil, tinfoil packaging laminates made from 
purchased tinfoil 
foil bag manufacturing 

paper novelties made from purchased paper 

244 

 
 
 
Appendix G
and interview invitations 

 International comparison: List of contacts for questionnaire 

All those listed were invited by email to contribute to the on-line questionnaire and attempts were 
been made to establish contact by phone.  

Country 

Organisation 

Status as of 03/29 

Brazil 

Brazilian Pulp and Paper Association (BRACELPA) / Brazilian Tree Industry 
(Ibá) 

called 03/23 

referred to consultants 

Brazil 

STCP Engenharia de Projetos Ltda 

Brazil 

Brazilian Agricultural Research Enterprise (EMBRAPA) 

Brazil 

Universidade Estadual de Santa Cruz 

Brazil 

Universidade Brasilia 

++ 
called 03/23 

no response 

+++ 

Brazil 

Instituto de Biodiversidade e Florestas, Universidade Federal do Oeste do 
Para 

+++ 

Brazil 

Forestry Science and Research Institute 

Brazil 

++ 

Brazil 

Universidade Federal de Santa Maria 

Brazil 

Universidade Federal de Viçosa 

Brazil 

ABIMCI - Association for Mechanically Processed Timber 

Brazil 

American Hardwood Export Council 

China 

China Paper Association 

China 

Forestry Economics and Development Research Center, State Forest 
Administration 

China 

China National Forestry Industry Association 

China 

China National Forestry Industry Association 

China 

China Timber and Wood Products Distribution Association 

China 

China Timber and Wood Products Distribution Association 

China 

Shanghai timber industry association 

China 

Guangdong timber industry association 

China 

State Forestry Administration 

China 

China National Furniture Association 

++ 

++ 

+++ 

China 

Beijing Forestry University, School of Economics and Management 

+++ 

China 

Wood Markets 

China 

Wood Markets 

China 

Canada Wood China 

245 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
China 

American Hardwood Export Council  

China 

Lumber Liquidators / University of Washington 

USA 

USA 

USA 

USA 

USA 

USA 

USA 

American Forest and Paper Association 

Forest Products Laboratory, USDA Forest Service 

Forest Products Laboratory, USDA Forest Service 

Hardwood Federation 

Center for International Trade in Forest Products (CINTRAFOR) University 
of Washington 

Southern Research Station, USDA Forest Service 

American Hardwood Export Council 

++ 

- 

++ 

+++ 

+++ 

-: declined; + telephone interview promised; ++: questionnaire reply promised; +++questionnaire 
return fulfilled (either by correspondence or through interview) 

246 

 
 
 
 
 
 
Appendix H
federations, associations and industry experts 

 International  comparison:  Online  survey  for  companies, 

Survey on key factors affecting costs of the Forest-Based Industries 

(F-BI: i.e. woodworking, pulp & paper manufacturing industries and their sub-sectors) 

Please indicate from what perspective you are replying this to questionnaire: 

1. 
2. 
3. 

from the point of view of a sector (e.g. as a sectoral expert) 
from the point of view of an association 
from the point of view of a company 

From the perspective of what country is this reply: (please select one country) 

Brazil 
China 

i. 
ii. 
iii.  USA 

Please focus your survey contribution on one sector or sub-sector. You are most welcome to cover 
additional (sub-)sector(s) with a separate questionnaire reply. 

Please select the (sub-)sector that is the subject of this questionnaire reply: 

1.  Woodworking sector  

(a)  Sawnwood sub-sector 
(b)  Wood-based panels sub-sector 
(c)  Other builders’ carpentry and joinery sub-sector 
(d)  Wooden containers & packaging sub-sector 

2.  Pulp, paper and paper products manufacturing sector 

(a)  Pulp production sub-sector 
(b)  Manufacture of paper & paperboard sub-sector 

- Graphic paper sub-sector 

- Packaging paper and paperboard sub-sector 

- Household and sanitary paper sub-sector 

- Other paper & paperboard grades sub-sector 

Impacts on investments and innovation 

What are the key current and future drivers or barriers for investment and innovation for your sector 
in your country (e.g. interest rates, loan securities, subsidies, tax shelters, market growth, RDTI 
support)?  

Current 

Future 

drivers/stimulators 

barriers/blockages 

247 

 
 
 
 
 
 
 
 
 
 
Sectoral Structure 

Are there any factors related to the size-class structure of the F-BI sectors you have indicated above 
which could influence the performance /competitiveness of companies? (e.g. predominance of 
multinationals/SMEs etc.) 

How do you expect company size distribution of those (sub-) sectors will change in the next ten years? 
What are the main factors that are driving this change? 

Breakdown of key cost components and cost structures 

If answering from the point of view of a company, please specify the number of employees in your 
company 

Presentation of the overall cost structure of the specified (sub-)sectors. From your perspective, please 
provide an indicative level (%) of cost structure for the following cost categories: (Even rough 
estimates of percentages are OK). 

Cost segment 
 . raw materials (e.g. wood, pulp, chemicals)  
 . operating and maintenance costs  
 . labour costs  
 . energy costs (e.g. heat, steam, electricity)  
 . transport and fuel costs  
 . capital costs (fixed one-time expenses)  
 . other costs 

Indicative share of total production costs: 

∑ = 100 %  

If possible, please specify the total average production cost per cubic metre or metric tonne of product 
produced? (that is including all types of costs as specified above) (indicate currency) 

Value 

Currency 

/ Unit (Mt or m3) 

Total average production cost per 
output unit 

248 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Do companies in your sector differentiate their products for different markets (e.g. local vs. EU 
market), in view of existing differences in regulations and policies (e.g. local vs. EU)? If so, to what 
extent? 

1.  No 
2.  Yes. Please explain to what extent: 

In your view what are the primary costs that are affected by legislation and to what extent? 

Cost category 

I don't 
know 

A cost 
decrease 

No cost 
change 

A cost 
increase 

Please add any details if possible: 

-raw materials (e.g. wood, 
pulp, chemicals) 

 operating and 
maintenance costs 

 labour costs 

 energy costs (e.g. heat, 
steam, electricity) 

 transport and fuel costs 

 capital costs (fixed one-
time expenses) 

 other costs 

In the following table, can you identify specific legislation or categories of legislation which are likely 
to have a significant cost impact for companies? 

Policy category 

Significant 
impact 

No 
significant 
impact 

Don’t know 

Please explain 

1. 

2. 

Climate Policy (e.g. LULUCF) 

Energy Policy 

Environmental Policy (e.g. relating to air 

2. 
and water quality, phytosanitary, environmental 
liability, or waste related) 

3. 
such as EU Timber Regulation, Lacey Act etc.) 

Forest-related Policy (e.g. FLEG-T policy 

4. 
health and safety, working time limits etc.) 

Employment Policy (e.g. relating to workers 

5. 
safety rules etc.) 

Products Policy (e.g. ecolabels, product 

249 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6. 
safety, transport vehicle emission limits etc.) 

Transport (e.g. quarantine regulations, road 

7. 
Trade (e.g. WTO rules, trade defence or 
trade defence mechanisms, quarantine rules etc.) 

Is EU regulation/legislation harder (e.g. costlier and/or more administratively burdensome) to comply 
with for companies in your sector than other trade destinations? Please explain. 

Do you expect domestic (i.e. Brazil, China, USA) regulatory impacts to change for your sector 
in the coming years? [Please mark your selection in colour].  

1. 
increase a lot 
2. 
increase a bit 
3. 
stay the same 
4.  decrease a bit 
5.  decrease a lot 

Considering your answer in the previous question, If possible, explain and give details: 

Do you expect EU regulatory impacts to change for your sector in the coming years? [Please mark 
your selection with colour]. 

1. 
increase a lot 
2. 
increase a bit 
3.  stay the same 
4.  decrease a bit 
5.  decrease a lot 

Considering your answer in the previous question, If possible, explain and give details: 

Please let us know if you have any comments or suggestions relating to this questionnaire or 
concerning the topic of our study in general.  

250 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Thank you for participating! 

251 

 
 
 
 
 
 
Appendix I

 Company size-class distribution of the ORBIS query result. 

Country 

Brazil 

China 

USA 

Total 

Company size category 

Very large 

Large 

Medium sized 

Small 

9 

44 

27 

80 

15 

119 

34 

168 

23 

152 

15 

190 

52 

98 

23 

173 

Total 

99 

413 

99 

611 

Note: The QuestionPro e-mail tracking functionality allowed monitoring how many of the emails were actually delivered to the 
intended recipients. Numbers in the above table correspond to the number of active, functional email addresses. 

252 

 
 
 
 
 
Appendix J
Regulation, Australian Illegal Logging Prohibition Act 

 Comparison  of  the  US  Lacey  Act  Amendment,  EU  Timber 

US Lacey Act Amendment 

EU Timber Regulation 

Australian Illegal Logging 
Prohibition Act  

Entry into force 

22 May 2008 

3 March 2013 

30 November 2012 

Regulated 
parties 

Applies to all operators 

Applies to the “first placer” of 
products on the EU market 

Applies to importers and 
processors 

Due diligence 

Lacey Act import declaration 
for certain species, otherwise no 
imposed system 

Obligation to follow a due 
diligence system 

Obligation to comply with a due 
diligence system 

lMonitoring 
body 

No body providing 
systems/procedures 

Recognised Monitoring 
Organisations 

No body providing 
systems/procedures 

Definition of 
legality 

Unlawful to import, export, 
transport, sell, receive, acquire, 
purchase interstate or from 
foreign country plants in 
violation of state or foreign law 

Illegally harvested= harvested in 
violation of the legislation in force 
in the country of harvest 

Illegal wood= wood harvested 
in contravention of laws in force 
in the place of harvest 

Key 
requirements 

Declaration form 
No obligation of ”due care” 

Up to the government to prove 
illegality 

Mandatory due diligence: 

• 

• 

• 

Provide information 

Risk assessment 

Risk mitigation 

Mandatory due diligence: 

• 
• 
• 
• 
• 
• 

Gather information 
Risk assessment 
Risk mitigation 
Custom declaration 
Statement of compliance 
Auditing 

VPA1 / CITES2 

VPAs / CITES not considered 

VPAs / CITES proof of compliance  VPAs / CITES not considered 

Product scope 

Applies to plants and products 
derived from plants 

Applies to wood and wood 
products 

Applies to wood 

Sanctions 

• 

• 

• 

Forfeiture of goods and 
vessels 

Fines 

Jail time 

• 

• 

• 

Fines 

Seizure of the wood 

Suspension of authorisation 
to trade 

• 

• 

• 

Seizure, forfeiture 

Fines 

Jail time 

Role of 
certification 

No preferential role for 
certification 

Minor to no role for certification 
(risk assessment/mitigation) 

No preferential role for 
certification 

1 Voluntary Partnership Agreements are a specific legal instrument of the EU Timber Regulation. They 
are  a  legally  binding  trade  agreement  between  the  European  Union  and  a  wood-producing  country 
outside the EU; 2 Convention on International Trade in Endangered Species of Wild Fauna and Flora. 

Source: modified after CEPI. 

253 

 
 
 
 
Appendix K

 Summary table for Brazil 

Policy area 
Environment 

Policy name 
National 
Environmental 
Policy 

Date 
1981 

Water Resources 
Policy 
Environmental 
Crimes Law 

1997 

1998 

Forest-related 

Forest Code of 
1965 (amended 
in 2012) 

1965 (latest 
amendment 
2012) 

Decree 3179 on 
penalties for 
forest crimes 
Decree 3420 

1999 

2000 

Agriculture and 
Livestock Plan 
2011-2012 

2011 

Trade 

Brasil Maior 

2011 

Areas covered by the NEP include: 
definition of standards, licensing, 
environmental impact assessments, 
establishing special areas for 
preservation, incentives for cleaner 
production, and environmental 
zoning 
Protection of Brazil’s river basins 
and the natural vegetation  
Establishment of criminal penalties 
for those found guilty of committing 
environmental crimes. 
The 2012 law regulates and restricts 
activities in specifically  
environmentally protected areas. 
The 1965 law established that 50% 
of rural land should be maintained 
as forest (legal reserves) and 
prohibited the clearing of natural 
vegetation in sensitive areas. 
Regulating the application of 
penalties for forest crimes 

Creation of the national forest 
programme. The aims of the NFP 
aims are to: (1) promote and 
implement sustainable forest 
development; (2) protect 
biodiversity of forest ecosystems; 
(3) harmonize sustainable forest 
development with sectoral policies 
and other sectors; (4) institutional 
development, with the Federal 
Government playing a key role in 
the coordination and modulation of 
activities. Specific objectives 
include: ensuring the production of 
raw materials to meet the needs of 
the domestic and external markets; 
and boosting the supply of forest 
products and by-products, restoring 
degraded areas, reducing waste, 
introducing technologies and new 
markets and promoting 
employment and income. 
The Agriculture and Livestock plan 
aims to increase agriculture 
production (including the area of 
forest plantations ) and encouraging 
environmentally sustainable 
practices.  
The plan Brasil Maior aims to foster 
innovation and competitiveness in 
the Brazilian economy. It focuses on 
strengthening production processes, 
developing technological and 
entrepreneurial skills, improving 
energy supply, diversifying exports 
and increasing internationalization, 
and developing competences for 
sustainable development. The plan 
targets specific productive sectors 
[including the pulp, paper and 
paperboard sector], and it deals 
with cross-cutting issues such as 
international trade, investment, 
innovation, technical and vocational 
training, sustainable production, 
small and medium enterprises’ 

Cost area 
Cost/Availability 
of raw materials 

Cost/Availability 
of raw materials 
Cost/Availability 
of raw materials 

Cost/Availability 
of raw materials 

Cost/Availability 
of raw materials 

Cost/Availability 
of raw materials 

Cost impact 

↗ 

↗ 

↗ 

↗ 

↗ 

↗ 

Cost/Availability 
of raw materials 

Cost/Availability 
of capital 

↘ 

254 

 
 
 
Brazilian Export 
Strategy 

2008 

Cost/Availability 
of capital 

↘ 

competitiveness, special initiatives 
for regional development, 
customers’ well-being, labour  
conditions and relations. 
The document provides a diagnostic 
analysis of the current export 
performance of Brazilian economy 
and it outlines a strategy aiming to 
increase exports and meet the 
targets contained in the national 
productive development policy. The 
strategy envisages five main 
objectives: 1) increase 
competitiveness of Brazilian 
exporters; 2) increase exports 
added-value; 3) increase the 
number of exporters; 4) increase 
access to foreign markets; 5) 
increase exports of services. 

Legend: ↗ : cost increase ; ↘ : cost decrease ; → : no significant cost implication ; ? : cost impact uncertain 

255 

 
 
 
 
Appendix L

 Summary table for China 

Policy area 
Environment 

Date 

Policy name 
Wildlife 
Conservation and 
Nature Reserve 
Development 
Programme 

Forest-related 

Forestry Law 

1984 

The Natural Forest 
Protection 
Programme 

1998 

1999 

Conversion of 
Agricultural Land 
to Forests and 
Grasslands (Grain 
for Green) 

1994- 

China National 
Action Programme 
To Combat 
Desertification 

Key Shelterbelts 
Programme 

1978 

Trade 

n.a. 

China Timber 
Legality 
Verification 
Scheme (CTLVS) 

Notes 
The WCNRDP targeted conservation 
of species and habitats. Between 2001 
and 2006, 831 natural reserves were 
created and 19.5 million ha of forest 
and other sites were protected. By 
2010, the number of reserves was 
predicted to reach 1800 (16% of the 
total land area) with 220 national 
nature reserves. 
Enacted with a view to protecting, 
cultivating and rationally exploiting 
forest resources, accelerating 
territorial afforestation and making 
use of forests in water storage and soil 
conservation, climate regulation, 
environmental improvement and 
supply of forest products to meet the 
requirements of socialist construction 
and people's livelihood. 
Affecting logging restrictions, 
protected areas, replanting, and a 
range of other policies aimed at 
protecting China’s forests and 
reducing the risk of erosion and 
flooding 
Initiated in 1999 in order to combat 
deforestation, ecological degradation 
and soil erosion resulting from over-
cultivation. At the 16th Party Congress 
in 2002, the GFG programme was 
expanded to a nation-wide 
programme. Some 151.36 billion yuan 
was committed to the programme. 
The grain-for-green policy aimed to 
move 15 million ha of low-yield 
farmland to forest and to afforest 
another 17 million ha of barren land. 
The programme was suspended in 
2007. By 2008, 8.2 million ha of 
cropland had been converted to forest 
through the programme. 
China signed UN Convention to 
Combat Desertification in 1994 and 
ratified the convention in 1997. The 
first national action programme was 
published in 1996. An update was 
issued in 2005. The long-term 
objective (-2050) is to establish 34 
million ha of forest and grassland, 1.8 
million ha of forest shelterbelts, 
enclose a further 19 million ha of 
desert to enable regeneration of forest 
and grassland. 
The program was planned initially for 
the period (1978-2050) in 8 phases. 
The total planned investment was 
7.68 billion yuan and 35.08 million ha 
of afforestation was planned. By the 
end of 2008, a total 24.47 million ha 
afforestation had been conserved by 
the program 
In order to meet the new 
requirements set by the Lacey Act 
Amendment and the EU Timber 
Regulation, China is in the process of 
implementing the China Timber 
Legality Verification Scheme (CTLVS) 

Cost area 
Cost/Availability 
of raw materials 

Cost impact  
↗ 

Cost/Availability 
of raw materials 

↘ 

Cost/Availability 
of raw materials 

? 

Cost/Availability 
of raw materials 

↘ 

Cost/Availability 
of raw materials 

↘ 

Cost/Availability 
of raw materials 

↘ 

Cost/Availability 
of raw materials 

↗ 

Legend: ↗ : cost increase ; ↘ : cost decrease ; → : no significant cost implication ; ? : cost impact uncertain 

256 

 
 
 
Appendix M

  Summary table for US 

Policy area 
Climate and 
Energy 

Policy name 
Clean Power 
Plan 

Date 
2015 

Environment 

Endangered 
Species Act  
Clean Air Act 

1973 

1970 -  

Clean Water Act  

1972 

Safe Drinking 
Water Act 
Resource 
Conservation 
and Recovery 
Act 
Comprehensive 
Environmental 
Response, 
Compensation, 
and Liability Act 
Forest-related  National Forest 

Management 
Act  

Labour 

Patient 
Protection and 
Affordable Care 
Act (PPACA, 
‘Obamacare’) 

1974 

1976 

1980 

1976 

2010 

Cost area 
Energy costs 

Cost implication 
Energy costs ↗ 
Potential for F-BI 
industries to make 
money from 
production of 
renewable energy ? 

Cost/Availability of 
raw material  
Capital and 
Operational costs 

Capital and 
Operational costs 
Capital and 
Operational costs 
Capital and 
Operational costs 

↗ 

↗ 

↗ 

↗ 

↗ 

↗ 

↗ 

Cost/Availability of 
raw material 

Labour  

↗ (*) 
? (**) 

Notes 
Cut harmful pollution from the 
power sector by 32% below 2005 
levels and smog-and soot-forming 
emissions that threaten public 
health by 20%. States are free to 
reduce emissions by various means 
and must present their plans to do 
so to the Environmental Protection 
Agency by September 2016 (with 
possible extension to September 
2018). If they do not do so, the 
EPA will impose a plan for the 
state. 
protection of endangered species 
and habitats 
The CAA of 1970 initiated four 
important regulatory programmes: 
the National Ambient Air Quality 
Standards (NAAQS); State 
Implementation Plans (SIPS ); 
New Source Performance 
Standards (NSPS); and National 
Emission Standards for Hazardous 
Air Pollutants (NESHAPs) 
Affecting disposal of waste 
products 
Affecting disposal of waste 
products 
Affecting disposal of waste 
products 

NFMA requires that publicly 
owned (federal and state) forests  
are managed in a way that gives 
due consideration to forest 
ecosystem services other than 
wood production 
Aims to increase the affordability 
and availability of health care and 
to keep the costs of health care 
down. Employers with ≥50 full-
time employees must offer health 
insurance to full-time workers by 
2015-2016.  
(*) Costs of healthcare for 
employers have increased as 
employers ensure that their and 
insurance companies have 
increased premiums to prepare for 
the impacts of the Act  
(**) In the long-term, the act aims 
to keep the cost of health 
insurance down, and the longer 
term impacts for employers are 
less clear  

Affecting disposal of waste 
products 

Capital and 
Operational costs 

Trade 

Trans-Pacific 
Partnership 
(TPP) 

2016 

TPP is a trade agreement between 
12 Pacific Rim countries (including 
the United States) – some of which 
already had bilateral trade 
agreements with the United States 

Reduced tariffs on 
raw materials and 
products 

↘? 

257 

 
 
 
 
Not yet in 
force 

Transatlantic 
Trade and 
Investment 
Partnership 
(TTIP) 

TTIP is a proposed trade and 
investment agreement under 
negotiation between the United 
States and the EU, with the aim of 
liberalizing liberalising trade and 
promoting economic growth 

Reduced tariffs on 
raw materials and 
products 

↘? 

Legend: ↗ : cost increase ; ↘ : cost decrease ; → : no significant cost implication ; ? : cost impact uncertain 

258 

 
 
 
 
 
 
 
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