Table Of Content'r, al
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ECONOMIC ASSESSMENT -OF WATER
POLLUTION ABATEMENT OPTIONS FOR
ONTARIO PULP AND PAPER MILLS
1
APRIL 1993
Ministry of
Ontario
Environment
and Energy
r
I
TD
899
.P4
r36
1993
Copyright Provisions and Restrictions on Copying:
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for Ontario. It may be reproduced for non-commercial purposes if credit is
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contact Service Ontario Publications at copyright a)ontario.ca
ISBN 0-7778-0867-6
1
ECONOMIC ASSESSMENT OF WATER POLLUTION
ABATEMENT OPTIONS FOR ONTARIO PULP AND PAPER MILLS
e
APRIL 1993
G
1
Cette publication technique
n'est disponible qu'en anglais.
Copyright: Queen's Printer for Ontario, 1993
This publication may be reproduced for non-commercial purposes
with appropriate attribution.
PIBS 2339
I
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I
NOTE:
This report and the data on which it is based represents the operation of 27
Ontario pulp and paper mills subject to MISA Regulation.
In October 1992, Abitibi-Price announced the permanent closure of one of its
mills in Thunder Bay leaving twenty-six mills currently subject to MISA
Regulation in Ontario.
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ABSTRACT
The cost-effectiveness and potential economic and financial effects of different levels
of water pollution abatement identified were assessed in support of effluent limits
development for Ontario pulp and paper mills. Implications of incremental abatement
costs, the capacity of firms to pass on these costs as increased product prices and
effects on the competitive position and financial performance of the sector as a whole
and its constituent firms were assessed. The annualized capital and operating costs
of the options analyzed in the report ranged up to 9% of direct manufacturing costs
but could exacerbate poor financial results should financial performance similar to the
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early 1990s continue for the next several years. However, if future financial
performance during the next decade mirror that of the average performance over the
last 10 years, changes in measures of liquidity, solvency or profitability would range
from little or no change for one option to a 27 % reduction in profit at another
company for the highest cost option.
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TABLE OF CONTENTS
CHAPTER/ TITLE PAGE
SUBSECTION
I
........................................ - viii -
EXECUTIVE SUMMARY
.......................................... -
1.0 INTRODUCTION
1 -
..................... - 3-
2.0 ANALYTICAL PROCEDURES AND ISSUES
2.1 BAT Options, Abatement Cost Functions and Cost-Effectiveness .. - 3 -
..................................... - 4 -
2.2 Analytical Steps
..... -
3.0 STRUCTURE OF THE ONTARIO PULP A.N.D. .P.A.P.E.R.. I.N.D.U.S..T.R.Y...... - 8 -
3.1 Industry Overv.ie.w. .a.n.d. I.m.p.o.rt.a.n.c.e........................ 8-
3.2 Market Pulp......................................... - 14-
3.3 Newsprint - 18-
..........
1 3.4 Fine Papers, Paperboard and Other Paper Products - 21 -
.................................... - 23 -
3.5 Industry Outlook
4.0 POTENTIAL ABATEMENT PROGRAMS, COSTS AND
........................................ .27-
EFFECTIVENESS
.....................
4.1 BAT Options for Pulp and Pap.er. M..il.ls...................... - 28 -
I
4.2 Input Data and Assumptions - 28 -
............................. - 35 -
4.3 Abatement Cost Functions
..............
4.4 BAT Options and Cost Estimates - 36-
..................
4.5 Cost-Effectiveness of Abatement Options - 44 -
......................... -
4.6 Distribution of Abatement Costs 48 -
......................................... .49-
4.7 Summary
5.0 ABILITY OF THE ONTARIO PULP AND PAPER SECTOR TO
..............
INCREASE PRICES OR REDUCE FACTOR COSTS - 52-
................... -
5.1 The Potential to Increase Product Prices 52 -
.......................... - 55 -
5.2 Newsprint Mar.k.e.ts. a.n.d. .P.ri.c.es.......................
5.3 Market Pulp - 59-
...............
5.4 Fine Papers, Paperboard and O.th.e.r .P.r.o.du.c.t.s................ - 61 -
5.5 Ability To Change Input Prices - 61 -
6.0 FINANCIAL ASSESSMENTS AN.D. I.M.P.A..C.T.S. O..F. B.A..T. O.P..T.IO.N.. C.O..S.T.S.
ON PULP AND PAP.E.R.. F.I.R.M..S............................... - 64-
A 6.1 Introduction ...................... - 64 -
6.2 Financial Indicators and. T.h.r.e.sh.o.l.d.s....................... - 67 -
6.3 Adjustment Procedure - 68-
6.4 Financial Performance for the Canadian Industry 1981-1990 - 69 -
- i -
1
................ 1
6.5 Historical Performance of Firms, 1981-1990 - 70 -
...............
6.6 Financial Implications of MISA Related Costs - 71 -
................... - 76 -
6.7 Summary of MISA Related Cost Results
6.8 Effects of Costs of C.o.m..p.ly.in.g. .w.it.h. E.n.v.ir.o.n.m.e.n.t.a.l R..e.g.ul.a.ti.o.ns. .in..
Other Jurisdictions - 77 -
.....................
7.0 IMPLICATIONS FOR COMPET.I.T.IV..E.N.E.S.S....................... - 82-
7.1 Cost Competitiveness - 82 -
7.2 Importance of the Exchange Rate to the Ontario Pulp and Paper
.......................................... .86-
Industry
.................
7.3 MISA Costs Per Unit of Product Produced .......... - 88 -
7.4 MISA Costs as a Proportion of Manufactu.ri.n.g. C..o.st.s........... - 89 -
7.5 Other Issues Affecting Competitiveness - 91 -
.......
7.6 Environmental Protectio.n. A.c.t.iv.it.ie.s. i.n. O.t.h.e.r .J.ur.is.d.i.ct.io.n.s........ - 92 -
7.7 Concluding Comments - 96 -
............................................. - 99 -
8.0 SUMMARY
.........................................
9.0 REFERENCES - 103.
APPENDIX A PLANT SPECIFIC ABATEMENT COST FUNCTIONS
INITIAL LOADINGS, LOADING REDUCTIONS, FINAL
LOADINGS AND COSTS OF BAT OPTIONS
APPENDIX B DEFINITION AND CALCULATION OF STANDARD
RATIOS AND PROCEDURE FOR ADJUSTING
FINANCIAL DATA
APPENDIX C ECONOMIC IMPACT TABLES
I
LLIISSTT OF FIGURES
NUMBER TITLE PAGE
..............
Figure 3.1 Ownership Of Ontario Pulp and Paper Industry - 10-
Figure 3.2 Ontario Pu.l.p., .P.a.p.er. .an.d. .P.a.p.e.rb.o.a.r.d. C.a.p.a.c.it.y. f.o.r. 2.7. .M.i.ll.s. S.u.b.j.e ct.15-
to MISA
......
Figure 4.1 Kraft Mill Subsector Abatement Costs and Final Loadings - 38-
'
Figure 4.2 Kraft Mill Subsector Abatement Costs and Final AOX Loadings
(5 Mills) .......................................... .38-
Figure 4.3 Kraft Mill Subsector Abatement Costs and Final AOX Loadings
.......................................... .39-
(4 Mills)
'
Figure 4.4 Kraft Mill Subsector Abatement Costs and Final BOD Loadings
(9 Mills) .......................................... .39-
Figure 4.5 Kraft Mill Subsector Abatement Costs and Final TSS Loadings
(9 Mills) .......................................... -40-
Figure 4.6 Sulphite Mill Subsector Abatement Costs and Final BOD Loadings
.......................................... -40-
(8 Mills)
'
Figure 4.7 Sulphite M.il.l .S.u.b.s.ec.t.o.r .A.b.a.te.m..en.t. C..o.st.s. a.n.d. F.i.n.a.l .T.S.S. L.o.a.d.in.g.s.
(8 Mills) - 41 -
Figure 4.8 Fine Paper/Deinking/Tissue/Board.Mill Subsector Abatement Costs
........................
and Final BOD Loadings (8 Mills) - 41 -
Figure 4.9 Fine Paper/Deinking/Tissue/Board .M.il.l .S.u.b.s.e.ct.o.r .A.b.a.te.m..e.n.t .C.o.s.ts
and Final TSS Loadings (8 Mills) - 42-
' Figure 4.10 Corrugatin.g. S.u.b.s.e.c.to.r. A..ba.t.e.m.e.n.t .C.o.s.ts. a.n.d. F..in.a.l .B.O.D.. L.o.a.d.in.g.s.
(2 Mills) - 42-
Figure 4.11 Corrugating Subsector Abatement Costs and Final TSS Loadings
.......................................... -43-
(2 Mills)
.......
Figure 4.12 Annualized Cost Per Kg Removed of AOX for Kraft Mills - 43-
Figure 4.13 Incremental Annualized Cost per Incremental Kg of AOX
........................
Removed for Three BAT Options - 477 --
Figure 4.14 Annualized Cost $/Tonne of Product - Most Cost Effective Option -48-
Figure 4.15 Annualized Cost $./T.o.n.n.e. o.f. P.r.o.d.u.c.t .- .M.o.s.t .C.o.s.t .E.ff.e.c.tiv.e. .O.p.ti.o.n. -49-
Figure 5.1 Newsprint Prices - 58-
.................................... - 60-
Figure 5.2 Pulp Price Index
Figure 6.1 Canadian Paper and Allied Group - Industry Performance
........................................ .69-
1981-1990
Figure 6.2 Net Income for Six Firms Which Operate Pulp and Paper Mills in
...........................................
Ontario -70-
Figure 6.3 Return on Assets for Six Pulp an.d. .P.a.p.e.r .F.ir.m.s. .a.n.d .In.d.u.s.t.ry.....
Aggregate, 1981-1990 - 71 -
Figure 6.4 Total Debt to Total Assets for Six Pulp and Paper Firms and
.........................
Industry Aggregate, 1981-1990 - 72-
LIST OF FIGURES (continued)
NUMBER TITLE PAGE 0
Figure 6.5 Current Ratio for Six Pulp and Paper Firms and Industry
Aggregate, 1981-1990 72-
Figure 6.6 Current Ratio - Six Pulp and Paper Firms Subject to MISA Most Cost
..................................... - 80-
Effective Option
Figure 6.7 Current Ratio - Six Pulp and Paper Firms Subject to MISA Most Cost
..................................... - 80-
Effective Option
Figure 6.8 Return on Capital - Six Pulp. a.n.d. .P.a.pe.r. F.i.r.m.s. S.u.b.j.ec.t. t.o. M..IS.A....
Most Cost Effective Option - 80-
Figure 6.9 Return on Capital - Six Pulp and Paper Firms Subject to MISA Maximum
.................................... - 80-
Removal Option t
Figure 6.10 Total Debt to Total Assets - Six Pu.lp. .a.n.d. P.a.p.e.r .F.i.rm..s .S.u.b.je.c.t. t.o.
MISA Most Cost Effective Option - 80-
Figure 6.11 Total Debt to Total Assets -. S.i.x. P.u.l.p .a.n.d. P.a.p.e.r .F.ir.m.s. .S.u.b.je.c.t .to. .MISA
Maximum Removal Option - 80 -
Figure 6.12 Return on Assets - Six Pulp. a.n.d. P.a.p.e.r. F.i.rm..s. S.u.b.j.ect to MISA
Most Cost Effective Option - 81 -
Figure 6.13 Return on Assets - Six Pulp and Paper Firms Subject to MISA Maximum
.................................... - 81 -
Removal Option
Figure 6.14 Ann. Capital Cost to Cap Exp - Six Pulp and Paper Firms Subject
...................... - 81 -
to MISA Most Cost Effective Option
Figure 6.15 Ann. Capital Cost to Cap Exp - Six Pulp and Paper Firms Subject
......................
to MISA Maximum Removal Option - 81 -
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