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How AI and carbon credits could impact the paper recycling industry

Bales of scrap paper inside a facility
Baxi's presentation, "Sustainable global shift in recovered fibre – 2030 perspective" considered the current state of the paper recycling sector and what could change within the coming years. Adobe Stock Images

At the BIR World Recycling Convention, Ranjit Baxi, the managing director of J&H Sales International in the U.K. and founding president of the Global Recycling Foundation, talked about the importance of artificial intelligence (AI) and carbon credits in the paper recycling sector.

He argued that the sector should harness the power of AI to improve quality, efficiency, and costs, as well as verifying "green" audit trails. He challenged the sector to focus on the creation of a global carbon credit system whereby paper and other recyclers would be financially rewarded for their role in saving CO2 as part of the drive to net zero emissions.

Baxi's presentation, "Sustainable global shift in recovered fibre – 2030 perspective" considered the current state of the sector and what could change within the coming years.

Francisco Donoso, the paper division president of Dolaf Servicios Verdes S.L in Spain, said that the presentation helped open the sector to new perspectives that are not often discussed.

The speaker shared five key factors that determined successful global trade: logistics costs, currency volatility, economic outlook, demand, and quality control. With parts of the world developing local collections, he believed that exporting lower grades of any fibre would by 2030 be "a no-go area" and more fibre would end up in energy recovery. 

Improving quality and efficiency in sorting plants will be key in the coming years Baxi argued. AI, robotics, and optical sorters will all help to achieve this efficiency. Paper mills will demand green audit trails, and AI in data systems "will play a very important part in our industry" in generating them, as well as transforming logistics and payment systems.

Baxi acknowledged that voluntary carbon credits (VCCs) bought by carbon emitters to offset their CO2 emissions was not a current focus for the sector but "in the next five years, this is what you will all be talking about." Earning credits by recycling paper and other materials could bring in $ 1 to 2 billion for stakeholders across the global recycling chain, he believed. "We are supplying 240 million tonnes of recovered fibre to generate about 430 million tonnes of new paper across the world. That 240 million tonnes can be, should be, and must be part of the VCC system," said Baxi.

Baxi also thought the Indian market had big growth prospects: "Demand for recovered fibre in India will grow first and foremost because of e-commerce." The BIR says that there are expected to be 300 million people in India using e-commerce by 2025, increasing packaging demand. Capacity at Indian paper mills, of which there are around 750, is projected to grow from 14 million tonnes to over 20 million tonnes by 2030 and paper consumption is projected to be 25 million tonnes by 2030. "The good news for us is that 75 percent of Indian paper mills are totally dependent on recovered fibre," Baxi said. Around 30 percent of domestic fibre in India is recovered and it imports around 12 million tonnes.

Considering exports of key paper grades to India over the last 18 months, Baxi called 2023 "a roller coaster ride" with prices falling 50 percent. "Volatility in fibre prices and sea freight costs are becoming more and more important for paper mills to decide which region and which supplier to buy from." In 2022, sea freight to India was around $1,400 and is currently (as of October 2023) nearer $700. "It is helping to tell us that the market now is more stable. The volatility phase is over." 

Simone Scaramuzzi, sales and purchasing director at LCI Srl in Italy, described the market situation in Europe. Mills were not working fully and buying only what was necessary, he said, due to a drop in e-commerce and consumer demand. Energy costs are now around pre-COVID-19 levels and collection levels have fallen 25 to 30 percent. "We are now exporting more than selling to local mills." Shipping costs had fallen but Scaramuzzi did not anticipate any market improvement this year. 

Discussing the Middle East, Atul Kaul, director of pulp and paper at Waraq in Saudi Arabia, said the region produces four million tonnes of recycled containerboard but "every mill is expanding, and every mill needs more quality paper". Even so, fibre was being pulled out of the region to Southeast Asia due to demand there. Kaul said that after peaking in 2022, the industry "came to a crash" in 2023 when prices and demand plummeted. He agreed with Baxi that efficiency would be critical in the future.

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