A needle in a haystack: Projecting the climate impacts on Brazil's pulp and paper industry

Abstract

Climate change is expected to severely impact the forestry industry by increasing wildfire occurrence, triggering pest outbreaks, or modifying trees' productivity. To understand the long-term impact of climate change on forest production, we investigated how fluctuations in forest productivity and land availability would impact the expansion of Brazil's pulp and paper industry. We used a Mixed Integer Nonlinear Model to evaluate the financial returns, costs, and potential mill locations under multiple climates and land market scenarios. The study area was the state of Mato Grosso do Sul in Brazil, which is among the world's most attractive natural resources investments in pulp and paper. Our results showed that the region needs to expand its plantation forest area by at least 586,166 ha from the current land base of 912,371 ha in the upcoming decades to supply enough pulpwood for incoming mills and offset potential productivity losses driven by climate change. Pulpwood production cost is expected to increase by 0.61 % annually (or 16.4 % in the next 25 years). These results highlight the risks associated with losses in the productivity of plantation forests due to the changes in climate and land use. We assessed the importance of land use change rate in the market development. If it remains unchanged, the industry's success could be restrained, reducing positive externalities in the region. Furthermore, the model we proposed here can be extended to other industrial problems (e.g., wood pellet mills and biochar collection points) and assess different climate scenarios (e.g., climate shocks like droughts or wildfires).