Pulp Nonfiction: Regionalized Dynamic Model of the U.S. Pulp and Paper Industry

This article presents a modeling framework that enhances our ability to analyze the implications of policy for future sustainability of industrial systems. The framework quantifies the relationship between physical input and waste flows, capital vintage, and investment behavior in the U.S. pulp and paper industry. A regional vintage model is developed that simultaneously incorporates investment decisions, vintage structure of the capital stock, and physical material and energy flows, in addition to paper demand. Each capital vintage is specified by size, output structure, and age‐specific retirement rates, as well as fiber use and energy intensities. Both embodied and disembodied technological change are incorporated, as well as greenhouse gas emissions from fuel use, and decomposition and incineration of waste. Estimated equations are used to simulate industrial futures until 2020, from a system of nonlinear differential equations. Our results demonstrate the economic and physical inter‐dependence between material and energy flows and the central role energy prices have in decision‐making. For instance, an increase in average energy prices, ceteris paribus, will on average discourage paper recycling, which has implications for greenhouse gas emissions as well as for changes in energy intensity. The analysis of the data reveals diminishing rates of energy self‐generation, and the immense longevity of capital, which hampers rapid change in input and carbon intensity. This stresses the importance of investment‐led strategies in facilitating faster capital turnover to enhance future sustainability of the system.