Co-product allocation at a dissolving pulp mill
Northern Pulp AB operates a mill in northern Sweden that produces 500,000 air-dried tonnes (adt) of dissolving pulp per year and co-produces 45,000 t of crude tall oil (CTO) and 120 GWh of surplus electricity exported to the grid. A European customer wants to compare this pulp with dissolving pulp from a Chinese supplier. The consultant has mill-level aggregated LCI data: total purchased wood 2.6 million m3, total mill GWP 800 kg CO2e per adt before allocation. Electricity and heat are metered on the pulp line; CTO extraction is integrated and not separately metered. Preliminary allocation shares are 8.3% by mass, 17.8% by energy content and 6.5% by economic value. The functional unit is 1 adt of dissolving pulp at 88% dry content, delivered to the customer's gate in Germany. The customer's procurement team wants a single number and a clear statement whether the Swedish pulp is at least 20% lower in GWP than the Chinese alternative.
1. Recommend an allocation approach for the mill's co-products and explain how you would treat the exported electricity. Justify the choices against the ISO 14044 allocation hierarchy.
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ISO 14044 sets a hierarchy: avoid allocation by subdivision or system expansion; if that is not possible, allocate using a physical relationship; if no physical relationship reflects the function, use another relationship such as economic value.
Step 1 - subdivision. The pulp line is metered, so the pulp's direct electricity and heat can be separated. CTO extraction is integrated, so ask for sub-metering of the extraction unit's steam and power. If metering is feasible, allocate only the remaining shared burdens (wood yard, recovery boiler, effluent).
Step 2 - system expansion for electricity. The 120 GWh exported has a clear market substitute. Credit it at the grid mix the customer would otherwise use, and disclose the choice (Nordic residual mix versus country mix). This avoids burdening pulp with electricity that is sold separately.
Step 3 - CTO. Mass (8.3%) and energy content (17.8%) are physical but not causal: CTO is sold as a chemical feedstock, not burned, so energy allocation over-burdens pulp. Economic allocation (6.5%) better reflects the revenue-driving function but is volatile. Use economic allocation as the base case, with mass and energy as sensitivities, and document that this follows ISO's 'other relationship' route because no physical relationship reflects CTO's function.
2. Quantify how much the allocation choice can change the customer comparison, and advise how to report the 20% claim.
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At 800 kg CO2e/adt before allocation, the pulp burden becomes:
- economic allocation (6.5% removed): ~748 kg CO2e/adt
- mass allocation (8.3% removed): ~734 kg CO2e/adt
- energy allocation (17.8% removed): ~658 kg CO2e/adt
The spread is about 90 kg CO2e/adt, roughly 12%. The electricity credit is also material: 120 GWh / 500,000 adt = 0.24 kWh/adt; at 0.3 kg CO2e/kWh that is ~72 kg CO2e/adt. So allocation and credit choices together can move the result by more than 150 kg.
Whether the 20% claim is robust depends on the Chinese benchmark. If the Chinese pulp is ~1,050 kg, the Swedish result is 29-37% lower and the claim survives all allocation choices. If the Chinese pulp is ~850 kg, the difference is only about 12% and the claim is inside the allocation uncertainty. Report the base case plus a table of allocation and electricity-credit sensitivities, and require the Chinese data to use the same boundary, functional unit and allocation logic. Do not give procurement a single number without that table.