ForestryBrief Professional #25 🌳💰📡

This is a Communication-pillar issue. It follows a thread we opened in European Forestry Pulse #85. There we flagged a quiet line in Stora Enso's Q1 report. The company's income from free carbon allowances is falling fast. The reason is that the company got cleaner. On paper, that looks like a penalty for doing the right thing. The truth is more interesting. We built this issue with Eeva-Liisa Heinaro at Carbon Lab Finland, who sees both sides of the carbon trade.

One note before we start. This issue is about the compliance carbon market. That is the EU Emissions Trading System, or ETS, that big emitters pay into. It is a different market from the forest-carbon credits a forest owner sells. We covered that other market in the Carbon Series. Keep the two apart. People mix them up all the time.

In May we read Stora Enso's Q1 report and flagged one sleeper line.

The company's income from emission rights was about €72 million in 2025. For 2026 it expects €10 to €20 million. That is a fall of 70 to 85% in a single year.

Stora Enso pointed to changes in the EU's free allocation rules. Several of its sites had become almost entirely biogenic. Biogenic emissions are the carbon from burning wood and other plant matter.

Here is what happens when a site gets that clean. It stops being covered by the ETS at all. And an installation outside the system receives no free allowances. So it has none left to sell.

Read that again. The mill got cleaner. So it lost income worth tens of millions.

That looks like a fine for good behaviour. The cleaner you run, the more you lose.

After that issue ran, Eeva-Liisa Heinaro got in touch. One of her analysts had asked a sharp question. Should this drop be booked as a pure loss? A 100% negative hit?

She started digging. The answer turned out to be more interesting than the question.

Regular readers met Eeva-Liisa in the Carbon Series. Here is the short version.

She spent 30 years in paper industry sales. Then she moved into carbon. She runs Carbon Lab Finland, an independent arm of Conifer Consulting. She has sold carbon projects to forest owners. She has sold carbon credits to corporate buyers. Very few people in Finland have done both.

So when she reads a carbon line in an annual report, she reads it from both sides. That is rare. It is also exactly what this story needed.

Free allowances do not vanish for one reason. Three separate forces push them down. Two have been running for years. One is new.

Force one: the cap falls. The ETS sets a total limit on allowances. That limit drops a set amount each year. Brussels calls it the linear reduction factor. In plain terms, fewer allowances exist every year.

Force two: the benchmark tightens. Free allowances are handed out against a sector benchmark, not a plant's own past emissions. That benchmark gets stricter over time. So a mill can change nothing and still get fewer allowances.

Force three: the 95% exclusion. This one works differently. It is not a slow squeeze. It is a cliff.

The rule sits in Annex I of the ETS Directive. It was added by an amendment agreed in 2023. It applies from 2026.

It works like this. Take an installation's average emissions over the relevant five-year period. If more than 95% of those emissions come from burning qualifying biomass, the installation falls outside the Directive. It is simply no longer an ETS installation.

No coverage means no free allowances. That is the cliff Stora Enso walked over.

Forces one and two were always coming. Any serious operator has had them in the forecast for years. They are the ETS doing exactly what it was built to do.

Force three is different. It is recent, it is abrupt, and the industry is fighting it.

We are not going to pretend this is a happy story for everyone. It isn't. Ignore that and the rest of this issue is worthless.

In January 2026, Cepi published a formal policy paper. Cepi is the Confederation of European Paper Industries. It speaks for the pulp and paper industries of 19 countries and around 850 mills.

Cepi is asking the EU to reopen the ETS Directive before 2030. Two of its six asks matter here. It wants the 2021–2025 benchmark values frozen for the 2026–2030 period. And it wants the 95% exclusion stopped.

Cepi's argument is direct. The threshold "penalises such early and deep decarbonisation efforts," because it pushes nearly emission-free installations out of the system and takes away free allowances they were using to fund the next round of investment.

The paper gives an illustration. Imagine a company spends over €250 million on one mill to reach 98% fossil-free production. At a carbon price near €70 per tonne, the yearly saving works out around €10 million. That is a payback period beyond 25 years.

Cepi also notes the sector has cut its emissions by more than half since 2005. These are not laggards complaining. These are the front-runners.

Now the other side, because it exists. The ETS was built to price fossil emissions. An installation that is 95% biomass is barely a fossil emitter. There is a real logic to saying it no longer belongs in a fossil-emissions market. The system was never designed to pay clean producers.

That is the honest picture. A coherent rule. A legitimate grievance. A live policy fight.

Hold both. Then keep reading, because there is a second question underneath.

If the allowance line falls, where did the value go?

Some of it did not vanish. It moved. Going clean pays in ways that never touch the allowance line.

Energy you control. A mill running on its own biogenic energy needs less fossil fuel. So it is less exposed to fuel price shocks. In a world of volatile energy prices, that security is worth a lot. It is hard to put one number on it. It is still real.

Buyers who pay more. More customers now want low-carbon supply. Some will pay extra for it. That shows up on the sales line, not the allowance line.

Eeva-Liisa calls these counterfactual advantages. They are benefits you gain by being clean. They are spread across the accounts. You cannot point to one tidy figure. So they are easy to miss, and easy to undersell.

You will often hear CBAM named as a clean-producer win. Check the detail before you use it.

CBAM is the EU's Carbon Border Adjustment Mechanism. It entered its definitive phase on 1 January 2026. Two facts matter.

First, the cost sits with the importer. An EU producer does not pay CBAM on what it makes and sells inside the EU. The charge falls on whoever brings covered goods into the bloc.

Second, and this is the part that gets missed: CBAM currently covers six sectors. Cement, iron and steel, aluminium, fertilisers, electricity and hydrogen. Pulp and paper are not among them.

So for a European mill today, CBAM is neither a bill nor a shield. The Commission has proposed widening the scope, and further sectors have been discussed. Watch it. Do not claim it yet.

This is why free allocation matters so much to the paper sector. For now, it is the carbon leakage protection they actually have.

Now the part that matters most for communication.

The policy fight is one thing. How you talk about your own numbers is another. You do not control the first. You fully control the second.

Most clean producers treat the allowance drop as a headwind. They put it in the outlook section, quietly, as a cost. That is the defensive read.

Flip it.

The same fact tells a far better story. "Our free allowances are shrinking because we cleaned up early. We saw it coming. We built for it. That is leadership, not a loss."

This costs nothing. It is the exact same number, told from the other side. One framing sounds like a company taking a hit. The other sounds like a company that was years ahead.

Three ways to play the same card, for three audiences.

For an investor call: "Our emission-rights income is falling because our sites are now almost entirely biomass-fired. We crossed the clean threshold ahead of our peers. The cost we carry today is the cost of a transition others still have in front of them."

For a journalist: "We are losing free carbon allowances because we stopped needing them. That is what cleaning up looks like on a balance sheet."

For staff and recruitment: "We made the hard energy choices a decade early. The numbers prove it. That is the kind of company we are."

Two honest conditions.

The flip only works if it is true. You have to have done the work. A firm that leaned on free allowances to delay cleaning up cannot claim this. The card belongs to producers who actually cut their emissions.

And the flip is not a substitute for the policy fight. Cepi should keep pressing its case. Argue for a better rule and tell a better story. These are not alternatives. Most companies are doing neither.

This is the flip-the-script discipline at the heart of the Forestry Communication Playbook. Same fact. Better frame. The data does not change. The story does.

Quick reminder, because this trips up smart people.

This issue is about the ETS. That is the compliance market. Big emitters must hold allowances for what they emit. Forest-carbon credits do not work here. They never have.

The other market is the voluntary one. That is where a forest owner sells carbon credits to a company that wants to fund climate action. We covered that fully in the Carbon Series.

Different markets. Different prices. Different rules. If someone quotes you the ETS carbon price for your forest credits, they have mixed them up.

This issue shows why the clean-producer story often gets told backwards. And it shows how to flip it.

But your story is your own. Your stakeholders, your numbers, your media, your politics — all specific. Knowing which version of the clean-producer story to tell, and to whom, takes more than a template.

That is what ForestryBrief communication consulting does. We help forest and forest-industry teams turn technical facts into a story that lands. EN | DE | HU.

If you want to flip your own card the right way — [email protected].

Primary source: Eeva-Liisa Heinaro, Carbon Lab Finland — conversation with ForestryBrief, June 2026. Her quotes and attribution in this issue were reviewed and approved by her prior to publication.

Stora Enso EU ETS figures (2025 income about €72 million; 2026 expected €10–20 million): Stora Enso — Interim Report January–March 2026. Context first reported in European Forestry Pulse #85.

The 95% biomass exclusion: Directive 2003/87/EC, Annex I, as amended by Directive (EU) 2023/959 (10 May 2023), applying from 2026. Installations whose average emissions over the relevant five-year period are more than 95% from qualifying biomass combustion are not covered by the Directive. Plain-language explainer: emissions-euets.com — Biomass.

EU ETS free allocation mechanism (linear reduction factor, sector benchmark tightening, Scope 1 scope, biogenic emissions zero-rated): European Commission — General guidance on the allocation methodology (PDF) and the EU ETS Handbook.

Cepi position (call to reopen the ETS Directive before 2030; benchmark freeze; stopping the 95% exclusion; sector figures; the €250 million illustration): Confederation of European Paper Industries — Recalibrating the EU ETS before 2030, 27 January 2026.

Carbon Border Adjustment Mechanism (CBAM) (definitive phase from 1 January 2026; cost borne by the importer; six covered sectors): European Commission — CBAM overview and CBAM sectors.

The voluntary carbon market (for contrast): ForestryBrief Professional #15 — The Carbon Market Rebuilt Itself.

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Wish you all the best: Peter

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