Chile's pulp mills poised for carbon capture and sustainable fuel revolution

Carbon capture and sustainable fuel production represent significant circular economy opportunities for Chilean pulp and paper mills. However, having the right policies in place is critical to unlocking investment, BNamericas was told.

Chile aims to achieve carbon neutrality by 2050, while corporate ESG considerations are increasingly driving interest in emissions management, process optimization, and the utilization of industrial waste and byproducts.

Investments in carbon capture at mills would enable them to obtain biogenic carbon dioxide for their own e-fuels or green methanol production systems, as well as for third-party use. Additionally, biofuels, including various types of sustainable aviation fuel (SAF), could be produced from processing waste biomass.

Investment in infrastructure for CO2 capture or sustainable fuel production would require appropriate incentives.

“The challenge with all of these is that you need incentives,” Nickolai Selbach, US-based operations VP of the bioproducts division at global engineering and consulting firm Wood, told BNamericas.

“Biofuels, SAF, carbon capture – any and all of these will require government incentives to be economically viable. Are you going to buy [for example] a gallon of gasoline for around US$5, or are you going to buy a gallon of ethanol for US$15?” he said.

“You either have to mandate it by law or you need government incentives to stimulate the market to invest in these technologies because as they are more expensive.”

Selbach spoke to BNamericas during a recent visit to the Chilean offices, part of a network of Wood operations spanning 60 countries that share expertise and knowledge.

Carbon capture

In terms of carbon capture, Wood's bioproducts engineers in the US and Canada are engaged in system integration, conducting early-stage front-end studies.

A key economic challenge is securing the right offtakers, as the proposed CO2 volumes would require large buyers, such as green methanol or e-fuels producers.

For example, a mill project in Canada is expected to produce around 1Mt/y of CO2, while a traditional consumer like a beverage plant would only need a fraction of that amount.

“It’s an order of magnitude,” said Ulf Tryggvesson, bioproducts technical director at Wood’s Canadian offices, noting that there is potential in Chile to produce other industrial inputs from waste biomass.

Tryggvesson was also in Chile for discussions about client projects.

Integrating a carbon capture and storage system typically requires several hundred million dollars.

In addition to potential future demand from e-fuels plants, demand for associated carbon credits exists from multinational companies such as Microsoft and Amazon.

Pulp and paper mill investment

Carbon capture technology could be installed at existing or future mill complexes, which typically incorporate biomass-fired power plants.

Over the next 10 years, mill investments in Chile are expected to focus on modernizing existing assets, involving projects under US$50mn. Beyond that, once plantations mature, investment in new processing capacity should resume.

“You can only make as much pulp or paper as you have wood,” Tryggvesson said.

Selbach outlined potential investment flows for pulp and paper mills in Chile, where facilities are already among the most efficient globally.

“What we’ll see in Chile, I think, over the next 10 years is what we see in North America by and large, and that is optimization of existing assets.

“There’s always a push to reduce water consumption, the amount of fresh water required to make a ton of pulp, it’s energy efficiency, how to make a ton of pulp with less energy.”

Chile's largest pulp and paper companies are Arauco and CMPC.

Green methanol and e-fuels

Regarding e-fuels made from green methanol – produced from green hydrogen and CO2 – a demonstration plant is currently operating in the southern Magallanes region. A larger-scale plant, Cabo Negro, is in the environmental review phase.

Further north, the Biobío region, known for its industrial and agricultural activities, processes more than half of Chile’s wood.

Biobío is seen as a potential candidate for CO2 capture initiatives linked to local e-fuel or green methanol demand, as it houses pulp mills in the districts of Arauco, Laja and Nacimiento.

Green methanol and e-fuels could be used locally as feedstock for the chemical industry, for bunkering or for air transport, according to a 2024-50 green hydrogen roadmap published by regional sector association H2VBiobío.

Together, the mills produce around 7.4Mt/y of CO2, which could potentially be used to produce up to 5.3Mt/y of methanol.

Utilizing CO2 obtained from biomass or directly from the air – an emerging technology – could give end products a competitive advantage.

Currently, the forecast local demand for CO2 in Biobío is 160,000t/y.

Biobío chemical companies Oxiquim and Bakelite account for almost all imported methanol, which is used in producing fertilizers, as well as resins, which are used as adhesives by pulp and paper mills.

Biofuels and SAF

In terms of biofuels and SAF produced from forestry sector waste, mills could leverage their existing know-how and infrastructure.

“They have the logistics, they have the vehicles to transport everything, and the contractors,” Tryggvesson said. “They already have power plants and all the necessary components.”

Cellulosic waste and residues can be converted into sustainable fuels through various pathways, such as the Fischer-Tropsch process.

Tryggvesson added: “Airlines are willing to pay for it [SAF], especially given the political pressure to do so. There is certainly money and interest, along with a strong push to maximize SAF use. I would say the market for SAF is unsaturable.”

Chile has published a SAF roadmap.

Globally and locally, air travel is expected to continue its upward trend, with emissions advances achieved through technological efficiencies offset by increased fuel consumption. The sector nevertheless aims for net-zero emissions by 2050, a goal that will require significant fuel decarbonization.

In 2023, global SAF production reached 600Ml (million liters), with output expected to triple this year, accounting for 0.53% of jet fuel demand, according to estimates from the International Air Transport Association. By 2050, over 400Bl of SAF could be needed, when around 874Bl of fuel is expected to be consumed.