International Paper 2012 Annual Report Download - page 32

Brazil, China and Morocco, have signaled they intend
to continue to participate in an extended Kyoto
process. While only the EU had actual emissions
caps, some countries are enacting local programs to
address climate change. Currently, these local pro-
grams do not appear to materially impact IP oper-
ations. Russia and the U.S. have not agreed to
participate in the post-Kyoto process. Due to the lack
of clarity around what post-Kyoto will look like, it is
not possible at this time to estimate the potential
impacts of future international agreements on Inter-
national Paper’s operations. Under the European
Union Emissions Trading System (EUETS), the EU
has committed to greenhouse gas reductions. Inter-
national Paper has two sites covered by the EUETS.
These measures did not have a material effect on our
European operations in 2012, nor are they expected
to have such an impact in 2013 at current market
prices for emission credits. Significant swings in
market price associated with credits could impact
European operations.
The U.S. has not ratified the Kyoto Protocol nor have
efforts in the U.S. Congress to legislate the control of
greenhouse gas (GHG) emissions been successful.
To date, the activity in the U.S. has been spear-
headed by the U.S. EPA and, to some extent, by the
states. Pursuant to the GHG Mandatory Reporting
Rule promulgated in 2009, the EPA began a process
to collect data on emitters of greater than 25,000 tons
of greenhouse gas per year. Twenty-four of our U.S.
facilities and six closed landfills are covered by and
submitted reports as required under this rule. We do
not believe that the reporting rule has had nor will
have a material impact on our operations. Addition-
ally, the EPA has indicated that it will propose New
Source Performance Standards (NSPS) for various
industry sectors which will limit GHG emissions from
certain sources. Currently, the EPA has not identified
the pulp and paper industry in the first phase of
sectors to be covered by the new standards. How-
ever, we anticipate that, at some future time, pulp
and paper sources will be subject to new NSPS rules.
It is uncertain what impacts, if any, future NSPS will
have on International Paper’s operations. The EPA
has convened a Science Advisory Board (SAB) to
assess the neutrality of biomass when combusted in
new sources. The SAB began deliberations in 2011
and submitted recommendations to EPA in late 2012.
It is not clear what, if any, of the SAB recom-
mendations EPA will act on or the timeframe in
which they may take action. Because the use of
biomass is prevalent in the pulp and paper pro-
duction process, the findings of the SAB and how
they are incorporated into climate policy and sub-
sequent regulations could be material to the industry
and the Company.
Some U.S. states have considered legal measures to
require the reduction of emissions of greenhouse
gases by companies and public utilities, primarily
through the planned development of greenhouse
gas emission inventories or regional greenhouse gas
cap-and-trade programs. One such state is California.
International Paper does not have any sites currently
subject to California’s GHG regulatory plan. There
may be indirect impacts from changing input costs
(such as electricity) at some of our California
converting operations but these have yet to manifest
themselves in material impacts. We are monitoring
proposed programs in other states.
It is difficult to predict whether passage of climate
control legislation or other regulatory initiatives by
Congress or various U.S. states, or the adoption of
regulations by the EPA or analogous state agencies
that restrict emissions of greenhouse gases in areas
in which we conduct business, may have a material
effect on our operations in the U.S. In addition to
possible direct impacts, future legislation and regu-
lation could have indirect impacts on International
Paper, such as higher prices for transportation,
energy and other inputs, as well as more protracted
air permitting processes, causing delays and higher
costs to implement capital projects.
International Paper has controls and procedures in
place to stay adequately informed about develop-
ments concerning possible climate change legis-
lation and regulation in the U.S. and in other
countries where we operate to ensure we continue to
assess whether such legislation or regulation may
have a material effect on the Company, its oper-
ations or financial condition, and whether we have
any related disclosure obligations.
In summary, regulation of greenhouse gases con-
tinues to evolve in various countries in which we do
business. While it is likely that there will be increased
regulation relating to greenhouse gases and climate
change, at this time it is not reasonably possible to
estimate either a timetable for the implementation of
any new regulations or our costs of compliance.
Additional information regarding climate change
and International Paper, including our carbon foot-
print, is available at http://internationalpaper.com/
US/EN/Company/Sustainability/Climate.html.
EMPLOYEES
As of December 31, 2012, we had approximately
70,000 employees, 42,000 of whom were located in
the United States. Of the U.S. employees, approx-
imately 27,500 are hourly, with unions representing
approximately 18,000 employees. Approximately
12,000 of the union employees are represented by
the United Steel Workers (USW).
In September 2012, International Paper negotiated the
integration of four former Temple-Inland mills into the
International Paper/USW Mill Master Agreement
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