UPM Annual Report 2019

Production

CASE

3 EPR-type nuclear power plant unit is scheduled to commence regular electricity production inMarch 2021. In Germany, UPMannounced its investment in a natural gas-based CHP plant at UPMNordland paper mill. After completion, the plant will reduce UPM’s fossil CO 2 emissions by 5%. In Hürth, we partner with E.ON to build a biomass fired boiler providing steam for the paper mill, replacing the current fossil-fuel-based steam supply.

investments and programmes in 2019, whilst others are proceeding and more were announced. The research programme More with Biofore in China continued. The UPM Changshu paper mill has already achieved a 2% improvement in its energy efficiency. In Russia, UPMPlywood completed its expansion at the Chudovo plywood mill. The new 19MWbiomass boiler uses wood-based by-products fromplywood production, such as bark, chips and dust. It increases the mill's material efficiency and reduces fossil fuel consumption. In Finland, UPMEnergy is currently refurbishing the Kuusankoski hydropower plant through an extensive renovation andmodernisation project, lasting from2019–2022. TVO’s Olkiluoto

CAPACITY TO GENERATE POWER THROUGH OWN POWER PLANTS AND SHAREHOLDINGS Nominal MW Hydropower 732 Nuclear power 588 Thermal power 137 UPM Energy in total 1,457 Mill site combined heat and power (CHP) 1,398 Mill site hydropower 7 Mill site power generation in total 1,405 Total UPM 2,862 ELECTRICITY GENERATION THROUGH OWN POWER PLANTS AND SHAREHOLDINGS TWh 2019 2018 Mill CHP 5.7 5.6 Hydropower 2.8 2.9 Nuclear power 4.9 4.7 Thermal power 0.2 0.6 Total 13.6 13.8 fuels do not have a negative impact on acidification. In terms of logistics, we have entered into a long- term charter agreement with the Dutch company, Spliethoff Group. This company will design and build seven vessels, which we will use for sustainable sea transportation in Europe. These vessels will be fuelled with liquid natural gas (LNG), meaning a significant reduction in NOx (approx. 85%), SO 2 (approx. 99%) and CO 2 (approx. 25%) emissions in comparison to the more commonly used marine gas oil. NEW TARGET, NEW AMBITION After already achieving our target for nitrogen oxide (NOx) and sulphur dioxide (SO 2 ) emissions in 2018, we have revised our reduction target for acidifying flue gases and have widened the scope to include all UPM production, and not just pulp and paper mills. The continuous efforts to improve energy generation processes and investing in advanced flue gas purification technology are what have enabled us to achieve the earlier goal so soon. Along with our new reduction target, we also aim to ensure that the positive development of our CO 2 emissions from fossil

REDUCING ENERGY USE AND EMISSIONS TO AIR

2030 responsibility targets on page 60 Climate actions on page 86 UPM Energy on page 42 UPM Communication Papers on page 48

We constantly look for new solutions to minimise our environmental impact by selecting optimised energy sources and generation methods, and by improving energy efficiency.

We favour the use of renewable and other carbon-neutral energy sources. Biomass- based fuels account for 70% (70%) of our fuel usage. As the use of weather-dependent energy sources increases around the world, the need for balancing power within energy systems will also grow. In Finland, UPMhas significant assets in hydropower — the most effective and sustainable method of producing balancing power. Paper and pulpmills, which use electricity and heat in their production processes, account for the majority of UPM’s total energy consumption. Most of this energy is used in the manufacture of mechanical pulp, for pumping and for paper and pulp drying.

We generate steam and electricity through combined heat and power (CHP) plants at all of our pulpmills, and at almost all of our paper mills. At some mills, all or part of this energy is produced by external or co-owned power plants. We are always looking for ways to improve energy efficiency across our operations, with audits, innovations and internal campaigns. However, in 2019 we did not reach our annual target of increasing energy efficiency by 1%. As a result of the energy-saving investments we carried out in 2019, UPM reduced its energy costs by EUR 1.2 (3.2) Continuous improvement in energy efficiency

million, avoided emitting 12,800 (23,000) tonnes of CO 2 and achieved a 41,000 (95,000) MWh reduction in energy consumption. The annual savings were EUR 1.4 (4.1) million, 15,600 (28,000) tonnes of CO 2 and 49,000 (118,000) MWh. Reducing emissions to air In 2019, we tightened our 2030 targets for reducing emissions of fossil CO 2 and acidifying flue gases. For acidifying flue gases, the earlier 2030 target was already reached. For fossil CO 2 emissions, we wanted to be significantly more ambitious to comply with the UN’s 1.5°C pledge. Continuous improvement and investments will help us to reach the new targets. In line with this, we finalised some

Fossil CO 2

emissions

TARGETS 2030 65% reduction from 2015 level 15% reduction achieved for UPM’s total CO 2 TARGETS 2030 20% reduction of acidifying flue gases from 2015 level 12% achieved for the

mio t

8

6

emissions (scope 1 and 2)

4

2

0

15

16

17 18

19

Target

CO CO

2 from purchased electricity 2 from on-site energy generation

UPM average product

SIGNIFICANCE • Energy generation is the main source of air emissions • Fossil fuels are the largest contributor to climate change • UPM is a significant producer and user of energy

FUELS USED FOR HEAT GENERATION TWh

TARGETS • Significantly cut fossil CO 2 increase energy efficiency • Minimise acidifying flue gases (NO x

2019 2018 19.4 19.2

emissions from production and

Black liquor

Bark and other biomass Heat recovered from TMP production Renewable fuels total

7.6

8.3

and SO 2

) emissions by

efficient purification

1.3

1.5

28.3 29.0

OUR WAY • Committed to continuous improvements in energy efficiency and to an increased share of renewable and low-emission energy • Use of Best Available Techniques (BAT) • Focus on meeting our 2030 responsibility targets

Peat

1.1 1.3 7.1 0.6 2.8

1.0 0.4

Purchased heat

Natural gas

7.1

Oil

0.6 2.8

Coal Total

41.2 40.9

90

91

OUR WAY

OUR WAY

UPM ANNUAL REPORT 2019

UPM ANNUAL REPORT 2019

CONTENTS