The purpose of this literature review is to give an account of the scholarly literature on the role of policy instruments for creating a sustainable and competitive pulp and paper industry (PPI). The review focuses its attention primarily on public policy instruments but also addresses the interplay with other factors that have been important for the pulp and paper industry to transform into an environmentally sustainable and innovative industry. It is interesting and relevant to study the pulp and paper industry in this context for a number of reasons. Firstly, the pulp and paper industry is an energy and pollution intensive industry with a legacy that spans over several centuries. In Sweden, it plays a significant role in the economy as it accounts for about 6 per cent of the country’s gross domestic product. Globally, the pulp, paper and printing industry is the fourth largest industrial consumer of energy. A characteristic of the pulp and paper industry is that it also produces energy as a by-product and already generates about 50 per cent of its own energy needs from biomass residues.
In the context of climate change the PPI can play an important role in the long term as it could develop into a clean energy supplier. To reduce the industrial use of energy is an important mean to reducing the threat of increased global warming. A major concern facing the PPI in Western European Countries in recent years is a possible decline of international competitiveness, resulting in declining market shares and job losses. Main factors driving these changes are globalisation, the emergence of new actors and markets and competing technologies. Rising market competition from Asia and South America have posed challenges on the strategic reorientation of the industry.
In the following part of the review, we discuss the role of policy instruments in this transformative process and in what way the industry has responded to policies and to other factors which affect the competitiveness of the sector such as consumer demands. The review covers the conditions within the Swedish PPI primarily but makes an international comparison with the situation in other countries which have a significant PPI’s such as Finland, Norway, Canada and the U.S.
The search for the scientific literature was carried out by using a key word approach in the recognised article database ISI Web of Science. The search has led us to the most relevant articles investigating the main questions described above. These articles are published in recognised international scientific journals during the period 2000-2013. The review also includes a selection of reports published by international organisations. An overview of the articles and reports is available in the reference list.

The literature review is organised as follows. Chapter 2 presents the literature describing the most important country specific and international policy instruments for a “greening” of the PPI in the last two decades. Chapter 3 addresses other factors and driving forces that have been important for the development of a sustainable and competitive PPI since the 1990’s. Chapter 4 describes the strategic responses of the industry to the policy measures. The impacts of measures on competitiveness and on the environmental performance of firms are discussed in chapter 5. The last chapter 6 discusses some of the main conclusions of the report. Each chapter illustrates conditions in the Swedish PPI and makes comparisons to the situation in an international context where relevant comparative aspects have been found in the literature.