One of the industries most affected by rapid inflation in capital costs, by costly environmental expenditures, and by the energy crisis, is the pulp and paper industry. Most production increases in the near future will come from expansion of existing unbalanced mills where capital expenditures can be limited to certain areas of the mill. The cost of pollution control equipment for a new mill, to meet the federal and state air and water required standards, makes up a large percentage of the total capital cost. In fact, the environmental cost of a new mill today is equal to the entire construction cost for a mill built in 1955. This paper analyzes several conventional processes used in the digesting, washing and bleaching in pulp mills from economic points of view and then describes a number of technical innovations which have been introduced in the pulp and paper industry in the last few years that help overcome the shortcomings of conventional technology, and which provide higher productivity and greater returns on investments.