Why is butcher paper spelt without an apostrophe, rather than as "butcher's paper", when "carpenter's square" is spelt with an apostrophe?
"Butcher's paper" is found, as is "butchers' paper" more rarely.
It's just the difference between using the genitive to associate one noun with another ("butcher's paper" being paper that belongs to or is associated with a butcher or a figurative butcher that represents all butchers, and "butchers' paper" being paper that belongs to or is associated with butchers) and using a noun adjunct to treat butcher as an adjective ("butcher paper" hence being paper that is associated with butchers).
The three possibilities of "butcher paper", "butcher's paper" and "butchers' paper" would all hence be standard English.
Of these three, the third is unusual unless there's a need to point out the plurality - we more often posit a single case to represent the class than refer to the plurality, so it's not really seen in this use.
Of the remaining too, there seems that there is a general move away from the genitive and toward the adjunct, perhaps related to the general move away from using the apostrophe in cases where one style would use it and another would not that I mention toward the end of this answer. This leaves its mark in some cases where we have what appears to be a plural adjunct despite plurals being normally considered incorrect such as "writers group" originating from "writers' group" but changing from a genitive use to a sort of half-adjunct-with-plural/half-genitive-without-apostrophe use.
- Butcher's Paper. Normal use of genitive, found, and common in some equivalent cases.
- Butcher Paper. Normal use of adjunct, found, and increasingly more common.
- Butchers' Paper. Valid but unusual unless plurality needs to be pointed out for some reason.
- Butchers Paper. Unusual use of adjunct from plural. Considered incorrect by many, but sometimes found where one form has mutated into another.
That one of the two more usual forms is found rather than the other is down to the vagaries that lead to one of two or more possibilities winning out.