Forest industry emerging as a leader in Canada's innovation economy

Stepped-up innovation by Canada’s forest industry promises to grow the nation’s GDP while slashing carbon emissions and helping to achieve the country's climate targets, say industry executives and business strategists.

The forest sector has become a leader in many parts of the emerging bioeconomy and accounts for 12% of Canada’s manufacturing sector GDP, according to the report, “Branching Out: How Canada’s Forestry Products Sector is Reshaping its Future,” by Eric Miller, president of Rideau Potomac Strategy Group and a fellow at the Canadian Global Affairs Institute.

“Wood products are now being used as the base materials for tall buildings, such as condo towers, and as an important component to the nation’s fuel supply. Bioplastics made from wood are being turned into everything from airplanes to product packaging,” Miller's report says.

On the climate front, investments in new technologies by the pulp and paper industry have cut its greenhouse gas emissions by 66% since 1990, and some 30 mills across Canada now generate “green” electricity onsite from forest residual materials.

“This is an industry that employs a lot of people in rural Canada, is part of the solution on the climate issue, and is doing all sorts of projects in biochemicals, biomaterials and tall wood buildings,” Miller told RE$EARCH MONEY. “The forest industry is really at the forefront of the innovation economy and is a big part of Canada’s future.”

From 2010 to 2018, Natural Resources Canada’s $190-million Forest Industry Transformation Program has funded 28 projects, “with 80% of them creating new products or diversifying product offerings at Canadian companies,” NRCan says.

The forest industry has accelerated its innovation efforts to achieve the best carbon outcome along with the best GDP outcome, says Stéphane Renou, president and CEO of FPInnovations, a private, not-for profit organization that functions as the industry’s research arm. “The forest industry is exceptionally positioned to make progress on both at the same time.”

“We’re really seeing the forest industry as a solution provider moving into the low-carbon world, by producing biofuels, biomaterials, biochemicals and engineered wood,” says Robert Larocque, senior vice-president at the Forest Products Association of Canada (FPAC).

Strong federal support provided

“Forests reduce greenhouse gas emissions, and the sector’s innovations help Canada transition to a low-carbon economy,” Miriam Galipeau, NRCan communications advisor, said in an email. She noted that federal Budget 2019 committed up to $253.1 million over three years, starting in 2020-21, through NRCan to extend existing innovation and diversification programs.

Opportunities in tall wood buildings and biofuels

In specific innovation areas, Galipeau said a $5-million federal investment, through NRCan’s Tall Wood Building Demonstration Initiative, resulted in two model projects: the 18-storey Brock Commons residence at the University of British Columbia and the 13-storey Origine condo unit in Quebec City. NRCan’s subsequent Green Construction through Wood Program continues to support tall wood construction.

“As a direct result . . . Canada is changing its national building code this year to allow tall wood buildings as high as 12 storeys from the current six-storey limit,” Miller says. Every cubic metre of wood substituted for other building materials reduces total carbon emissions by two tonnes, which can help cut the 13% of carbon emissions globally from using steel and concrete, he says.

Larocque says another fast-growing opportunity is forest-based biofuels, from bio-oil to renewable natural gas. Biofuels will benefit further from the rollout of the new federal Clean Fuel Standard, with final regulations expected by this June, he says.

Quebec has been particularly supportive of the innovation drive, industry executives say. The 2019-20 budget of François Legault’s government invested $50 million to strengthen the province’s Wood Innovation Program, and $30 million to bolster the Residual Forest Biomass Program.

In comparison, Alberta's UCP government cut the Agriculture and Forestry Ministry’s budget by 9.1%, with a total 15% reduction planned by 2022-23. Of the $145-million cut over four years, $34.1 million will be eliminated by transitioning from government-supported R&D to producer- and industry-led research.

FPInnovations plays “essential role”

Budget 2019 renewed funding for FPInnovations, which had a budget last year of about $76 million (nearly 32% of it provided through federal agreements). The organization, which includes university research networks and First Nations partners, plays an essential role in the sector’s innovation ecosystem, Miller’s report said.

“We are in the process of evolving more and more towards commercialization: how we get from great technology to actual products,” Renou says.

Improved procurement, regulations needed

Industry executives say a government boost is needed to promote and market forest-based biochemicals and biomaterials (such as recyclable plastics, nanocellulose, and cellulose filament) that replace fossil fuel-based products. “We’re looking for a similar incentive, either a carbon credit like the low-carbon fuel standard will provide or a supportive policy like with the tall wood buildings,” Larocque says.

Miller’s report, as well as Canada’s first national bioeconomy strategy, released last year by the industry-led BioDesign consortium, stressed the need to improve government procurement programs and to modernize Canada’s regulatory system to support innovation. This includes levelling the regulatory playing field for wood-based products competing with other materials.

Galipeau says NRCan is working with the National Research Council of Canada, Treasury Board Secretariat, and Public Services and Procurement Canada on the Low Carbon Assets through Life Cycle Initiative. It will develop a framework for the federal procurement of low-carbon buildings to support the Greening Government Strategy, she says. “The research will create the conditions within which regulatory neutrality can be developed, regardless of the material used.”

Developing markets in China

When it comes to export opportunities, Miller says the Canada Wood Group does an excellent job. But to strengthen that effort, his report recommended Canada develop a sectoral arrangement on trade forest products with China, focused on the construction sector.

Galipeau says NRCan’s Expanding Market Opportunities Program has been a success in developing wood construction markets in China. From 2002 to 2018, Canada’s wood products exports to China increased by more than 2,600%, and totalled $1.7 billion in 2017.

As an example, the Sino-Canadian Low Carbon Eco-District Demonstration Project is the largest community-scale demonstration for wood construction in China. One hundred Canadian-style wood-frame townhomes have been built with Canadian wood, with another 200 units under development.

Nevertheless, Canadian forest products and forestry research face stiff global competition, including from European countries, Russia, China and South America, Renou says. “To win, Canada needs really to win on the innovation front as well as on the coordination of policies that enable everybody to make the right investments.”

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