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Innovation central to Canada’s forest industry growth: CD Howe Institute


May 14, 2019
By C.D. Howe Institute

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Canada’s forest products industry is facing barriers to growth that require innovation, new trade markets and supportive government policies to overcome, according to a new report from the C.D. Howe Institute. In Branching Out: How Canada’s Forestry Products Sector is Reshaping its Future, author Eric Miller examines how the sector is responding to its challenges and recommends policies that will help expand its contribution to the Canadian economy.

The external forces buffeting Canada’s forest sector – price swings, U.S. trade protectionism, and shifting market demand for its core products – have challenged the sector to become an innovation leader, he writes. As a natural resource-based sector, it also has had the come to terms with the challenges of sustainability and associated changes in the regulatory environment. “Today, Canada’s forest sector shows potential as a leader in innovation, environmental sustainability and international trade,” said Miller.

Among key exporters of forest products, Canada has been more exposed to the dwindling demand for newsprint than many of its key competitors, who have been able to expand more rapidly their exports of other types of paper and related products. More generally, investments in new capacity have languished in Canada, while expansion (including by Canadian companies seeking to diversify and jump over protectionist barriers) has proceeded in the United States, Europe and elsewhere. “To open new markets for Canada’s forest products, a priority should be developing a sectoral arrangement on trade with China, focused on the construction sector,” said Miller.

Even though the forest sector already accounts for 12 per cent of Canada’s manufacturing sector GDP, it has the potential to do even better, writes Miller. Canadian innovations in 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. Meanwhile, bioplastics made from wood are being turned into everything from airplanes to product packaging. While many of these applications are in a somewhat nascent phase of development, they are fast evolving and show significant potential.

For example, extensive research on fire and the structural performance of wood products and systems has been conducted in Canada and elsewhere. The findings demonstrate that wood buildings can be designed to be as safe as other types of construction and can meet or even exceed the building code requirements. One of the tallest wood buildings in the world is the 18-story Brock Commons Tallwood House, which is located on the campus of the University of British Columbia in Vancouver. Prior to that, the eight-storey Wood Innovation Design Center (WIDC) in Prince George, B.C., broke the mould. These buildings and the recently completed 13-storey Origine Eco-Condos in Quebec City, Que., were built with prefabricated components and specially designed assemblies developed by Canadian engineering and manufacturing firms.

“As the universe of tall wood buildings grows, these suppliers are now well-positioned to take these products and expertise global,” said Miller.

Given the rapid growth in applications for wood products, supporting the forest sector directly reinforces Canada’s desire to provide world-leading opportunities to its citizens in STEM professions. Moreover, sound forest management practices lead to better environmental and economic outcomes, including greater levels of carbon sequestration and increased biodiversity, according to the report.

The report’s key recommendations include:

  • Scale up the government contributions to FPInnovations, a non-profit innovation hub for the forestry industry, and other vehicles with a successful track record of commercialization.
  • Consolidate the early product and process innovations supported by the federal government in partnership with the industry to make Canada a global leader in the emerging “tall wood building space.”
  • Endeavour to ensure “regulatory neutrality” for the use of emerging wood and wood-based products.
  • Create a window supported by carbon tax revenues to drive innovative local solutions to forest management, adaption and utilization; and
  • Develop a sectoral arrangement on trade in forest products with China, focused on the construction sector.

Read the full report here.