—and with quick PowerPoints, but the instructions we had here was to stick to six, seven minutes. I'll try my best to stay within that seven minutes.
Second, I want to mention to you that I moved to Canada three years ago, so I have a bird's-eye view and a critical view, maybe a not-so-patriotic view, so I might say something that might not be correct, but that will be my view.
Third, I'm not a forester, but a chemical engineer trying to make value-added products from wood and cellulosic products, like agricultural residues. I'm in that field. I don't take care of forests; I try to make use of the wood of the forests.
Like any agri industry, the forest industry also goes through its cycles. It's hopefully going out of that low cycle to a more optimistic position with some sales from British Columbia to China. Yesterday it was mentioned that the renminbi hub in China is going to help, but my colleague just told me that the Russian supply to China is going to hurt British Columbia as well. But there are other ways in which we could be increasing our sales and industry. One is pellets, of course, if the housing market in the U.S. gets better, but we need to do something now strategically for the long term to be in the game. That's my story there.
As far as bioenergy and biochemicals are concerned, there are three important things to remember in making it from wood. One is to have the technology. In many cases we do have the technology, but it's not economical enough. A good example of that is making alcohol from wood. It is possible technically, but not at a price that is going to sell. You need to have technology, you need to have economics, and the regulatory policy issues have to be correct. Under these situations, it's going to work, and I'm going to cover a little of all of them.
First of all, the constraints to the economic development of bioenergy and biochemicals from wood include the fact that transferring the wood from the forest to the mill in Canada costs about $100 to $120 per tonne. That cost alone makes us less competitive than other emerging countries, where it is much cheaper.
Second is the nature of the raw material technology-wise. We do make a lot of products from starch in Canada. We make a lot of ethanol, we make a lot of other products from vegetable oils, but making them from cellulose is always a problem. That's nature's way. We cannot handle that. Cellulose and lignin are much more difficult molecules to work with and, hence, we are not able to make them at a competitive price.
Third, emerging countries like Brazil, India, and China are making many of these chemicals at prices that we are not able to meet.
Fourth, and very important in the present context is the petroleum industry and the price of crude. It not only affects transportation fuel, as most people commonly imagine, but petrol crude also goes into making 5,000 products. Everyday plastic products, etc., come from crude. So it's not only transportation. I'll highlight that by giving you one example that is often quoted in Canada, that in the petroleum industry the amount of material that goes into making those plastics is 4%, with the remainder going into transportation, etc. But that 4% makes for 40% of the industry's profit. That's something we say we should be doing in the case of wood: trying to see if we could make things of higher value other than pulp and paper, and then gain the market.
Coming to some of the products in different stages of development—I can't list all of them, but will just give you a few—one is biocrude, which an oil company in Canada is now doing. From wood you make a product that is close to petroleum in its characteristics, and you can make a number of other products from that. You have polystyrene, you have succinic acid. All of us talk about succinic acid and amber in Sarnia, but if you look at the nitty-gritty of it, they're not making it from wood or cellulose but from cornstarch, which is a different game and much easier to do. In that case we have to look for what other types of products we have.
You have some products that are high-volume low-cost bulk chemicals, you have low-volume high-cost chemicals, and some in-between. After a lot of discussion, people in my field say that we have to look for that sweet spot in-between because we may not be able to do the other two ends successfully. We may not be able to do the bulk chemical, because the profits are small and we can't compete with some of these emerging countries. Cancer treatment from birch wood may be a good product, but it will be so small in quantity. So we look for those intermediary products, like cellulosic fibres or some of these polyalcohols, etc., which are in the market.
Also in Canada we have made a head start with some of these products. Nanocellulose is something that Canada has a head start with, but it's not a bulk chemical, so you'll not make as much money as if it were a bulk chemical.
There are issues of climate change and LCAs, which might someday turn away from...and disinvestment in petroleum, which might might make us look to wood in a different manner, economically and socially. But those are at different stages of development as well.
In conclusion, I'd like to make my suggestions, if you're making any decisions on these matters. There are five of them.
First is that we, as scientists, should not be working on the production of ethanol, because that's not going to get us any money—from cellulosics at least. We can get it from corn, we can get it from wheat and other things in Canada. And even for the other products, we have to wait for price of petroleum to rebound. At $60, even at $120, some of these products are not viable. At $60, it's definitely not viable.
Second, regarding the pellet industry, we are exporting to Europe as long as they are willing to buy. Even if we are going around the Gulf of Mexico and bringing it from British Columbia to Europe, they're still willing to buy. But then in my hometown in Thunder Bay, we are bringing in pellets from Norway or Texas—so-called advanced pellets. As a scientist and fellow citizen in that small town, I've asked many people to give us some money to create those advanced pellets, which can be kept in the snow and rain and they will still give you the heating power.
While we are selling normal pellets to the world, we are buying advanced pellets here. I'm saying this not with the view of that particular situation, but if we had the technology for pellets, then we could use more of the pellets in this country without buying and making silos at a high price. It's a matter of only a little bit of technology. If they can do it in Norway and other places, we can do it as well. We just need some inputs in that direction.
Third, some of my colleagues around the witness table are making dissolved cellulose products. Indeed, there are many companies in Canada that are now producing dissolved cellulose and exporting it to other countries to make into rayon, which is then sent back to Canada. As I was thinking about it this morning, I thought that this is a complete reversal of roles. I'm from India. In time of the British, they used to take our cotton from India and bring it to the United Kingdom, make textiles from it, and send it back to India. Mahatma Gandhi said that wouldn't do, that we weren't going to buy those clothes any more.
But we are doing exactly the same thing in Canada. We are making dissolved bulk now and sending it to India, Brazil, or some other country; they're making rayon and we are buying the rayon at a higher price with our own raw material. The question I'm asking here is, why don't some of these companies, with the help of the government and some policies put in place, make that value-added product here? Why not? How do we allow a product to get out of here, add value, then come back?
There are many examples of this. The City of Toronto's solid waste is sent to the U.S. You pay a price for the solid waste to go to the U.S., they put it into a landfill, then they grow tomatoes and sell them to Toronto. So you're paying twice. You're paying for it to be taken away and you're paying for the tomatoes again, while you could do that here.
That's a really easy-to-understand thing. We are doing the same thing with dissolved bulk as well.
Fourth, and last, when I came to Canada I was appointed as Canada research chair because in Thunder Bay—and I'm giving this as a typical example—we had five paper mills. Four closed and we were tasked with creating an institute called the Biorefining Research Institute. We said “Let's do something else with the word 'value-added'”, but all the government funding agencies tell you, when you go to them for money, “Bring an industry that will pay 50% of the research amount”.
You are talking about professors always asking for money. How do I get that money, that 50%? I go to Resolute mill, which is barely surviving in Thunder Bay, and say, “I have this bright idea, can we do this together?” They'll say, “We don't have the time, the amount of resources, to give you that 20% or 30%”. So how do I get the money to do the research then?
I am not saying give professors money. I know of professors taking money and not delivering, but then industries cannot also expect that it's sitting there for them to come and take. So there has to be a mechanism that will be put in place to see that we at least try to deliver, that we just don't take the money and go away. But as the situation is for us, at least in Thunder Bay because we are away from the major cities, getting an industry partner who will help us to run a good industry-based project is nearly impossible. All funding agencies say 40%, 50%, has to come from industry.
My last point is that we need to think a little bit out of the box sometimes. If we want to make biochemicals, if you talk to a person who has worked in a paper mill, he's only talking about black liquor and white liquor. Maybe you have to go a little bit beyond that, and when I talked about strategic decisions, I'll just end by saying that a Saudi Arabian oil minister is famously quoted to have said, “The Stone Age did not end for lack of stone.”
That's why I started by saying that we have to be looking strategically for what to do with our wood when the petroleum era closes. That's the point I would like to make here with a few examples as far as I could.
Thank you very much. I didn't take one hour, but maybe eight minutes.
