Thanks very much for the opportunity to speak to the committee today. I've been asked to discuss the economic recovery of the forestry sector with a special focus on pathways to a low-carbon future.
My name is Don Roberts. I'm the founder and CEO of Nawitka Capital. Nawitka Capital is an investment banking firm focusing on the renewable energy and clean technology sectors with a special emphasis on the emerging bioeconomy. I've been associated with the forest products sector for over 40 years. Prior to starting Nawitka in 2013, I was vice-chairman of investment banking with CIBC where I founded and led the bank's renewable energy and clean technology team.
I'm here to speak to the ongoing transformation of the Canadian forest sector through innovative uses of wood-based products and to try to propose some concrete measures to support Canada's goal to reduce carbon.
Where are the opportunities? In assessing the alternatives, I'd like to draw on the “Wood Fibre Futures” report, which I co-wrote earlier this year for the Government of New Zealand. The objective of that report was to show how forest resources could be leveraged to support New Zealand's move to a net zero emission economy by 2050. Quite frankly, the conclusions are equally applicable to Canada.
After reviewing over one hundred emerging products made from lower value woody biomass, we settled on two with the most commercial promise. The first is biocrude oil, which can be used directly for heat and power applications or further processed—and this is important—into a suite of transportation fuels, biochemicals and biomaterials. The second product is bio-coke, or torrefied wood, which can be used for steel-making.
The good news is that our Canadian forestry firms are already partnering with innovative Canadian biotech firms to construct biocrude oil plants. For example, Bioénergie AE, a joint venture between Quebec-based Arbec Forest Products and Ottawa-based Ensyn Technologies, built a 40-million litre biocrude plant in Côte-Nord, Quebec in 2018. Out west, Arbios Biotech, a joint venture between B.C.-based Canfor and Australia-based Licella, is currently considering the construction of a commercial biocrude plant in Prince George.
Although it's more of a niche market, bio-coke or torrefied wood can be used as a substitute for metallurgical coal and the production of iron and steel. Given the relatively high carbon intensity of traditional steel-making technologies, this could well be an attractive emerging market for lower quality wood from the forest sector.
Things are already happening here. ArcelorMittal, which is Dofasco's parent, is working to build a 50,000 tonne per year bio-coke plant in the Netherlands. Dofasco itself is currently working with several bio-coke technology providers to build a demonstration plant in their Canadian steel mill.
There's also a meaningful opportunity for products derived from high-value solid wood to reduce carbon emissions in the built environment. Specifically, the opportunity revolves around the ability to reduce carbon emissions through carbon sequestered, carbon avoided and carbon eliminated. I've identified specific technologies and products in my longer written submission.
What is the role of government here? In our view, the most effective policy tool to support the move to a low-carbon future is flexible regulation that focuses on a specific sector that emits a lot of carbon. Such regulation sets specific carbon intensity targets and then lets private sector actors figure out the best way to meet the targets. Compliance is facilitated through the use of tradeable carbon credits. Such flexible regulations, in our view, foster the most innovative use of technologies because the technology is feedstock agnostic. They leave decision-making in the hands of the private sector.
Importantly, especially given our COVID situation, such tools are not a direct cost to the public treasury since the burden of compliance is borne by the heavy carbon emitters. This is essentially an application of the “polluter pays” principle.
The Government of Canada is already working on the development of a clean fuel standard for specific sectors. Low-carbon fuel standards focusing just on the transport sector already exist in B.C., California and Germany. As documented by the International Energy Agency, the adoption of this policy tool is clearly a global trend.
To reach the full potential of the forest sector, we also recommend that policy-makers recognize the carbon emissions produced by construction and the carbon stored in the built environment. Like the case of low-carbon fuel standards, flexible regulations could be implemented to measure that carbon and incentivize behaviour to reduce emissions through smart material selection.
It's worth noting that a side benefit of this kind of policy applied to the Canadian built environment is that it could significantly expand the domestic market for Canadian solid wood, which would decrease the Canadian lumber industry's dependence on exports to the U.S. Given that the softwood lumber dispute between Canada and the U.S. is never going to end, a large Canadian market would be of considerable strategic value. This is particularly important when we realize—and I really mean this—that the cornerstone of a competitive forest sector, especially in temperate climates like Canada, is a competitive solid wood sector. That was a key conclusion of the “2008 Future Bio-pathways” study, which I in fact led on behalf of the Forest Products Association of Canada, the Government of Canada, and the provinces of Quebec, Ontario and B.C.
In conclusion, part of Canada's forest sector has been hit hard by the COVID shock. However, opportunities exist for a sustainable recovery to a lower-carbon future. The forest sector is really well positioned to punch above its weight. Having said that, a joint public and private sector effort is required to make this happen.
Those are my comments. I'm happy to be here today to answer any questions.
Thank you.