Workforce implications of innovation in Canada’s Forest Sector

On May 4th, the House of Commons Standing Committee on Natural Resources  released its report,    Value-added products in Canada’s forest sector : cultivating innovation for a competitve bioeconomy . The report  is the latest discussion of  advancing Canadian value-added forest products and a forest-sourced bioeconomy, and addresses five themes: (1) protecting Canadian forests and primary resources (which recognizes the threats of climate change and beetle infestation); (2) advancing industrial integration, innovation and talent development; (3) strengthening partnerships with Indigenous peoples; (4) maximizing market opportunities in Canada and abroad; and (5) a case study on building with wood, with a focus on advanced mass timber construction.

Discussion of the issue of training and talent development (beginning on page 18), calls for  more internships and employment opportunities for engineering and science students and highly trained post-graduates;  the need to develop a well-educated forest-sector workforce in rural areas; and the need for diversity and gender equity.  Employment implications are present in the discussion of wood-based construction of homes, where witnesses talk about transforming wood construction from a craft-based industry to a more mainstream manufacturing process, where “prefabrication in a factory environment would make wood construction more cost competitive and less wasteful, with greater potential for automation, customization and design accuracy.” The report also provides a case study of two Canadian examples of “tall wood buildings”: including Brock Commons, a new 18-storey student residence at the University of British Columbia , and Origine, a 13-storey building in Quebec City’s Pointe-auxLièvres eco-district.

The United Steelworkers , who represent over 18,000 forestry workers after their 2004 merger with the  Industrial, Wood and Allied Workers of Canada (IWA), presented a Brief to the Committee in November 2017.  The Brief identifies  the main challenges facing the sector, as low harvest volumes, insufficient infrastructure funding, and decreasing raw log exports, and concludes  that, although it’s a provincial jurisdiction,  “The Steelworkers submit that Canada needs a national forestry strategy that recognizes while the challenges within the lumber, pulp, paper, or value added sector are unique, … the whole sector is highly integrated, and dependent on each facet of the sector succeeding. “  The Brief also states  “The costs that the industry as a whole faces will further increase with the federal government’s plan to roll out a $50/tonne price on carbon by 2022. This new carbon pricing regime will not only risk further impacting tight margins in regions like Ontario, but also risks leading to carbon leakage. Canadian companies are now operating in the southern USA which does not have a carbon pricing regime.”

Unifor, which represents approximately 24,000 forest workers, also issued a report (not submitted to the Committee)  in October 2017:  The Future of Forestry: A Workers Perspective for Successful, Sustainable and Just Forestry .  A key message from Unifor is the need to involve workers in a in  a national  policy-making process: “forestry ministers must lead efforts to bring together business, government, labour, Indigenous leaders, environmental organizations and community leaders in a reinstated National Forestry Council.”  Also on this topic, a 2017 report by the Innovation Committee of the Canadian Council of Forest Ministers,  A Forest Bioeconomy Framework for Canada . 

Federal government releases detailed proposals for Canada’s carbon pricing system, including output-based pricing for industrial emitters

On January 15, the Minister of Environment and Climate Change and the Minister of Finance issued a press release  announcing the full draft legislative proposals relating to the carbon pricing system. Public comment will be accepted until February 12, 2018.   The full text of  Legislative and Regulatory Proposals Relating to the Greenhouse Gas Pollution Pricing Act and Explanatory Notes are in English  and French versions . Comment on the legislative proposals will be accepted until April 9, 2018, with “structured engagement” and consultation with provinces and territories, Indigenous Peoples, environmental non-governmental organizations, industry, and business promised over the Winter/Spring of 2018.

Minister McKenna also released for comment the proposed regulatory framework for carbon pricing for large industrial facilities – an Output-based Pricing System (OBPS), with the aim “to minimize competitiveness risks for emissions-intensive, trade-exposed industrial facilities, while retaining the carbon price signal and incentive to reduce GHG emissions.   Emission sources covered by OBPS will include fuel combustion, industrial process, flaring, and some venting and fugitive sources – but notably, “Methane venting and methane fugitive emissions from oil and gas facilities will not be subject to pricing under the OBPS.”  The system will include emissions of all seven of the UNFCCC-designated greenhouse gases, “to the extent practicable” – carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, sulfur hexafluoride and nitrogen trifluoride. Details are  in Carbon pricing: regulatory framework for the output-based pricing system  (French version here) , and  build on the Technical Paper : Federal Carbon Pricing Backstop (French version here) , released in May 2017.

Leading up to the January release, the federal government had released clarification about the timing of  the planned backstop carbon pricing mechanism on December 20, 2017 – it  will come into effect by January 2019, bringing the carbon price to $20 per tonne in any jurisdiction that doesn’t meet the federal benchmark.  Full details are set out in:  Supplemental Benchmark GuidanceTimelines , and the Letter to Ministers . Generally positive reaction followed, from the Pembina Institute  and  Clean Energy Canada.

Initial reaction/summary of the proposed legislation released on January 15:  “Ottawa’s new carbon pricing plan will reward clean companies” from CBC,  and from the Globe and Mail, “Ottawa prepares to relax carbon-pricing measures to aid industry competitiveness” .  More substantive comment comes from the National Observer, in  “Trudeau government explains how it will make polluters pay” (Jan. 15).  Reaction from Environmental Defence came from Keith Brooks , who calls the proposed plan “an effective and fair pan-Canadian carbon pricing system.”  Reaction from  Clean Energy Canada is similar.

Meanwhile, in Alberta: Note also that the province of Alberta released their new Carbon Competitiveness Incentive Regulation (CCIR) for large industrial emitters in December 2017, also based on an output-based allocation system.  Carbon Competitiveness Incentive regulations replaced the current Specified Gas Emitters Regulation (SGER) on Jan 1, 2018, and will be phased in over 3 years.  It’s expected to cut emissions by 20 million tonnes by 2020, and 50 million tonnes by 2030.  Favourable testimonials from the oil and gas, wind energy, and cement industry are quoted in the government press release on December 6.

To explain output-based carbon pricing, the Ecofiscal Commission published Output-Based Pricing: Theory and Practice in the Canadian context , by Dave Sawyer and Seton Stiebert of EnviroEconomics in early December.  The highlights of the paper are summarized here, with a discussion of the pros and cons and challenges of implementation, with special attention to Alberta’s provisions.

Carbon Pricing: Provincial differences and the risk of Carbon Leakage

In the second of two reports it has published on carbon pricing, the EcoFiscal Commission concludes that “In the context of a $30 per tonne carbon price, only a small number of sectors, representing less than 5 per cent of Canada’s economy, are likely to experience significant competitive pressures. Even with a $120 per tonne carbon price … 90 per cent of Canada’s economy would still be virtually unaffected by competitiveness challenges. ”   Provincial Carbon Pricing & Competitiveness Pressures: Guidelines for Business and Policy Makers  examines the economies of British Columbia, Alberta, Ontario, and Nova Scotia, and states that impacts will differ across sectors and provinces. In Alberta, 18 % of the economy is potentially exposed, compared to 2% in B.C., Ontario, and Nova Scotia.   The report recommends targeted, transparent, and temporary support measures for genuinely vulnerable industries, in the form of free permits (under a cap and trade system) or carbon tax rebates. Other recent reports related to carbon pricing: Implementing Effective Carbon Pricing  from the New Climate Economy; “The Path to Carbon Pricing” by Christine Lagarde (IMF) and Jim Yong Kim (World Bank) in Project Syndicate; and Uses of Revenue from Carbon Pricing in which the Climate Markets and Investment Association forecasts that globally, governments will raise $22 billion in climate revenue in 2015. From Resources for the Future, Lessons Learned from Three Decades of Experience with Cap-and-Trade examines U.S. programs and the European ETS.

No Carbon Leakage in Europe as a Result of Cap and Trade Policies

A study commissioned by the European Commission has concluded that Europe’s cap-and-trade program has not caused industry to relocate to countries without greenhouse gas regulation in a process known as “carbon leakage”. In a series of sectoral “factsheets”, the report presents historical data on the structure, performance, and competitiveness of sectors (including iron and steel, chemicals, paper, cement, refined petroleum) and assess the degree to which carbon leakage may have occurred. Although the study found that no companies left Europe for unregulated territory between 2005 and 2012, the authors indicate they suspect this may change.

Read Carbon Leakage Evidence Project Report by Ecorys Consultants, Netherlands at: http://ec.europa.eu/clima/policies/ets/cap/leakage/docs/cl_evidence_factsheets_en.pdf, or read a summary at Bloomberg news at: http://www.bloomberg.com/news/2013-10-31/carbon-curbs-haven-t-spurred-production-exodus-eu-study-shows.html.