Transcript The Forest Industry. Climate Change and Sustainability

FPAC Presentation to:
Greening Industry Network Conference
Waterloo, Ontario
June 16, 2007
Presentation Overview
1) Industry Background
2) The Forest Industry. Climate change and Sustainability
3) Capital Investment: The Driver of Competitive
and Sustainable Renewal
4) Enabling Renewal: The Role of Public Policy
Canada’s Forest Industry – An Overview
• Shipments of $88 billion in 2006
• Source of over 820, 000 jobs - 320,000
direct
• Over 300 forestry dependent communities
• High productivity, high wage sector
• Leading source of business and economic
opportunities for Canada’s Aboriginal
peoples
The Leading Exporter of Forest Products
Forest Products Exports 2005 (CAN$ Billions)
Canada
United States of America
Germany
Sweden
Finland
Russian Federation
France
China
Austria
Brazil
Indonesia
Belgium
Netherlands
38.4
22.1
21.8
17.2
15.8
9.9
9.5
8.1
7.8
7.1
7.0
6.4
4.9
0
Source: FAO February 2007
10
20
30
40
50
One of Canada’s Leading Industrial Sectors
Industrial Contribution to GDP (2006)
3.0%
2.7%
2.5%
2.2%
1.8%
2.0%
1.6%
1.5%
1.0%
1.0%
0.8%
0.5%
0.5%
Source: StatsCan March 2007
Rail Transport
Plastics and
Rubber
Mining
Chemical
Manufacturing
Motor Vehicle
Manufacturing
Oil and Gas
Forest
Products
Industry
0.0%
Share of Provincial Manufacturing
Employment
Key Sector in Each Region of Canada
2006 Contribution to Canada's Manufacturing Em ploym ent: 12.3%
35%
30%
25%
20%
15%
10%
5%
0%
32.3% 30.3%
14.9%
12.1% 11.8% 11.3% 10.1%
8.2%
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Source: StatsCan April 2007
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Presentation Overview
1) Industry Background
2) The Forest Industry. Climate Change and Sustainability
3) Capital Investment: The Driver of Competitive
and Sustainable Renewal
4) Enabling Renewal: The Role of Public Policy
Canada’s Forest Sector and a Changing Climate
• The wealth and prosperity generated by the industry almost
entirely dependent on the ecosystem.
• Significant risks and implications associated with a changing
climate:
- Insect Infestations: Mountain Pine Beetle
- Fires
- Forest Management
Critical Impacts and Adaptation Issues for Canada’s
Forest Sector
• Climate Change Impacts & Adaptation: A Conspiracy of
Silence?
• Changing practices today to minimize risks and take
advantage of opportunities:
- Insect disturbances: can we anticipate the next epidemic?
- Forest Fires: How a changing climate will impact on their frequency,
location and severity
- Forest Management: Impacts at the stand level of a changing climate
on growth, yield and other variables
• Need a climate change adaptation effort proportional to
the magnitude of the challenge
Canada’s Forest Industry and GHG Emissions
Mitigation
• Industry takes pride in its record both of
leadership in reducing emissions and proactive
collaboration with government and other
stakeholders:
- Since 1990, Canada’s pulp & paper sector has
reduced emissions 44% while increasing
production volume 20%
- In November, 2003 the forest industry became the
first to sign an MOU with the Government of
Canada on climate change
Canada’s Forest Industry and Bio-Energy Climate
Change
• Pulp & paper sector largest industrial
energy user in Canada
- 24% of Canadian total
• 60% of total self-generated from renewable
sources – about 1700MW of installed
biomass cogeneration capacity
• Potential to become net source of green
power by 2020 through reinvestment &
technological innovation
Can Superior Sustainability Performance Confer
Competitive Advantage
Presentation Overview
1) Industry Background
2) The Forest Industry. Climate Change and Sustainability
3) Capital Investment: The Driver of Competitive
and Sustainable Renewal
4) Enabling Renewal: The Role of Public Policy
Forest Industry an Major Source of Private Sector
Innovation in the Canadian Economy
1293
912
Source: Statscan April 2007
143
131
129
Electrical
40
Transportation
and
Warehousing
170
Plastics
Mining, Oil and
Gas
Motor Vehicle
Forest Products
261
Petroleum and
coal products
537
Computer and
peripheral
546
Aerospace
1400
1200
1000
800
600
400
200
0
Pharmaceuticals
Millions of $ Cdn
Research and Development Expenditures 2006
Globally Canada’s Forest Products
Companies are not as profitable as others
Return on Capital Employed, 1998-2005 average
12
ROCE (%)
10
Typical Cost of Capital: 9-12%
9.8
7.0
8
6.3
6
5.7
5.4
4.6
3.4
4
2.2
2
0
India
Latin
America
& South
Africa
Source: PwC, CIBC World Markets, April 2007
Other
Asia
Europe
USA
Australia Canada
& New
Zealand
Japan
The Forest Products Industry is Making
Significant Investments
7
Billions of $Cdn
6
5
4.94.7
4.9
4.5
5.3
3.8
4
5.4
5.6
5.5
5.6
5.1
4.7
3.6
4.9
3.6
3.1
3
2.7
4.7
3.5
3.1
4.5
3.4
2
1
0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Investment
Source: StatsCan Jan 2007
Depreciation
Much of Canada’s Production Capacity is
Older and Less Efficient Than That of
Leading Competitors
Source: Jaako Pöyry, March 2007
Presentation Overview
1) Industry Background
2) The Forest Industry Climate Change and Sustainability
3) Capital Investment: The Driver of Competitive
and Sustainable Renewal
4) Enabling Renewal: The Role of Public Policy
Renewal through Reinvestment
• Attracting Capital Investment Ultimately the
Responsibility of the Industry Itself
• But Public Policy Plays a Critical role in Shaping
the Investment Climate
- Government determines the slope of the playing
field
Canada’s tax regime discourages manufacturing
investment
2006 METR on Manufacturing
Investment
45
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ar
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m
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Sw
D
5
20
25
30
35
40
45
2006 total tax receipts (% of GDP)
Source: CD Howe, OECD 2006
50
55
Priorities for Addressing Climate Change in a ProCompetitive Manner
• A robust emissions pricing regime, with appropriate
recognition for early actors
• Market – based renewable energy incentives can
contribute to the solution but have potential for
unintended consequences
• Strengthened Public –Private Partnerships in Support
of the development of Breakthrough green
technologies
• Greater commitment of resources and policy focus to
impacts & adaptation issues
Conclusion
• Can we compete?
- Yes! We have done it in the past.
• The key is shifting our expectations to
reflect the rigours of the new global
market place
• If we shift- quickly– we can do it again