Draft – For discussion only

A Forest Bioeconomy Framework for Canada

Discussion Paper

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Table of Contents

1. INTRODUCTION ............................................................................................................................................. 2

2. BACKGROUND ............................................................................................................................................... 3

3. APPROACH .................................................................................................................................................... 4

DEFINITIONS ........................................................................................................................................................ 4 EVIDENCE ............................................................................................................................................................ 4

4. RATIONALE ................................................................................................................................................... 5

AN OPPORTUNITY FOR INNOVATION ......................................................................................................................... 5 A SOLUTION TO CLIMATE CHANGE ........................................................................................................................... 6 A PROVEN TRACK RECORD ...................................................................................................................................... 6

5. KEY ELEMENTS OF THE CCFM FOREST BIOECONOMY FRAMEWORK FOR CANADA ........................................ 7

VISION ................................................................................................................................................................ 7 COMMITMENT TO SUSTAINABILITY ........................................................................................................................... 7 ANTICIPATED LONG-TERM OUTCOME ....................................................................................................................... 8 PILLARS ............................................................................................................................................................... 8 PROPOSED POLICY AREAS FOR ACTION ...................................................................................................................... 9

6. CONCLUSION ............................................................................................................................................... 11

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1. Introduction

Canada’s 150th anniversary is the ideal time to remember that, as a federation, Canada works

best when we work together. There has been a long tradition of cooperation between the

federal and provincial and territorial governments on forestry matters. Governments at all

levels collaborate and draw on one another’s strengths, integrating and leveraging our world-

class science to develop informed solutions for the benefit of all Canadians. This collaboration

has allowed us to create something greater than any of us could on our own.

Canada’s history, and an important part of our future, depends on our forests. They play a

central role in our recreational, cultural and spiritual pursuits; they are part of the Canadian

identity and experience; they provide ecological services that sustain our communities and

industry.

Canada has an unprecedented opportunity to provide global leadership with regards to the

forest bioeconomy. Canada possesses a technical capacity and forest biomass availability

virtually unmatched elsewhere in the world. Being responsible stewards of these globally-

significant assets gives considerable impetus for seeking new ways of maximizing the value

derived from Canada’s forests, to enhance the well-being of all Canadians. Although a pioneer

in forest sector innovation, Canada is one of the few countries in the developed world that lacks

a national long-term approach for increasing economic growth through the forest bioeconomy.

The Canadian Council of Forest Ministers (CCFM) has taken action over the past years to

advance forest sector innovation in Canada, to retain Canada’s global competitive advantage.

By outlining a dedicated framework to promote the forest bioeconomy in Canada, CCFM

member jurisdictions are collaborating to address this critical need. The challenge is to drive

cleaner and more efficient management our natural resources, and develop the bio-solutions of

tomorrow supported by the best available science.

This discussion paper presents the core elements of the CCFM’s proposed framework for

advancing Canada’s forest bioeconomy. It outlines a clear vision leading to tangible outcomes.

This paper also outlines the guiding principle and four pillars of a forest bioeconomy framework.

Finally, this paper identifies seven policy action areas to address the regulatory, financial,

engagement, partnership, and scientific gaps and challenges that currently inhibit the growth of

Canada’s forest bioeconomy.

Your feedback on the key elements outlined in this paper will inform the CCFM’s development

of a forest bioeconomy framework for Canada, to be delivered in 2017.

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2. Background

The CCFM comprises the fourteen federal, provincial and territorial ministers responsible for

forests. The primary role of the CCFM is to act as a vehicle to work cooperatively on common

forest and forest-related issues of Canadian and international concern. The CCFM has four

objectives:

Promote cooperation between governments regarding emerging forest and forestry-related issues of common interest and of intergovernmental or international significance;

Cooperate in developing and maintaining the scientific information base required to support forest management decision making;

Demonstrate international leadership on sustainable forest management; and Share information on issues impacting on the forest sector

The CCFM has been steadfast in its commitment to supporting and advancing forest sector

innovation in Canada. Canada’s forest sector leads in several important bioeconomy fields and

is recognized for its effective, efficient innovation system.

In July 2015, CCFM members convened a National Forest Innovation Summit in Kenora, Ontario.

It brought together forest sector stakeholders across government, industry, academia, and

research organizations to produce the Declaration on Forest Innovation. This Declaration

outlines the Council’s commitment to advancing innovation in the forest sector based on the

pillars of collaboration, engagement and mobilization.

In June 2016, CCFM jurisdictions endorsed its Innovation Action Plan (2016-2020). This

document sets forth an ambitious yet achievable array of actions to carry out over the four year

period, as applicable to specific jurisdictional contexts, to maximize forest sector

competitiveness and sustainability.

The CCFM continues to be a leading voice in forest sector innovation in Canada and a supporter

of climate change mitigation, long-term environmental sustainability, economic

competitiveness and green jobs. The CCFM is pursuing activities that are rooted in the Council’s

strategic advantages, namely convening conversations and better aligning efforts across a

diverse range of actors.

To this end, the CCFM recognizes the critical need for increasing policy certainty in order to

advance Canada’s forest bioeconomy. Specific pathways may be endorsed, adopted and

mobilized by jurisdictions accordingly.

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3. Approach

Definitions This discussion paper is focused on identifying the critical success factors for advancing

Canada’s forest bioeconomy. Key concepts are defined below for the purposes of this paper:

Bioeconomy refers to the economic activity generated from the conversion of renewable

biological resources into value-added bio-based products. The forest bioeconomy seeks to

develop viable pathways for replacing fossil fuels and petrochemicals with advanced products

derived from sustainable forest biomass. These fossil fuels and petrochemicals are found in

everyday consumer products such as plastics or chemicals, and carbon-intensive building

materials such as cement and steel. The bioeconomy also includes the production of biofuels.

Innovation is the commercialization of change, not just in terms of products and technologies

but also in business models, markets, applications for forest products and partnerships. It is

through innovation that the forest industry can adapt to emerging economic, environmental,

and societal pressures, while taking advantage of new opportunities and building on strengths

of non-traditional partners.

Clean technology can be considered to belong to two main categories. The first is any product,

process or service designed with the primary purpose of contributing to remediating or

preventing any type of environmental damage. The second category is related to a product,

process or service that is less polluting or more resource-efficient than equivalent normal

products that furnish a similar utility. However, the primary use of clean technology is not

environmental protection.

Sustainable Forest Management consists of management practices that maintain and enhance

the long-term health of forest ecosystems for the benefit of all living things, while providing

environmental, economic, social, and cultural opportunities for present and future generations.

Although the definition of sustainability is constantly evolving, it is based on the need to adapt

forest practices to make the most of rich forest resources. Continuous improvement of

environmental performance, as informed by science, is key to developing natural resources

responsibly, sustaining local communities as well as international trade and jobs.

Evidence Evidence for this discussion paper has been compiled by the CCFM Innovation Committee

through preliminary engagement over the fall of 2016.

On September 21-22, 2016, Natural Resources Canada, in collaboration with the Forest

Innovation by Research and Education Network, assembled a wide range of committed

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stakeholders for the National Workshop on Forest Sector Innovation and Transformation in

Gatineau, Québec. Over 60 provincial and territorial participants came together, including

Assistant Deputy Ministers responsible for forests, senior industry executives and high-level

delegates from academia and research organizations, as well as international experts, in part to

identify the critical success factors for advancing Canada’s forest bioeconomy.

Stakeholders articulated the clear need for a dedicated approach to the bioeconomy in Canada.

They also stated that the CCFM has a key role to play. Overall, the message heard was that

there is a need to leverage R&D investments and scientific knowledge to truly achieve Canada’s

potential, and that immediate action is needed.

Building off of the Forest Innovation Summit, Council member sought to engage and listen,

including by presenting at the BioCleantech Forum and Scaling-Up Conferences, both on the

topic of Canada’s bioeconomy. Over 150 presentations were then reviewed and considered,

including from non-traditional partners and international stakeholders. Regional discussions

have also been held to gain a balanced perspective. This campaign of engagement has been

instrumental in identifying the key elements for advancing Canada’s forest bioeconomy

presented in this paper.

4. Rationale

An Opportunity for Innovation Canada is recognized as one of the top countries in the world to invest. It leads the G20 in terms

of its sound fiscal strength, as reflected in its triple-A credit rating. Canada has a sound banking

system, a competitive tax system, and it is easy to start a business. Canada’s labour force is well

education and highly-skilled, and our trade networks are highly integrated with the global

economy.

Despite this, Canada faces persistent low levels of productivity growth. The Advisory Council on

Economic Growth notes annual GPD growth in Canada could slow significantly, perhaps as low

as half the rate of the past 50 years. Why are these sound macro policies not translating into

new sources of wealth for Canadians?

The bioeconomy is recognized as an area with high-growth potential in both urban and rural

areas. By some accounts, bioeconomy revenue growth has been greater than 10 percent per

year over the last decade, substantially faster than the rest of the Canadian economy. The Pan-

Canadian Framework on Clean Growth and Climate Change (PCF) states that the global market

for low-carbon goods and services is worth over $5.8 trillion, growing at an annual rate of 3

percent. The forest bioeconomy could open up new revenue streams for producers. In looking

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towards 2030, the OECD indicates that biotechnology could contribute up to 2.7 percent of

2030 GDP in OECD countries.

The challenge is to realize this potential. Although the quality of Canadian R&D is high, gaps

remain in its conversion to innovation and subsequent commercialization. Currently, Canada

only invests about 1.6 percent of its GDP in R&D ($31.6B per year), compared to other OECD

countries that invest an average of 2.4 percent. A cohesive policy framework on the forest

bioeconomy would help guide both the use of public and private resources.

A Solution to Climate Change The need to address climate change presents an opportunity for the forest sector over the

medium term. As bioproducts become a key part of the bioeconomy, an increased market pull

for low-carbon solutions is anticipated, and the forest sector is well-positioned to deliver.

The PCF outlines complementary new actions for reducing emissions and increasing carbon

sequestration in forests, including the use of low-carbon bioenergy and bioproducts that use

feedstocks from forestry fibre, such as harvesting and mill residues, to replace higher-carbon

alternatives. Canada’s 2030 target is a 30 percent reduction below 2005 levels of greenhouse

gas (GHG) emissions. Achieving this target will require Canada’s per capita emissions to be

reduced by 36 percent. Decarbonizing the economy will be key to achieving Canada’s emission

reduction target, as well as to global efforts to hold warming to below 2 degrees Celsius.

With Canada’s population expected to increase by nearly 18 percent by 2030, and the global

population expected to reach 8.3 billion by that same year, there is growing pressure on forests

to continue to provide a range of goods and services that support communities and livelihoods.

A Proven Track Record Anchored in strong collaboration across jurisdictions, federal programming has been successful

in bringing about demonstration projects and realized commercial ventures, which are tangible

elements of the forest bioeconomy. Natural Resources Canada as well as provincial and

territorial governments, including with FPInnovations, have a proven track record in supporting

forest sector innovation through the delivery of an integrated and coordinated suite of activities

along the full spectrum of the innovation continuum. Governments across Canada have

developed new markets for engineered wood products and tall wood buildings.

Discussion Question: What do you think are the biggest barriers facing the

advancement of Canada’s bioeconomy?

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5. Key Elements of the CCFM Forest Bioeconomy Framework for Canada

Vision In terms of scope, the CCFM Forest Bioeconomy Framework would be a non-binding

commitment among CCFM members that provides a clear vision, identifies common priority

areas, and outlines a comprehensive suite of policy actions for creating a more effective,

enabling environment to grow Canada’s forest bioeconomy.

Vision: The vision of CCFM members is for Canada to be a recognized global leader in the forest

bioeconomy. This would be achieved by providing multi-faceted support for the innovative

application of novel technologies to forest biomass, including by utilizing co-products and

finding alternative uses for forest fibre.

Guiding Principle: The forest bioeconomy is based on the principle of efficiency. Forest

resources should be managed in a sustainable manner adding maximum value, including by

reusing materials to preserve natural capital stocks and respecting the services and cultural

value they provide to support the well-being of Canadians. This includes clean water, clean air,

regulated temperatures, as well as the intrinsic value of pristine landscapes. Canada’s forests

would continue to support recreational, cultural and spiritual pursuits.

In the bioeconomy, science is can be recognized as foundational and a mechanism to address

important issues currently facing the world. Science can support the development of new

bioproducts and production systems, support market access, inform regulations and standards

and is the basis of sustainable forest management. Science is one of the ways that the guiding

principle behind this proposed Framework may be translated into tangible actions.

Commitment to Sustainability CCFM members recognize that Canada’s environmental credentials in forest management

represent our competitive advantage. Sustainable forest management is an approach that

maintains and enhances the long-term health of forest ecosystems for the benefit of all living

things, while providing environmental, economic, social, and cultural opportunities for present

and future generations. Thanks to this approach and other related efforts to curb deforestation

activities, the deforestation rate is decreasing in Canada. In fact, less than 0.02% of our forest

lands are deforested each year.

Canada’s forest bioeconomy is based on sustainable management practices, and the scientific

research behind them. In fact, on June 8, 2016, the CCFM renewed their commitment to

working together to promote sustainable forests and forest products. Growing the bioeconomy

would enhance resiliency in Canada.

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Anticipated Long-term Outcome With this vision and guiding principle in mind, the question remains, ‘what would it mean for

Canada to be a recognized global leader in the bioeconomy?’ In short, a robust forest

bioeconomy in Canada would be identified by the availability of sustainable bio-based raw

materials sourced from healthy forests available for high added-value processing supplied

through a well-functioning market enabled by an effective innovation system and supported by

a well-trained, competent labour force, based on sound science. Canada’s bioeconomy could

enhance ecosystems while promoting relationships with Indigenous Peoples and local

communities.

Pillars

The forest bioeconomy is cross-cutting in nature. As such, the proposed bioeconomy framework

is based on four pillars.

Supply of forest biomass: Innovation and clean technology development are already considered

as high-risk pursuits and the forest bioeconomy adds additional risk elements, including

biomass supply uncertainty. Currently, Canada’s forest sector has highly efficient and has well-

integrated supply chains, which presents opportunities and challenges for new developers

seeking to commercialize new bioproducts as well as for established players seeking new

partnerships and ventures. Overall, access to high-quality, predicable and stable forest biomass

supplies, such as harvesting and processing residues, would stimulate creativity for developing

new uses of traditional wood products and new applications of wood fibre. Supply

arrangements could include community and regional models, and modern tenure systems.

Demand for forest bio-based products and services: As markets become proven, and consumer

demand increases, communicating the Canadian advantage will help differentiate Canada’s

forest bioeconomy. This competitive advantage will help draw in new R&D opportunities and

commercial investments as entrepreneurs seek to push the bounds of what can be done with

forest fibre, without compromising sustainability.

Support for innovation: From theory to lab to bench to demo to pilot to full commercialization,

innovation is long and achieving success requires a variety of skillsets and expertise. Upstream

foundational science supports the development of novel bio-products. Science will also provide

the necessary data to inform policies and regulations, ensuring these bioeconomy pathways are

sustainable. Canada’s forest bioeconomy would be further advanced by effective programming

Discussion Question: What is your vision for Canada’s forest bioeconomy?

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and partnerships that result in clear pathways to commercialization. Flexibility and versatility

are attributes that aid researchers and entrepreneurs in overcoming the innovation valley of

death.

Skills and relationships: Canada’s forest bioeconomy presents an opportunity to create jobs

and partnerships with non-traditional actors. But workers need relevant skills to capitalize on

these opportunities, including the required science capacity and competency to generate the

necessary research and knowledge to develop and promote innovative bioproducts. As such,

governments, industry, research organizations and education institutions can leverage

programming and partnerships to ensure that the forest sector is adequately supported in

advanced training, internships, and re-training programs Further, Indigenous People will

continue to play an important role as employees, business owners, land managers, and

providers of economy knowledge and community stakeholders.

Proposed Policy Areas for Action

Efficient standards and an effective regulatory regime for new bio-based products

Streamlining and improving standards and regulations requires extensive collaboration across

jurisdictions. Currently formal mechanism tends to be ad hoc. Further, an absence of product

standards limits market access. To this end, Canada has taken a significant lead in advancing the

standardisation (both Canadian and International standards) of a new class of biomaterials (i.e.,

cellulose nanomaterials), as well as codes and standards for tall wood buildings and engineered

wood products. Through participation in international fora, Canada has the opportunity to help

establish international standards which could remove trade barriers, harmonize research and

development activities, and support the development of regulations. Regulatory mechanisms

are also one option for increasing demand for bioproducts, including biofuels, through

renewable content requirements. Finally, whether developing a new biorefineries or a

community heating system, complex and protracted regulatory processes significantly increase

the cost of establishing a new venture. There are significant opportunities to increase efficiency

and transparency.

Innovative financial mechanisms, including tax measures, to de-risk commercialization

Financing the forest bioeconomy requires significant capital investments. And commercializing

new ventures can be costly. There are opportunities to level the playing field between forest

bioeconomy ventures and traditional natural resources extraction operations through tax

credits and incentives, such as capital cost allowances. A positive development for the

bioeconomy industry would be a taxation system that supports higher cash flows and enables

access to a larger pool of capital. Financing the forest bioeconomy requires astute investors

with a suite of products available to de-risk projects. Green financing, such as Export

Development (EDC) Canada’s green bonds, are advancing this sector. More than CAD$ 3.5

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billion in green bonds were issued in Canada between 2014 and 2017 by TD Bank, EDC and the

Province of Ontario. But more could be done to catalyze new investment and partnerships.

Collaborative research and development along the innovation continuum

Significant investments from industry and government, coupled with focused research at

academic institutions and other research organizations, have enabled the scale-up and

commercialization of a series of novel products derived from forest biomass. They are

completely different from the traditional offerings (for example, cellulose nanocrystals,

engineered fibre mats, biogas). FPInnovations is the world’s largest public-private forest

research organization and has made significant headway in advancing the commercialization

new products. Other promising research areas include advanced genomics and for optimizing

inventory management. Finally, big data could be offer precision solutions.

Public sector procurement to promote clean tech and supply chain sustainability

The purchasing power of the public sector can influence markets and stimulate demand for

green products, including those derived from forest biomass. Governments also have a role in

tracking the emission profile of buildings, operations and fleets, and could improve the

transparency of GHG reporting. There is an opportunity to build bridges across jurisdictions to

adapt best practices and share lessons. With an eye towards innovative technology, more can

be done to improve green procurement.

Outreach to attract investment and increase demand for Canadian bioproducts

Canada’s forest industry is highly interconnected with global markets. And Canada’s forest

scientists are highly engaged with their international counterparts. Actors in Canada’s forest

bioeconomy can leverage these networks and promote Canada as a competitive location for

investment, innovation and research, to draw in new partners. The challenge is communicating

the Canadian advantage, including in emerging markets, and for tall wood buildings, advanced

engineered wood products as well as advanced materials.

Accessible comprehensive investment-grade data on the bioeconomy

Researchers, investors, and entrepreneurs rely on comprehensive data to gauge the risk and

potential rewards associated with new bioeconomy opportunities. A set of official and regularly

updated statistics on Canada’s forest bioeconomy does not exist, although considerable

investments have been made in improving bioeconomy data. Due to the newness of many

biotechnologies and products, they do not have unique codes under the main classification

systems used to track North American economic activity and global trade. There has been

ample study but no consensus on the actual GHG emissions mitigation potential of bio-based

activities in Canada, nor is there an authoritative source on biomass availability. Without

consistent and comparable data, it is difficult to determine the growth and opportunities of

Canada’s bioeconomy, which in turn becomes a barrier to investment.

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Workforce training and strong partnerships with Indigenous communities

There is an ongoing need for governments to provide support that will facilitate community

investments in clean technologies, build local capacity, and foster an entrepreneurial

environment, and ensure that workers have the necessary skills for the forest bioeconomy for

tomorrow. Indigenous communities across Canada are increasingly exploring economic

development opportunities related to forest-based bioenergy development for available

markets and local consumption. Despite the growing body of knowledge regarding the

economic opportunities related to the production and use of forest biomass for heat and

energy, many Indigenous groups in northern and remote communities are not well-placed to

take advantage of these opportunities. The goal is replicate successes where possible, and

continue to reduce barriers.

6. Conclusion

CCFM member recognizes the critical need to provide a clear path forward and enhance policy

certainty for advancing Canada’s forest bioeconomy. Appropriate pathways can be endorsed,

adopted and mobilized by jurisdictions accordingly.

This paper contextualizes the need for continued and accelerated transformation of Canada’s

economy to capitalize on emerging opportunities from the innovative use of forest resources

and fibre, including from co-product and alternative options. It outlined the key elements of a

framework for advancing Canada’s forest bioeconomy. It presented seven policy action areas

that would be high-impact and, in aggregate, achieve the vision outlined above.

The CCFM is seeking your views on the future of Canada’s forest bioeconomy. Please visit

www.ccfm.org for further information and to respond to our survey. For questions or

comments contact Matthew Bock (matthew.bock@canada.ca) of Natural Resources Canada.

Discussion Question: What are your thoughts on the proposed CCFM

Framework for advancing the forest bioeconomy? Do you think the proposed

policy action areas sufficiently comprehensive and effective?

Discussion Question: What roles do you see for the CCFM in advancing the

forest bioeconomy?