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FPAC Presentation to: Greening Industry Network Conference Waterloo, Ontario June 16, 2007. Presentation Overview. Industry Background The Forest Industry. Climate change and Sustainability Capital Investment: The Driver of Competitive and Sustainable Renewal - PowerPoint PPT Presentation
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FPAC Presentation to: Greening Industry Network Conference
Waterloo, OntarioJune 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
• Shipments of $88 billion in 2006• Source of over 820, 000 jobs - 320,000
direct • Over 300 forestry dependent communities • High productivity, high wage sector• Leading source of business and economic
opportunities for Canada’s Aboriginal peoples
Canada’s Forest Industry – An Overview
Source: FAO February 2007
Forest Products Exports 2005 (CAN$ Billions)
4.96.47.07.17.88.1
9.59.9
15.817.2
21.822.1
38.4
0 10 20 30 40 50
Netherlands Belgium
Indonesia Brazil
Austria China
France Russian Federation
Finland Sweden
Germany United States of America
Canada
The Leading Exporter of Forest Products
Source: StatsCan March 2007
Industrial Contribution to GDP (2006)
2.7%
2.2%1.8% 1.6%
1.0% 0.8%0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
For
est
Pro
duct
sIn
dust
ry
Oil
and
Gas
Mot
or V
ehic
leM
anuf
actu
ring
Che
mic
alM
anuf
actu
ring
Min
ing
Pla
stic
s an
dR
ubbe
r
Rai
l Tra
nspo
rt
One of Canada’s Leading Industrial Sectors
Source: StatsCan April 2007
2006 Contribution to Canada's Manufacturing Employment: 12.3%
32.3% 30.3%
14.9%12.1% 11.8% 11.3% 10.1% 8.2% 7.6% 7.0%
0%5%
10%15%20%25%30%35%
New B
runsw
ick
British
Colum
bia
Quebec
Newfo
undla
nd
Nova S
cotia
Alberta
Manit
oba
Saskat
chewan P.E
.I
Ontario
Sh
are
of
Pro
vin
cial
Man
ufa
ctu
rin
g
Em
plo
ymen
t
Key Sector in Each Region of Canada
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
• 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
Canada’s Forest Sector and a Changing Climate
• 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
Critical Impacts and Adaptation Issues for Canada’s Forest Sector
• 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 GHG Emissions Mitigation
• 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
Canada’s Forest Industry and Bio-Energy Climate Change
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
Research and Development Expenditures 2006
912
546 537
261 170 143 131 129 40
1293
0200400600800
100012001400
Ph
arm
ace
utic
als
Ae
rosp
ace
Fo
rest
Pro
du
cts
Mo
tor
Ve
hic
le
Min
ing
, Oil
an
dG
as
Co
mp
ute
r a
nd
pe
rip
he
ral
Pe
tro
leu
m a
nd
coa
l pro
du
cts
Pla
stic
s
Ele
ctri
cal
Tra
nsp
ort
atio
na
nd
Wa
reh
ou
sin
g
Mil
lio
ns
of
$ C
dn
Source: Statscan April 2007
Forest Industry an Major Source of Private Sector Innovation in the Canadian Economy
Source: PwC, CIBC World Markets, April 2007
Return on Capital Employed, 1998-2005 average
9.8
7.06.3 5.7 5.4
4.63.4
2.2
0
2
4
6
8
10
12
India LatinAmerica& SouthAfrica
OtherAsia
Europe USA Australia& New
Zealand
Canada Japan
RO
CE
(%
)
Typical Cost of Capital: 9-12%
Globally Canada’s Forest Products Companies are not as profitable as others
Source: StatsCan Jan 2007
4.94.5
3.8 3.6
4.7
2.7
3.63.1
3.5
4.74.9
5.4 5.5 5.6 5.65.1 4.9 4.7 4.5
3.43.1
5.3
0
1
2
3
4
5
6
7
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Bil
lio
ns
of
$Cd
n
Investment Depreciation
The Forest Products Industry is Making Significant Investments
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
• 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
Renewal through Reinvestment
Source: CD Howe, OECD 2006
Ger
man
y
Canad
a
Finlan
d
Nethe
rland
s
Unite
d Kin
gdom
Switzer
land
Irelan
d Portu
gal Swed
en
Denm
ark
Austri
a
Norway
Italy
Franc
e
Spain
New Z
eala
nd
Austra
lia
U.S.
Japa
n
Korea
5
10
15
20
25
30
35
40
45
20 25 30 35 40 45 50 55
2006 total tax receipts (% of GDP)
20
06
ME
TR
on
Ma
nu
fac
turi
ng
In
ve
stm
en
t
Canada’s tax regime discourages manufacturing investment
• 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
Priorities for Addressing Climate Change in a Pro-Competitive Manner
• 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
Conclusion