Between 2013 and 2022, Canada’s share of global softwood lumber production declined from 13% to 10% by volume, writes Heather Exner-Pirot/Adobe

By Dr. Heather Exner-Pirot

September 16, 2024

Canadian policy debates have become locked in a perceived dichotomy between acting on the climate and growing a strong economy. Winners and losers, trade-offs and costs seem to appear at every corner. But there’s one sector in Canada that can uncompromisingly advance emissions reductions goals while thriving economically: the forestry industry. Unfortunately, benign neglect of Canada’s world-leading forest resources has left a lot of opportunity on the table. It’s time to start capitalizing on it.

Stacked up beside Canada’s enormous energy and mining sectors, the forestry industry may not loom large in Bank of Canada updates or major bank analyses. But it is a significant part of the Canadian economy by any metric. In 2022, the sector generated nominal GDP of $33.4 billion, exports of $45.5 billion, and employed over 212,000 people, of whom 11,000 were Indigenous. Forestry contributes to Canada’s trade balance, with a $32 billion surplus, and is a key source of income and employment for about 300 communities in every province except PEI. Areas of historical strength include, yes, 70% of the world’s maple syrup production, which has been growing steadily and hit over $600 million in exports in 2022; as well as world-leading exports of softwood lumber, newsprint, and pulp products.

The enormity of Canada’s forest resource is hard to overstate. We have 234.5 million hectares of commercial forests, of which only 0.4% is harvested each year. Unlike other jurisdictions globally, deforestation (the permanent clearing of forest to make way for non-forest use) is a minor issue here, accounting for only 0.02% of our forest. We account for only a third of a percentage point of global deforestation despite having almost a tenth of the world’s forests.

Quantity and Quality

Canada also has 35% of the world’s certified forest area, a term to describe third-party sustainable management standards. Increasingly, these are administered by Indigenous Peoples, whose management of forest resources has increased 135% since 2003. Canada competes on both quantity and quality.

Yet despite the big numbers, and a highly profitable 2021 thanks to a COVID-era construction and renovation boom, the Canadian forestry sector has spent much of the 21st century on the back foot. The softwood lumber disputes, pine beetle and other infestations, wildfires, and regulatory burdens have all diminished the sector’s ability to compete and grow. While the value of Canada’s forest sector is still increasing, our production volumes and global market share are in decline. Between 2013 and 2022, Canada’s share of global softwood lumber production declined from 13% to 10% by volume. Canada’s share of global wood pulp production (mechanical, semi-mechanical, and chemical) declined from 10% to 4% over the same period.

This is not due to a lack of demand but rather a lack of vision. As an economic sector, forestry is not a 19th or 20th century phenomenon. It is foundational to construction and housing, and a solution to many of our low-emissions material needs. Other nations have thriving forest sectors, even as ours slowly diminishes. A key difference is a lack of policy support. In Canada, the forestry sector is the victim of, at best, inattention, and at worst, obstruction.

Management, Markets and Access

What could an ambitious Canadian forestry strategy produce? How could we leverage our enormous and unique resource to address Canadians’ economic and environmental needs? There are three areas primed for action.

The first is using active forestry management practices to address wildfire risk while providing new feedstock for forest products. Increased wildfires may be an inevitable consequence of climate change, but we are not helpless to mitigate their impacts. Strategically thinning forests and reducing fuel loads reduces wildfire risk and severity. This can be made more economical by using low-value residual fibre to feed into bioproducts and bioenergy, such as forest biomass-derived heat and electricity. We should be incentivizing investment and demand for these sectors as part of our wildfire mitigation response.

The second is to strategically develop both markets and supply chains for mass timber. Engineered, or mass, timber products are thick, compressed layers of wood that can be used as structural load-bearing elements. This allows them to displace carbon-intensive products such as steel and concrete. Using wood products in construction not only displaces emissions but actually acts as storage, reducing embodied carbon in buildings by as much as 40%.

To take advantage of the opportunity and grow global market share, Canada should develop local supply chains and standardize building archetypes, connectors and specifications. This has the added bonus of reducing costs and time of construction as we work to increase housing supply. The application of mass timber should be expanded as well: Ontario announced in April it would allow mass timber construction for 18-storey buildings, up from the previous twelve. Other provinces should follow suit.

The third is to implement policies that provide reliable access to timber resources. Canadian companies perennially fall short of their full Annual Allowable Cut (AAC) – the amount of timber that can be harvested sustainably as determined by each province – partly because there is tremendous difficulty in accessing the permits. The area harvested in Canada has dropped by about 14% since 2016. The gap between harvest and AAC should be reduced.

BC is a worst-case scenario. Despite the province’s incredible resource, weak policy, slow permitting, and activism has led to mill closures, curtailments, and the loss of thousands of jobs just in the past year. It is almost inconceivable to think that the Canadian forestry sector is hampered by a lack of access to timber supply. Our peer jurisdictions in the United States, Sweden and Finland harvest far greater proportions of their commercial forests each year, in a broadly sustainable way.

A Question of Leadership

There are opportunity costs of letting our global forestry market- share continue to decline. One is that it reduces options for builders at home and around the world to choose renewable wood products over higher-emitting steel and concrete. North America is currently producing a fraction of the CLT (cross-laminated timber) that Europe produces, despite our higher population growth and access to Asian markets.

It further limits economic opportunities for the many Indigenous communities that rely on forestry. There are already about 1,400 Indigenous-owned businesses in the forestry sector. New markets, opportunities and products can expand these businesses and help communities move through the value chain to milling and manufacturing.

Maximizing our potential will require policy leadership. The sector is served by a handful of industry associations and the Canadian Council of Forest Ministers, whose secretariat is provided by Natural Resources Canada’s Canadian Forest Service. But it is still lacking a coordinated national strategy that looks not only at environmental management, climate adaptation and Indigenous reconciliation, but at economic competitiveness and industry innovation as well.

Canada was born on third base; an immensely endowed nation with world-class supplies of almost every conceivable resource. When it comes to the potential of our forest sector, we have not been able to see the wood for the trees. Let’s not wait any longer to develop a coordinated forestry strategy that will make us a global leader once more.

Heather Exner-Pirot is Director of Energy, Natural Resources and Environment and the Macdonald-Laurier Institute.