Eric Johnson and Mahima Sharma

The federal government has stepped up in a significant way on climate action by setting ambitious targets to reduce greenhouse gas emissions and accelerate our move to a lower carbon economy. And as the late Jim Carr, Canada’s Minister of Natural Resources from 2015 to 2018 often said, there is no path to a net zero carbon economy without Canadian forestry and forest products from Canada’s sustainably managed forests.

Forests play a critical role in climate change mitigation as trees capture CO2 from the atmosphere. As trees grow across Canada’s boreal forest, they absorb and store carbon. As they approach the 50-to-100-year age range and beyond, they become susceptible to natural disturbances like pest outbreaks, droughts, storms, and fires – causing them to release that carbon back into the atmosphere. While such natural disturbances are normal, they are becoming more frequent and severe, significantly increasing greenhouse gas emissions from Canada’s forests and putting lives and critical infrastructure at risk.

In  his recent report to Parliament, Commissioner of the Environment and Sustainable Development Gerry V. DeMarco noted that Canada’s forests are becoming a net source of emissions because of forest fires and disturbances caused by insect outbreaks, which are now among the biggest threats to our nation’s climate targets.

The increasing catastrophic nature of wildfires in recent years is a result of climate change. As such, we must prioritize proactive forest management with a focus on climate adaptation. The good news is that the 2022 National Inventory Report showed that forest land and harvested wood products’ GHG emissions decreased from a net source of 8.2 Mt in 2005 to a net sink of 21 Mt in 2009 and a sink of 9.1 Mt in 2021. It proves that managing our forests and using carbon-storing wood products in the built environment are powerful tools as we work to adapt to a warming climate.  Further making the point about the importance of forest management is the fact that many of our national parks are turning into carbon sources because of these very natural disturbances.

That managing our forests and using carbon-storing wood products in the built environment are powerful tools as we work to adapt to a warming climate.

In Canada’s managed forest, we can minimize these disturbances through sustainable forest management and by renewing our forests with younger trees to restart the carbon-storing cycle. At the same time, harvested trees are converted to valuable carbon-storing wood products to build our communities, while leftover wood chips from our sawmills and low-grade wood from our forest floor can be used to make pulp and paper, biofuels, bio-adhesives, and to green our electricity grid and power district heating systems.

Given the bounty of our forests and our leading sustainability indicators, Canada   is in a position that is the envy of most countries around the globe.  We are home to 9 percent of the world’s forests and to nearly 40 percent of its independently certified and audited forests. This resource provides us with a powerful and renewable asset that can help fast-track domestic progress toward our climate objectives, while supporting tens of thousands of family-supporting jobs here at home.

Delivering further GHG reductions for the country will require targeted and regionally optimized forest management, industrial operations, and most importantly more strategic industrial policy from our federal government. While national and regional politics has been conducive to getting the federal government to advance sector-specific decarbonization and growth plans for energy, critical minerals, and electric batteries, the forest sector is well positioned to be next in line to deliver on its climate and economic growth promise to Canadians.

In its Annual Report entitled “Compete and Succeed in a Net-Zero Future” in January,  the NetZero Advisory Body noted the value-added forestry sector as one of Canada’s seven priority sectors and specifically called out the competitiveness risks before Canada’s forestry and steel sectors given aggressive industrial subsidies and tax credits from the US Inflation cReduction Act (IRA). Not only that – governments in leading forested nations like Finland and Sweden have embraced the carbon-capturing power of their forests by creating integrated strategies and incentives to leverage the full forest sector value chain and realize its full climate and economic benefits. The Canadian government  must move on a similar industrial strategy for the forest sector, or we risk falling further behind our global competitors.

In addition to the IRA, the US  has recently doubled down on its forest biomass play by including forest biomass as eligible for Investment Tax Credits under the Infrastructure Investment and Jobs Act (IIJA). Furthermore, President Joe Biden signed a $1.7 trillion omnibus spending bill last  December 29th, recognizing forest bioenergy as “carbon neutral” and instructed US federal agencies to establish clear policies for forest biomass as a renewable energy source. This has given the US forest and clean technology sectors a competitive edge over Canada, attracting investments, technologies, and talent that could have had significant benefits here at home. To improve its position as a serious global forestry player and a leader in clean technology innovation and manufacturing, Canada must ensure its suite of Investment Tax Credits recognize the forest biomass opportunity.

Including biomass technologies in the Investment Tax Credit for Clean Electricity and Investment Tax Credit for Clean Technology Manufacturing is essential for Canada to capitalize on its abundant forest biomass resources and to accelerate progress towards our climate goals

Canada’s forest sector and its workers are not just looking for financial tools and incentives – we are also looking for policy coherence. While the federal government took the necessary steps in Budget 2023 to recognize forest biomass for its clean fuel potential, its Clean Fuel Regulation (CFR) is more ambiguous. Although designed to incentivize cleaner and greener energy, the CFR to date still does not recognize the sustainability attributes of biomass sourced from Canada’s independently certified and audited forests. This needs to change.

Canada has the tools to stimulate innovation, create new jobs, and drive economic growth in the clean technology sector. Clear policies and incentives will enhance the country’s energy security, promote sustainable land use practices, and reduce greenhouse gas emissions. In fact, other sectors are already looking to the forest-products sector to supply clean energy and fuels to meet their decarbonization objectives.

Forest biomass is a largely untapped resource for clean electricity and heat generation, which can significantly contribute to Canada’s decarbonization goals. Using forest biomass as a clean energy source to power technologies such as Combined Heat and Power systems, gasification, pyrolysis, and district heating that convert biomass into low-carbon electricity and heat under the Investment Tax Credit for Clean Electricity (ITCCE) will give Canada the tools to create jobs, stimulate economic growth, and further reduce Canada’s carbon footprint.

Moreover, utilizing biomass residues for energy production encourages the reuse of waste materials and minimizes the need for landfill disposal, thereby aligning with Canada’s emission reduction and circular economy objectives.

Incorporating biomass conversion technologies into Canada’s clean energy mix has numerous social and economic benefits. First and foremost, these technologies have the potential to create new employment opportunities in rural and remote areas where biomass residues are abundant.  This includes the provision of greater opportunity for Indigenous leadership and business ownership in and around forested communities.

Biomass residues for energy production can also help reduce the country’s dependence on fossil fuels, thereby enhancing its energy security and resilience. As Budget 2023 outlined, using forest biomass as an electricity-generating source can provide Indigenous, rural, and remote communities with a sustainable, reliable, cost-effective energy option that supports local economies, enhances energy security, and contributes to climate change mitigation.

This feedstock also offers environmental benefits, as it can help decrease greenhouse gas emissions and promote sustainable land use practices to reduce forest fires and deal with pests. When biomass is used to generate electricity, it displaces the need for fossil fuels, reducing the overall carbon footprint of the energy sector. Additionally, biomass conversion technologies incentivize sustainable land management practices by giving value to what is currently forestry waste. And we don’t have to stop there. It’s essential to continue to look at ways to further green the forest sector’s processes through projects like lime kiln decarbonization and bioenergy with carbon capture and storage (BECCS).

Close to 20 lime kilns across pulp and paper mills in Canada could benefit from fuel switching to forest biomass, and BECCS offers a solution for permanent carbon dioxide removals while meeting the goals of both the proposed Clean Electricity Standard and the Canadian Net Zero Emissions Accountability Act.

To remain competitive in the global forestry and clean technology markets, Canada must act swiftly to ensure its tax incentives align with those offered by other countries, particularly the United States. By expanding the scope of the Investment Tax Credit for Clean Electricity and Investment Tax Credit for Clean Technology Manufacturing to include biomass conversion technologies, Canada can level the playing field and attract the investments and talent necessary to maintain its leadership position in this crucial sector. Furthermore, including biomass conversion technologies in Canada’s clean energy tax incentives will signal to the global community that the country is committed to a diverse and sustainable energy mix. By embracing the potential of biomass residues as a valuable resource for electricity generation, Canada can demonstrate its dedication to a cleaner, greener future.

The time is now for Canada to seize the opportunity presented by its abundant biomass resources and incorporate the technologies that convert these residues into electricity into its ITC programs under a more comprehensive industrial strategy for the sector. By doing so, the country can unlock the immense social, economic, and environmental benefits of this sustainable energy source, while maintaining its competitiveness on the global stage. Investing in Canada’s forestry and clean technology sectors – and understanding their essential role in the fight against climate change – has never been more important.

Eric Johnson is Vice President for Federal Government Relations and Mahima Sharma is Vice President for Innovation, Environment and Climate Change at the Forest Products Association of Canada in Ottawa.