What would a Canadian industrial policy for forestry look like?/Adobe

By Eric Miller

September 16, 2024

Countries in every region of the world are seeking to grow their economies and drive innovation. As part of this process, they are looking to capture greater value from sectors where they have a natural comparative advantage.

These objectives are increasingly spelled out by governments in the form of industrial strategies; instruments that offer a clear set of policies governments use to promote and drive value in certain sectors of the economy. When done properly, they are vital instruments for driving economic prosperity.

Canada has recognized that it needs plans for managing and growing key sectors. This is why the federal government has strategic plans for the critical mineral and electric vehicle sectors.

Both sectors anchor regional economies and are fundamental to the energy transition. The other big sector that meets both the economic and climate objectives is forestry.

It is therefore imperative that Canada develop an industrial strategy for the forestry sector. Wood, pulp, and paper manufacturing represents about 9% of Canada’s total factory sales, making it one of the largest industrial sectors in the country. Last year alone, the outputs of the Canadian forest sector reached $73 billion. It employs more than 200,000 Canadians across hundreds of rural and northern communities.

An industrial strategy designed to grow the forestry sector and make it more innovative could play a significant role in pushing out the prosperity of Canadian life to the many villages and hamlets that too often feel ignored. Moreover, a well-designed strategy would see government action to address climate change become synonymous in forestry communities not with escalating costs, but with new jobs and greater fire resilience.

To be clear, calling for a forestry industrial strategy isn’t a call for bigger government intervention or large handouts to corporations. In fact, it’s quite the opposite.

So, what would a Canadian industrial policy for forestry look like?

Practical industrial policies require governments to get the small things right – ensuring policies don’t operate at cross purposes and that there is consistency and line of sight from one government department to the next. These policies should also strengthen infrastructure to incentivize private sector investment and engage global stakeholders to recognize the positive externalities businesses provide to their communities.

Practical industrial policies should recognize the interconnectedness of global challenges – from technological disruption to climate change to pandemics – and they require proactive, coordinated responses that transcend ideological divides.

Of course, businesses already navigate a complex web of policies, often shaped in ways that negatively impact their trajectory. We need to think integrally about how everything fits together and ensure our policies support all critical industries, not just the ones grabbing the latest headlines.

To realize the full potential of the sector, an industrial policy for Canadian forestry should include:

• Investment Tax Credits (ITCs): Implement ITCs specifically to incentivize the creation and use of biomass for heat and electricity, as announced in the 2023 Fall Economic Statement. Effective implementation is crucial to ensure these credits stimulate investment in sustainable biomass energy solutions.
• Mass Timber and Primary Wood Products: Promote mass timber construction to enhance the built environment. This involves increasing height allowances in the National Building Code from 12 to 18 storeys, enabling more low-carbon, affordable housing.
• Regulatory Harmonization: Harmonize regulatory frameworks and streamline permitting processes to reduce bureaucratic hurdles. This will facilitate faster project approvals and provide greater certainty for businesses in the forestry sector.
• Wildfire Mitigation: Eliminate regulatory barriers to active fire mitigation and prevention, with targeted financial support for regional, land-based decision-making. Encourage collaboration between industry and Indigenous Peoples on climate-smart forestry practices.
• Community Infrastructure: Invest in infrastructure in rural and northern areas to make these communities more livable and attractive to skilled workers, and to support the efficient transport of forestry products.
• Workforce Supports: Identify existing and to-be-created educational pathways that provide workers with the skills and practical experience needed to meet industry transformation objectives, to facilitate the design and development of emergent technologies, manufacturing processes, and downstream product applications.
• Global Advocacy: Enhance government efforts to defend Canada’s forestry interests globally, countering misinformation about the sector that puts Canadian jobs at risk, and addressing protectionist legislation in other markets that threatens the sector’s ability to compete globally.

In addition to these elements, the Canadian forestry industrial strategy needs to include an export component. For the foreseeable future, Canadian softwood lumber seems destined to be subject to U.S. protectionist tariffs. One important way around this is to develop new markets for valued-added forest products.

One of the most important global trends in housing is the rise of modular construction. In essence, chunks of houses are pre-made in a factory and then put together at the building site like a Lego kit. This is not only cheaper than classic site-built construction but requires fewer people to execute.

Considering that Sears sold kit houses to build communities across North America a hundred years ago and leading builders sold kit skyscrapers across the world at the beginning of the 20th Century, it should be possible to export Canadian-made wooden modular buildings. Moreover, once the infrastructure is in place, these buildings can be widely sold domestically and play a key role in solving Canada’s housing crisis.

Canada is hardly the only country facing a housing shortage. If it mobilizes the right collection of players, modular buildings can become a key Canadian forest product.

By thinking creatively and incorporating these and other elements, a forest sector industrial strategy can provide a comprehensive and coherent framework that ensures the long-term sustainability and competitiveness of Canada’s forestry sector.

Government support for forest-based solutions to Canada’s environmental, economic, and social challenges can simultaneously increase affordability, safety, and prosperity for everyday taxpayers across the country.

We know that our collective strength as a nation depends not only on managing our natural landscape responsibly, but also in how we build a cohesive policy environment that enables Canadian workers and businesses alike to achieve shared goals.

It’s time to take a pragmatic approach that supports both established and emerging sectors to keep pace and remain competitive, or face the consequences of falling behind.

Eric Miller is President of Rideau Potomac Strategy Group, global fellow at the Canada Institute of the Woodrow Wilson Center in Washington, and a fellow with the Canadian Global Affairs Institute.