Money Growing From Trees: Canada’s Pulp and Paper Green Transformation Program

Heather Lynch

The clock is ticking on the Pulp and Paper Green Transformation Program. After March 31, 2012, firms will no longer be able to tap into the $1 billion that was earmarked for approved capital projects with an environmental edge.

The federal program was first announced nearly two years ago in June 2009. It laid the groundwork for ambitious, industry-driven initiatives towards the development of alternative energy, efficiency and environmentally conscious innovation. The program calculates a maximum funding envelope for an organization based on a $0.16 per litre credit for black liquor produced by its mills between January 1, 2009 and December 31, 2009. Companies now have just shy of one year to access funding set aside for their projects.

A wide range of projects is considered under the program including recovery boiler upgrades or replacements, the installation of electricity-generating turbines for cogeneration, hog fuel dewatering, water reduction and the incineration of non-condensable gases. As of October 2009, a total of 24 Canadian companies had qualified for credits under the program, which have led to a number of investments by industry.

Fibrek’s mill in Saint-Felicien, QC is drawing down a total of $6.1M from the program, which will enable it to install five electrical motors designed to increase its green energy production capacity by roughly six megawatts.

Canfor Pulp Income Fund has a total of $122.2M in credits to spend and so far, has announced plans for upgrades that will reduce odour and particulate emissions, reduce the consumption of fossil fuel and water, and assist with incremental renewable electricity generation.

A total of $33.1M has been allocated in credits to Fraser Papers, while Mercer International has $57.7M earmarked for its projects. Mercer’s plans for the funding centre on its Celgar mill green energy project, which would involve the installation of a 48 MW condensing turbine and upgrades to its existing power boiler and steam management facilities.

Catalyst Paper’s Power River mill pulled in $13.3M worth of credits, enabling the investment in an equipment upgrade that will increase the mill’s ability to generate low-carbon electricity from biomass. The project is expected to augment the mill’s production of renewable electricity by 130,000 MWh/year, which translates to the amount of energy it takes to power close to 11,000 homes.

The AV Group will receive a cool $24M under the program, which will be directed to its Nackawic and Athoville facilities. “This funding allows us to invest in projects right away,” Shankar Ray, president and CEO of AV Group said of the initiative. The company will use the credits to increase renewable energy production and to improve energy efficiency.

The announcement of the Pulp and Paper Green Transformation Program has prompted not only investment in capital upgrades – it has had a significant impact on wider operational decisions for some firms as well. In the case of Tembec’s Skookumchuk pulp mill, the launch of the program contributed to the company’s decision to forgo a scheduled two-week shutdown in June 2009.

At a time when investments in capital upgrades to Canadian pulp and paper outfits are constricting, or in some cases, non-existent, the Pulp and Paper Green Transformation Program provides forestry facilities not only with the financial incentive to spend, it gives a boost to research and development in the industry by emphasizing the importance of innovation. This component is critical. As pulp and paper mills cinch in their belts another notch with every passing fiscal quarter, R&D divisions in many companies have been decimated. Even Canada’s first and oldest forestry faculty, housed at the University of Toronto for the past 104 years, is facing the possibility of extinction. According to a recent report by the Globe and Mail, the University teaches between 70 and 80 undergraduate students each year through the Faculty of Arts and Science, but draws no revenue. As a result, U of T is forced to offset forestry studies with resources it pulls in from other programs and the university’s administration is now claiming the faculty is no longer a financial feasibility.

A research paper prepared by the Government of Canada directly attributes the declining performance of the forestry sector to marginal investments in research and development. Reasons for lacklustre R&D are multiple, the paper notes, but include business leader attitudes, a lack of technological expertise and human resources, the presence of foreign businesses and, interestingly, insufficient government incentives (Madore & Bourdages, 1992). With the launch and considerable uptake of the Pulp and Paper Green Transformation Program, a lack of government incentives can safely be scratched from this list.



*Odette Madore, Economics Division and Jean-Luc Bourdages, Science and Technology Division. April 1992. The Canadian Forestry Sector: an industrial and technological profile