BRITISH COLUMBIA – An array of new prospects and obstacles rest at our bilateral doorstep as we embark on the greatest economic feat of the next two decades – the transition to a low carbon economy across North America.
President Biden’s visit to Ottawa this week reminds us that our true collective strength in achieving net zero lies not only in managing our natural landscape responsibly but also in how we collaborate to achieve shared goals.
Canadians and Americans have persisted in our joint pursuit of enabling opportunity for citizens, prosperity for businesses, and upholding environmental stewardship across generations and geography on both sides of the border.
This notion is no more evident than when looking at our symbiotic trade in natural resources. According to the U.S. Census Bureau, $437 billion in Canadian goods flowed into the U.S. (including nearly $23 billion in lumber and engineered wood products) in 2022. And while Canada and the U.S. have weathered a longstanding history on forestry trade relations, the importance of an integrated lumber market must not be understated.
Not only is Canada the largest softwood lumber exporter to the U.S., but over the past ten years, the U.S. has consumed an average of 38 per cent more softwood lumber than it produced annually, according to the Forest Economic Advisors Lumber Quarterly Forecast report. This means American demand for lumber far exceeds what the American forest sector can produce by a significant margin. This gap is expected to remain large over the next decade as the U.S. turns to lower carbon building solutions and builds more affordable housing.
Yet, over the last eight months, the U.S. has introduced a new national climate plan that is aggressive on policy, heavy on market incentives, and stands to erode the competitiveness of Canadian industry unless met with comparable decisive action by our government. Both the recent U.S. Inflation Reduction Act and Buy American provisions threaten Canada’s position as a preferred forestry trading partner and will impact our ability to compete for further global private sector investment.
The changing U.S. policy environment demands that we keep pace to remain competitive or face the consequences of falling behind.
For starters, government should pursue opportunities in next week’s federal budget to provide Canadian businesses with supportive tax credits and subsidies that will help accelerate industrial decarbonization. As the carbon price in Canada increases to $170/tonne by 2030, we must be nimble in our regulatory approach to ensure federal climate action enables our ability to compete on the global stage and does not hinder it.
The Biden Administration also recently introduced the $1.7 trillion Consolidated Appropriations Bill 2023 which declared forest biomass – a powerful source of renewable energy that converts wood waste like sawdust, branches, and bark into energy and fuel – as carbon neutral, while instructing all U.S. agencies develop guidelines to increase the use of forest biomass in their renewable energy supply.
This move by Biden should inspire action out of Ottawa to follow suit and invest in the full value chain of forestry, forest products, and promote the use of forest biomass to help displace fossil fuels and offset emissions, especially when taking into consideration the carbon that is absorbed during the growth cycle of trees. Biden’s shift to recognize the potential of forest biomass is a prudent move we must emulate in Canada to catch up with other markets including the U.S., Finland, and Sweden in seizing the potential of the global forest biomass market worth upwards of $250B.
On bilateral trade, another disconcerting trend is becoming increasingly clear.
Rather than sourcing from Canada to address the existing American lumber supply gap, European lumber imports are now displacing Canadian lumber imports as a result of the ongoing Canada-U.S. softwood lumber dispute.
In 2022, we witnessed offshore exports of lumber to the U.S. reach their highest levels since 2004-2006 with increased shipments from Germany and Sweden increasing by 17% and 27% respectively. In fact, European lumber exports to the U.S. have more than doubled since February 2021. It’s worth noting as we find ourselves in the sixth year of the current softwood lumber dispute that the U.S. charges no duties on that imported European wood.
As President Biden and Prime Minister Trudeau discuss our shared climate and economic goals, they should consider the GHG impacts of transatlantic shipments of lumber that could otherwise be sourced much closer to the U.S. market, right here in Canada. Moreover, Canada is home to nearly 40 percent of the world’s sustainably certified forest land, compared to single digits for the countries mentioned above.
In the meantime, safeguarding the interests of the Canadian workforce and its industries should remain a top priority for Canadian lawmakers and will depend on our federal government making decisive moves in the near term.
Only through clearly mapped plans can our government ensure regulatory, policy, and funding measures are moving together in a coordinated way. This should include establishing national roadmaps for key industrial sectors like forestry – providing a framework to accelerate carbon reductions, sustain and grow Canadian jobs, and unlock forestry’s potential to do more on the conservation of biodiversity, reconciliation with Indigenous Peoples, and mitigation of catastrophic wildfires and their impacts on communities.
Looking at the larger context and the interconnected nature of the Canada-U.S. relationship reminds us of the critical role that innovation and collaboration will play in shaping our future green economy, along with the growing need for Canada to continue to diversify our export markets and products.
By nurturing our trading partnerships and implementing smart policy, we can build a more sustainable future without leaving economic development opportunities on the chopping block.
Derek Nighbor is President and CEO of Forest Products Association of Canada (FPAC)