U.S. subsidy threatens industry

Canada’s battered forest industry faces a new threat on the horizon that could kills thousands of jobs as reports suggest the United States is looking to bolster a biomass subsidy, says the Forest Products Association of Canada.

MONTREAL — Canada’s battered forest industry faces a new threat on the horizon that could kills thousands of jobs as reports suggest the United States is looking to bolster a biomass subsidy, says the Forest Products Association of Canada.

Association president Avrim Lazar says U.S. producers would gain a competitive advantage unless Ottawa develops a national strategy and provides substantial funding to harness the country’s potential to become a bioenergy superpower.

“If the U.S. and European government subsidize the movement of their industries in that direction, we’re going to lose tens of thousands of jobs and we’re going to lose a huge opportunity,” he said.

An expanded U.S. program will lead to mill closures, Lazar added. The Canadian industry has lost thousands of jobs as the global recession has wiped out demand for lumber, pulp and paper.

The U.S. biomass crop assistance program, included in a 2008 farm bill, is designed to support the shift from fossil fuels to renewable energy. It is expected to provide about US$25 million in subsidies this year to convert one million tonnes of scrap wood and chips to energy.

However, the U.S. government is under pressure from the forest products industry to expand the program to include large companies and broaden the definition for eligible materials.

Canadian producers fear changes to the program’s criteria could in effect partially replace the black liquor subsidy set to expire in December.

It could also raise the cost of fibre for Canadian mills as companies look to secure the subsidy.

Lazar called on Ottawa to partner with industry to develop a bioenergy and bioproducts strategy.

“We’re at the doorstep of this huge opportunity, but we won’t go there just as an industry because we’ll be competing with governments,” he said. “So it’s an area in which we can pull our weight, but government action needs both coherent far-sighted policy and cash.”

The Department of Natural Resources said the Canadian government appreciates the biomass program’s potential to disadvantage Canadian producers and distort markets.

“We have formally raised our concerns about the impacts this initiative would have on the Canadian forest industry with the United States Department of Agriculture,” a spokeswoman said an email.

She said the government is assessing all its options.

Ottawa responded to the black liquor subsidy by providing in June a $1 billion to help the industry improve its environmental efficiency. It is among several initiates put in place to assist the industry and affected communities.

An expanded U.S. policy could provide up to US$4 billion a year in subsidies, with about half going to pulp producers, says Rod Young, chairman of RISI, a Boston-based economic analysis firm that specializes in the forest products industry.

Unlike the black liquor subsidy, which applies solely to pulp producers, the biomass program would apply to other industry players.

Lumber producers would share US$1.3 billion, other wood products, including plywood, would garner around US$200 million and mechanical pulping could attract US$140 million, he said.

The subsidy would amount to $50 per tonne as of 2010.

Canadian jobs would be threatened unless Canada develops its own program. But Young doubts the impact would be as severe as suggested by Lazar.

“The reason that tens of thousands of jobs are going to disappear in Canada is because Canada is so heavily oriented towards newsprint and newsprint demand is going down like a stone.”