The Kyoto Protocol came into force in February 2005, requiring a 5.2 percent collective reduction of Green House Gas (GHG) emissions by industrialized countries. Canada is looking at a six percent reduction by 2012, and the forest industry sector is responsible for its share.

The Forest Products Association of Canada says the forest industry has already reduced GHG emissions by 54 percent on an intensity basis since 1990, more than seven times the amount required by Kyoto. The industry has also collectively reduced fossil fuel consumption by 45 percent, reduced its landfill waste by 40 percent and improved local air quality by 60 percent, says the Association, while increasing production by 20 percent. These "early actions," which President and CEO Avrim Lazar says demonstrate the industry's willingness to achieve social and environmental responsibility, are unlikely to be recognized by the federal government, which announced last year that the forestry sector will be expected to reduce emissions by an additional 18 percent by 2010.

"It's a policy mistake on the part of the government," says Lazar. "It sends a clear message to good corporate citizens that environmental responsibility is not recognized and is indeed penalized by making it more advantageous to wait for regulation."

Lazar says the industry most easily reduces emissions through energy consumption, but that the sector already draws 60 percent of its power from renewable sources, making the additional 18 percent requirement a challenge.

"The best metaphor is this," says Lazar. "If you drive a Prius and your neighbour drives a Hummer and you're both asked to reduce your impact on the environment, your neighbour can just go out and buy a Ford truck, but you'll pretty much be reduced to a bicycle."

Despite the potential for reducing investment attraction, Lazar says industry progress could act as a catalyst for better international relations, as environmental credibility goes a long way.

"This is an opportunity to tell the global market place that there is no better environmentally responsible choice than Canadian forest products," says Lazar. "If the rest of the world managed forests the way Canadians do, there would be 20 percent less GHG emissions globally. If the rest of the world behaved like us, we'd all be bragging about emissions reductions seven times below target."

The cost of further reductions will be "eaten by communities," not the consumers, says Lazar, because Canada exports 60 percent of its products at a global price, which facilitates competitive outsourcing. Canadian companies might try to beat costs by setting up shop in countries like China and Brazil, which have no environmental strategies in place, further harming the environment while impacting Canadian forestry workers.

In a presentation for a BC Climate Exchange conference, BW McCloy and Associates acknowledged steps taken by the industry such as using increased levels of biomass energy - deemed CO2 neutral by the International Panel on Climate Change - and new wood energy products implemented by companies to displace the use of natural gas. These and other initiatives are positive steps in the direction of self-sufficiency, says the report, as well as potential economic opportunities in net selling of renewable energy. However, it also said that potential pulp sector earnings of $7.2 million annually from the sale of "Early Action" carbon credits could become a $4.2 million liability if the federal government confirms its perceived intention to withhold credit for these efforts.

Environment Canada was unable to comment on this decision at the time of press.

The BC Government announced its 2007 Energy Plan in February, which outlines ambitious energy goals like achieving zero GHG emissions by 2016, the development of a $25 million Clean Energy Fund and a BC Bioenergy Strategy, aimed at taking full advantage of BC's renewable and alternative energy sources. A key component of the Plan's Alternative Energy Policy is the development of energy generation projects that use sawmill residues, logging debris and beetle-killed timber. Besides helping the industry reduce emissions, the province hopes such projects will mitigate the impact of the mountain pine-beetle infestation, which has already adversely affected about a third of BC's merchantable pine volume, and is estimated to affect another 80 percent by 2013.

BC Hydro, working with the Ministry of Energy, Mines and Petroleum Resources and the Ministry of Forests, recently put forth a call for expressions of interest for energy projects that utilize various mill residues, 1.2 million bone dry tonnes (BDt) of which are incinerated without energy recovery each year and with adverse effects on local air quality.

Elisha Moreno, Media Relations Manager for BC Hydro says there were over 80 responses to the call, and that the company will use the information from the applicants to design a call for proposals.

"We received expressions of interest from a wide range across the country," said Moreno. "Everything from municipalities to large established forestry companies, First Nations and small and medium sized businesses."

The next step, she says, is to bring all applicants in to get full details of each expression and find out what challenges and opportunities might be specific to each applicant. The process will take at least until the end of the year, says Moreno.

As part of the Energy Plan the province also announced the development of the Innovative Clean Energy Fund, a $25 million incentive for projects that address BC-specific energy issues and showcase BC technologies. According to a statement from the Ministry of Energy, Mines and Petroleum Resources, funds will come from a .4 per cent surcharge on public utilities, with a $500,000 cap for high-energy consumers.

Coast Forest Products Association President and CEO Rick Jeffrey says it's too early to measure concrete the impacts on the industry because though the provincial and federal governments have outlined their intentions, there's a lot of work to be done, especially around the issues of early action credits and the creation of the Clean Energy Fund.

"It appears [the provincial government] wants to increase energy rates for mills to help fund the Clean Energy Fund, and this will have a tangible impact on the pulp and paper industry," says Jeffrey. "We have an ongoing discussion with the government and BC hydro, but there's no resolution yet."

On the positive, Jeffrey says it's likely there will be opportunities to use BC's forests to mitigate the impact of Kyoto rules and of carbon regulation, because they are a "carbon sink," meaning they reduce emissions by effectively storing CO2.

"The trouble is they are measuring carbon in absolute rather than relative terms and it's prejudiced," he says. "It doesn't represent a proper way to incent forest management."

Lazar says the sector would much prefer a carbon credit or cap and emissions trading system, which would allow sector earnings through the sale of carbon credits earned when companies beat emissions targets. The credits can then be sold to entities that fail to meet reduction goals. Because the pulp and paper industry is one with many opportunities to reduce emissions, it would likely be a seller rather than a buy of carbon credits, securing additional revenue for the the sector.

"It's better to take the money and spend it on the technology needed to make the reductions," says Lazar. "This would mean the most environmental progress for dollar expenditure. Giving the money to the government so bureaucracy can decide what happens to it is not a market solution."

Overall, forestry workers can expect changes in production to meet energy reduction goals and a possible shift in output as companies explore opportunities for renewable energy source production. Whether or not mill closures due to emission reduction or outsourcing is imminent remains to be seen, and is largely depended on newly established discussions between forest companies and provincial and federal governments around credit trading, early action credit and bioenergy products.