Some views on the pulp and paper boondoggle

Wrote this as I waited to get on to the ferry at Turku and didn’t have a chance to go online til now… Was going to be “Why the silence on the p&p boondoggle” , but the “silence” broke the first page of G&M yesterday.

Oh, well, better late than never…

Do Canadians understand the extent of the problem in the forest industry?  Enough about the car bailout, the pulp and paper industry has a right to complain and stick out their hand for government funding.

I usually take the anti bailout stance – what fails, fails. Done. Let the market determine. GM et al. didn’t do their job keeping up with the time etc.

But what’s happening in the pulp and paper industry is unnerving and it’s pathetic at how little lip service they’re getting. I was happy to see that it was in the Globe on Friday. But it still didn’t get down to the point.

WHY THE PULP AND PAPER INDUSTRY?

As someone who cares about the environment, people (i.e. new readers) may wonder why I support this industry seeing as though they have often wrecked havoc on our forests, polluted our air, etc. But, I see a different view on the pulp and paper industry. I, for one, don’t see it as a sunset industry. If they changed their vision to being a biomass industry they might just get themselves out of tunnel vision. They’re not about pulp products and paper products… they could be about energy. They could be about new biodegradable plastic, they could be…. (Read my views on it here.) – and this here requires us to invest heavily in R&D.

Black liquor is not a known word in the popular lexicon. But this green fuel (about half the log in the paper process) is one of the original biofuels made from waste product.  I believe it’s the fifth biggest fuel in the world. (sorry no links on this – sitting beside an expert on it though right now;)

WHAT’S HAPPENING?

The U.S. is subsidizing companies to promote greener fuels for transportation (i.e. blending biofuels with fossil fuels). Sounds good enough. But this also worked the other way around. Pulp and paper companies were then allowed to add fossil fuels to their original green fuels (black liquor) to get hold of the subsidy. Talk about a boondoggle….(that’s a good Bloomberg article)

What does this do to Canadian pulp and paper companies? Essentially destroys them. The p&p companies in the US are getting subsidized to the point of $250 000/day (for a 1000 ton mill a day). Let’s put this into perspective. International Paper got $330 million after taxes in Q1 of 2009… that would have been enough to keep the mills afloat in this downturn. Looking from an international paper company perspective, which company would be shut down – one in Canada or one in US?  The Canadian one of course,  the one with no subsidy. Who was looking out for these mills in Canada that just shut down? The managers operating mills in Canada are kind of muzzled since their sister mills are reaping in the benefits over the border (meaning Corporate of course won’t make a stink).

This subsidy has devastated one of the largest export industries in Canada. Mills are shutting down right left and centre, leaving billions of dollars in investments idle, useful infrastructure in limbo, and productive/knowledgeable workers (not only mill workers, but the entire network and community that surrounds it – what about the contract workers without pensions?) – in the dust. Once shut down, it’s hard to get these mills and these people back up again.

It’s frustrating.  Canada is resource rich on a renewable fuel (i.e. we have plenty of trees) As Harper pours billions of dollars into the oil and gas industry (clearly a limited time only investment), we’re letting a possible answer to our energy crisis slip between our fingers because we think it’s a sunset industry.

Enough silence. Time to get mad.

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4 thoughts on “Some views on the pulp and paper boondoggle

  1. Jay Godse says:

    Interesting pleadings. There are a few problems.

    Pulp & paper is a dying industry. Their markets are declining in spite of global population increasing. Subsidies will only prolong the inevitable.

    The folks who own the logging rights have their vested interests tied up in the pulp and paper markets. They also have large capital investments and distribution channels devoted to this dying industry. With these constraints, most of them will not reposition their businesses into biomass businesses because too many existing assets will have to be written off. Hard to do…

    They will have to go bankrupt and relinquish their logging rights to companies who want to start biomass businesses, if they have a business case they can believe in.

    Look at the big 3 car companies. GM has needed to cut off half its dealers for years. It took bankruptcy before it finally happened. The same will apply to pulp & paper.

  2. Niina Nieminen says:

    Jane, I totally agree with you and I´m really surprised that Canada’s p&p is not making the turn towards bioenergy…

    The fact is that Finnish p&p industry has already been moving towards bioenergy and greener innovations for several years. I´ve had a privilege to follow this movement towards “greener” while workig in a mill´s research lab and participating in different R&D-projects.

    There is a plenty of other possibilities in the p&p industry than just paper/cardboard. For example UPM has changed its divisions to be pulp&energy, paper and engineered materials. So the energy is already there in Finland and also other innovations. Why not in Canada too?

    Here is a quite recent piece of news concerning the production of biomass-based bio-oil as a collaboration of UPM & Metso in Finland.

    http://w3.upm-kymmene.com/upm/internet/cms/upmcms.nsf/prv/Metso_and_UPM_develop_biomass-based_bio-oil_production?OpenDocument

  3. janeporter says:

    Niina,

    Thanks for the link. Yeah, Finland is moving on this.. .and not just bioenergy, they’re working on new uses of paper (nano-paper etc.) and new products.

    That being said, it’s not that Canada is completely behind..

    I have heard that we have some of the best research in the world at Paprican (a canadian p&p research institute) but now their funding is being cut since a lot of the big players are bankrupt or close to it..

    But research won’t be commercialized unless the ones at the top have the vision to act on it.

    And, this subsidy (which is now ending oct 1 thanks to Obama admin i believe) has not helped the case.

  4. […] Comments janeporter on Some views on the pulp and pap…Niina Nieminen on Some views on the pulp and pap…Jay Godse on Some views on the pulp and […]

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