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Canada’s black liquor response: $1 billion for environmental and energy projects

The Canadian government has acted in support of Canadian pulp producers, revealing its $1 billion response to the U…

The Canadian government has acted in support of Canadian pulp producers, revealing its $1 billion response to the U.S. black liquor tax credit. The Green Transformation Program intends to provide Canadian pulp and paper companies funding of $0.16 per litre of black liquor produced during 2009, to be used for capital expenditures that make improvements to energy efficiency or environmental performance of any mill in Canada.

The funding was welcomed by the Forest Products Association of Canada, but the U.S. Coalition for Fair Lumber, representing a group of softwood lumber producers, professed to be “deeply troubled” by the program, in the context of the Canada-U.S. Softwood Lumber Agreement.

Canfor Pulp Income Fund released a statement saying the company is pleased with the “decision to level the playing field between Canadian and American pulp and paper producers.”

“As the program unfolds, we will aggressively pursue capital available to expedite projects planned for continued energy and environmental improvements,” says Paul Richards, president and CEO of Canfor Pulp Income Fund.

The FPAC expressed strong support for the Green Transformation Program. “What we particularly appreciate about this announcement is that it demonstrates a commitment to the future of the industry through its support to capital improvements – exactly what the industry needs to prepare for the return of markets,” says Avrim Lazar, president and CEO of FPAC.

Canada’s largest forest workers union is less pleased with the program. “It won’t save any mills or prevent further job loss,” says Dave Coles, president of the Communications, Energy and Paperworkers Union of Canada (CEP). “This money cannot be used to lower the price of the production of pulp, and make our industry more competitive with the U.S. In the short term, mills will still close because in order to take advantage of the subsidy, they must invest in capital.”

According to Natural Resources Canada, examples of projects that may qualify for the Green Transformation Program are: upgrades to cogeneration units, improvements to the energy efficiency of recovery boilers, more energy efficient pulp and paper machinery, and machinery to produce ethanol from forest biomass.

The program is capped at $1 billion, and the funds for eligible projects must be spent over a three-year period.