Proceedings of the Standing Senate Committee on
Agriculture and Forestry

Issue 9 - Evidence - October 28, 2010


OTTAWA, Thursday, October 28, 2010

The Standing Senate Committee on Agriculture and Forestry met this day at 8 a.m. to study the current state and future of Canada's forest sector.

Senator Percy Mockler (Chair) in the chair.

[English]

The Chair: I declare the meeting in session. Good morning from Canada to Finland.

Pasi Puttonen, Research Director, Metla — Finnish Forest Research Institute: A very good morning from Finland to you, honourable senators.

The Chair: We welcome you to this meeting of the Standing Senate Committee on Agriculture and Forestry.

I am Senator Percy Mockler, from New Brunswick, Canada. I am the chair of the committee. The committee is continuing its study on the current state and future of Canada's forest sector and looking more particularly at examining research, development and innovation in the forestry sector.

The meeting will be in two parts. We will be hearing a witness via video conference, which is the professor from Finland, for the first hour of the meeting. The other witness, also via video conference, will follow for the second hour.

I have the honour this morning of engaging the committee to hear first from Professor Pasi Puttonen, Research Director, Metla — Finnish Forest Research Institute. He is appearing from Vantaa, Finland. We are in Ottawa, Canada. Before I ask the witness to make his presentation, I will start by asking the senators on the committee to introduce themselves.

Senator Mercer: Good morning, I am Terry Mercer, from Nova Scotia.

[Translation]

Senator Robichaud: Good morning. My name is Fernand Robichaud, from the province of New Brunswick.

[English]

Senator Fairbairn: Senator Joyce Fairbairn, from Alberta.

Senator Mahovlich: Senator Frank Mahovlich, from Ontario.

Senator MacDonald: Senator Michael MacDonald, from Nova Scotia.

Senator Ogilvie: Senator Kelvin Ogilvie, from Nova Scotia.

Senator Eaton: Senator Nicky Eaton, from Ontario.

The Chair: Professor, we are honoured that you have accepted our invitation, and we thank you for accepting this invitation via video conference. I would now invite you to make your presentation. It will be followed by a question and answer session for one hour. As we say in l'Acadie in New Brunswick, la parole est à vous; we would like to hear from you.

Mr. Puttonen: Thank you very much for your invitation. I am pleased to see this trans-Atlantic connection is working so far. Let us keep our fingers crossed that it will work for the next hour. Thank you also for the introduction of the senators.

I will now switch to a presentation that should appear somewhere on your screen there. Has it come on?

The Chair: Yes.

Mr. Puttonen: Very good.

It is a presentation of quite a few slides. I will not go through each of the slides in this presentation; it is for your background information. I will take some key points of this issue of research technology and innovation in Finland.

This presentation is not only about the forest research institute. There is a network of all types of programs and organizations. I would like to present how Finland has organized itself for that research technology and innovation — what sort of linkages there are among funding organizations, research institutes, industry and the European Union, which are all part of the system.

First, I will speak about the innovation system in Finland, followed by a few key points on the forest sector in Finland — how we organized the research development and innovation in forestry, how our institute, Metla, has organized this and, finally, how much we have exchanged in this field with Canada.

This is a simplified view of the science and technology system in Finland. A key feature is that for the last 20 years at least, we have had a research and innovation council that is directly under the government. The prime minister is the chair of that council, which puts the issue of research and innovation in a very prominent position.

The operations are then run through a couple of major ministries. The ministry of education has a major role because that is where the education and research funding is. The other key ministry is the ministry of employment and economy because it runs the funding to industry for further development and research. Of course, we also have other ministries involved. For instance, we, in the forest research institute, are under the ministry of forestry and agriculture.

Another key feature of the Finnish system is that we have so-called sectoral research institutes under different ministries, such as our institute, which is under agriculture and forestry, as I mentioned. We have 20 different sectoral research institutes. In today's policy, these institutes are involved in very animated discussions as to whether they should stay independent or merge among themselves or with the universities. There is a lively debate on that.

However, thus far, the sectoral research institutes represent more of the applied side of science and technology, and the basic sciences are more in the universities. The funding of the universities is mainly through the Academy of Finland, which corresponds to the Natural Sciences and Engineering Research Council of Canada, NSERC.

We have another important funding body called Tekes, through which major funding to industry development goes. Then we have a couple of other major funding bodies. That is in brief; there is a high-level research and innovation council, and the sectoral institutes are key players with the universities in the system.

An odd feature is that Finland, for a small country of 5 million people, has 20 universities, close to 30 polytechnics and these 20 sectoral institutes. The level of involvement in higher education and research is fairly substantial.

On the current technology policy, it is self-evident its goal is to enhance the competitiveness of Finnish industry. Over the last years, the R&D funding, as a proportion of Finland's gross national product, has been around 3.5 per cent or 3.6 per cent. The target is to increase that even more. That is the funding part of the target to enhance competitiveness.

One key structure is the so-called strategic centres for science, technology and innovation that have been formed in the last two or three years. These are basically public-private partnerships, PPPs, to try to renew the industry clusters, find new bases for growth and increase the tax base. I will describe these more when I give you the description of Metla. We have six different science and technology innovation centres, and one of those is the Forestcluster Ltd, which I will talk about more in the coming slides.

In the technology innovation policy, it is not only the research and innovation but has to evolve to businesses and management skills. These management skills are emphasized in this policy as well as service innovations because already now much of the national product comes from the service industries.

The slide shows the R&D investments in Finland compared to mainly European countries. Sweden is leading the pack with close to 4 per cent of the GDP going to R&D. Finland is around 3.5 per cent, which we are now trying to increase, and then Japan, Switzerland and so forth. These are fairly high investments, and countries trust that these are investments worth doing.

On the forest sector, here are a few key figures. First, we have employment in the forest sector, meaning the forestry, the forest parts and then the industry itself. Nowadays it is about 3.5 per cent of the employment, and cross-national production is around 6 per cent; but it is still a very high share of the value of export, about 20 per cent on an annual basis. It has decreased over the last 30 years by almost half, but it is still a substantial part of the Finnish economy and also a large part of the industrial production. These figures compare with Ontario or British Columbia.

Although it has a proportion of the GNP, it does not actually employ that many people. The forestry where the harvesting, silviculture and such work is done employs less than 30,000 nowadays. It is fairly mechanized and rationalized.

Actually, we have a strange problem coming. We do not have enough workers for the forestry work, so we are looking at other alternatives, either employees from neighbouring countries or further mechanization of forestry work. The forestry industry, the pulp and paper, and the mechanical industry employ about 60,000 people. Those are as a result of fairly rationalized production lines both in the forestry and forest industries.

Another important feature of the Finnish forestry is the role of private non-industrial forest owners because they own about 60 per cent of the land, more of the timber and even more of the annual growth of the timber. This has led to different types of organizations that serve the non-industrial private forest owners, different types of forest associations and technology transfer organizations. When there is talk about forest policy in Finland, we have to remember that we have about 1 million people behind or against the decisions made in forestry.

The black line on the slide shows that the forests are growing more, and the red line shows the harvest or the drain. The forests are growing more than they are harvested, so it is a fairly sustainable system.

On forest policy, this is one of the parts of the puzzle or the network of how the innovation system works. At the national level, we have national forest programs for implementing the forest policy mainly at the national level, but it also includes the international aspect, and it is part of a science policy interface discussion.

The program is there to secure employment, the health of the forest and so forth. In this context of today, in this program, it includes reasonably detailed tasks for research, development and innovation for the coming years. This is the government's say of what should happen in the area of forestry. This is a national policy statement. In a little while I will describe the industry side of things, but this is the government side of how they see the national forestry being dealt with. In this context, as we are part of the government structure, our institute carries much of the research, development and innovation work needed in this program.

On the industry side, which we all know and most know in Canada, the forest industry is under major changes and pressures. It is same here in Scandinavia. There is a strong demand for growth in Asia; big companies such as the Finnish UPM-Kymmene or the Finnish-Swedish Stora Enso are making investments in Asia. There is high investment in Asia but also in Latin America.

Another feature is the change in the Internet and e-readership development. All these have created a need for renewal, and in Finland, that is part of the strategic clusters where the forest industry has created Forestcluster Ltd to help renew itself.

The industry side of things has formed this national strategic agenda in forestry. It emphasizes networking with all the players in research and innovation, and that is why we, as a research institute, are part of this cluster. It is a private limited enterprise, so we have had to buy shares of that enterprise using government funding. However, that is seen as part of the value chain in gathering new information, that we could or should be part of these types of arrangements. This is sanctioned by the government. The government is basically funding these programs. The industry puts in a certain part, 50 per cent, and the government through different funding organization puts another 50 per cent to this cluster, so it is part of the government's wish as well. It is not only the industry working for their benefit.

The cluster has very ambitious targets for the next 20 years, one of which is to double the value of Forestcluster Ltd's products and services. That is a very demanding, and also that half of the value would come from totally new products, and that is why there is a heavy research, development and innovation component functioning in the clusters, and also increase the use of domestic wood. That is basically saying that it has to help also the private non-industrial forest owners, and all this needs more investment funding.

Another player is the European Union. The European Union has several technology platforms, maybe 20 in different fields such as steel, mining, fisheries and so forth. Forestry is one of these technology platforms that aims to secure funding from the very large European Union framework program for its purposes.

Right now, a seventh framework program is under way, the eighth frame program is being planned, and all these technology platforms are trying to get their agenda to that funding board.

At the European level, a couple of years ago, they made a forestry-based sector platform, and they have a research agenda. Finland's agenda is part of the European agenda. Our institute, Metla, is part of the Finnish Forestcluster Ltd agenda.

Metla is currently going through a strategic discussion of the future. Recently, we added the word "bio-economy" to our mission so that Metla builds well-being and a future in a bio-economy society. "Bio-economy" is a buzzword and is not well defined, but it appears in many strategic papers. As we move forward, we have to define what we actually mean by that. In terms of forestry, we see it as one of those renewable resources that can lend itself to many types of products and services in the coming future. Bio-economy is key here.

We are a reasonably large institute. The funding is about 51 million euros annually, which makes us perhaps the biggest in Europe. It is not the best thing to be the biggest, but we are a reasonably large player in the European sector.

In terms of how we are organized to do the work, we have process-based functions. Our major functions are the production, acquisition and implementation of research results, including technology transfer, which I will describe more in the coming slides.

We have other public services because we are under the government. We provide certain services that the government deems important, such as national forest inventories, tree-breeding programs, survey of forest health, greenhouse gas assessment and reporting to the UN, Europe, and the Kyoto Protocol.

Much of the work is in the research process and in the production and acquisition process, which is from client to client. That means that, more than ever, we discuss with potential clients who need the information. We form our programs and projects through discussion with the client. We work with them throughout the research chain until we deliver whatever the goods, services and products are. The focus is from client to client. To think in terms of the client has been a needed cultural change but not a simple one in our institute.

How we are organized for the future shows in our research areas and how we have prioritized them. We are looking at forest-based entrepreneurship and how it supports livelihoods. That is the first priority. The next priority is the forest and society, which includes forest policy and societal impacts. Then we consider sustainable forestry practices, which includes ecological aspects; and last is the information we collect through all those programs and what services we can generate from those.

The main focus is on entrepreneurship, which supports the bio-economy side of things, which supports the strategic industry agenda. It also supports the government's policy agenda in forestry.

This slide shows the simplified research process. In the middle is a rough categorization of the types of goods and services we have. We have the traditional peer-reviewed publications but also many other technology transfer publications. We have many products for different types of customers, mainly on the forestry side. We are not yet doing much work in the forest industry. The products and services are forest-based. Tourism and recreation are seen as increasing uses of the forest. We have a number of expert services, starting with modelling programs for different purposes, experts working in different development aid projects in forest inventory and so forth. We are also part of the education system. We have joint professorship with the universities. They are in charge of teaching the new generation of forest scientists. This is all to say that we work with clients in terms of client-based products.

The next slide is a funnel picture of the strategic objectives, where the bio-economy now emphasizes priority areas of which entrepreneurship is a key. We must have core knowledge in these priority areas. We have defined some 20 priority areas led by professors. This is the basic expertise we must have in the institute to be regarded as a reliable institute. Then we have the programs and research projects. When I have shown this picture to other scientists, they can see that they are at the bottom of the funnel, the little black dot.

The industry side, being the government side, emphasizes different alliances with key players. Forestcluster Ltd, as part of the strategic centre for science, technology and innovation, is our new major ally. Another cluster is being formed in the energy and environment cluster, and we will also become a member of that.

We have alliances with other research institutes. These have recently been legislated by the state to force us to work closely with other research institutes and organizations, to increase the horizontal collaboration and the societal impact, to improve productivity and to ensure that international competitiveness will increase.

What are we doing with Canada? At the state level, there is an MOU between Canada and Finland, which was updated a couple of years ago, I believe, in 2007.

There are recent new initiatives between organizations in Canada. In Canada, we have now had formal collaboration with FPInnovations. There are joint programs in bio-energy, partly funded by the EU.

The key interest of Metla, FPInnovations in Canada and Forestcluster Ltd in Finland are the new wood-based bio- products. It is a long way to walk and develop those products, so a joint effort is needed. Even though the Finnish Forestcluster Ltd basically sees FPInnovations as a competitor in this field, discussions are taking place about working jointly. There are a couple of other EU collaboration networks. Our institute has plans in solid wood products to increase collaboration. Of course, there is collaboration between the scientists at universities and Natural Resources Canada, NRCan. On the whole, there is much room for further collaboration between Canada and Finland in the field of new bio-products. Metla is keen on any collaboration with any Canadian organization.

Starting from the high level of the network and with Finland being part of the European Union, a number of things dissipate from there that call for integration and collaboration. The existence of good science networks is self-evident. The EU framework programs that I briefly described are one key element. Of course, you understand that these EU framework programs basically compete against North American science and technology in an effort to be at least at the same level as North America in the coming years. Between the two continents, a kind of competition exists. All of these agendas in the EU emphasize key global areas of a few Asian countries and South America.

At the national strategic level in research, development and innovation, we have the centres of excellence. We have a government policy of a national forest program describing the government's will in forestry, and we have a few other programs. These programs target a new solution to lower the production cost through the value chain from the forest to the forest industry products. Lower costs and more valuable products not only raise the value of existing products but also develop new wood and wood biomass-based products.

Metla has tried to become part of this network and do the research, development and innovation. We have tried to change our strategy to support these goals, to refocus the research on a forest-based entrepreneurship and emphasize a client-to-client process, while maintaining good strategic science expertise in-house and finding new partners throughout the world.

I have a number of links for further information on the topics that I have described on forest science policy, science funding systems, forest policy systems in Finland, Forestcluster Ltd and the European forest-based sector technology platform, which is also updating its strategy.

I thank you for the opportunity to discuss this with you.

The Chair: Mr. Puttonen, thank you very much for the interesting, informative and educational presentation. We will move to questions.

Senator Eaton: We have been looking at the chain of taking new products from the forest to development and research. We are having difficulty getting the research to the marketplace, which is the last link. Have you had difficulty with this or have you come up with a solution?

Mr. Puttonen: We have the same problem because this represents a cultural change for how the scientists work. Traditionally, they do not think in terms of marketable products. Most of our organizations have tried to strengthen the way that we deal with intellectual property rights, IPR. That will provide a clear description of how and what could be done with these new research results and how it could be applied to some parts of the value chain. That has been one key element. It is of great concern to Finland and the entire EU that results do not reach the market. It is totally contrary to what happens in North America, in general terms. We look at the statistics of how many IPR products in the market come from research in North America compared to those that come from research in the EU, or in this case Finland. It is the same problem. We do not have a clear answer, but a gradual change is needed in how we work with scientists and emphasize the client-to-client view.

Of course, money always helps. We have various funding sources to help bring the ideas to the marketplace so that scientists do not consider that as part of their research funds. There is a special funding pot for bringing it through the IPR process.

Senator Eaton: We seem to have the same problem in taking venture capital to the marketplace. We have had extensive testimony from our building codes people. In some respects in Canada, building code changes for the use of wood products would apply only to five- to seven-storey buildings. Architects and builders would have to prove the viability of using wood products beyond that because our building codes do not march in step with the current research. Is that happening in Finland? Are your building codes as conservative as those in Canada?

Mr. Puttonen: Our building code is even more conservative than the codes in many Canadian provinces.

To date, the building code has allowed only two to three storey buildings, and we also tried to change that for the very reason of increasing the use of wood. We have to do that because, being a member of the EU, there is a target that, by 2020, so much of the energy should come from renewable energy and, at the same time, we must decrease the greenhouse gases.

Wood is seen as a solution, but the building code has been a block here as well. It has been changed, and there is increasing evidence that fire safety can be handled in wooden buildings. Our dear neighbour, Sweden, changed their building code 10 to 15 years ago, and they are building seven- to ten-storey buildings with good success. We do have the same problem, but the general atmosphere is now right for changing the building code.

It is not only the code itself, of course — or it is not about wood — but also competing against the steel-concrete- aluminum sector. That sector tries to influence the building code, even though the wood itself would be good. This is competition among different industries.

Senator Eaton: It sounds as though we have many of the same problems.

Mr. Puttonen: Exactly.

Senator Mercer: Professor, thank you very much for your interesting presentation.

Who owns the research that comes out of these projects, particularly the public-private projects? Obviously that goes to the implementation and the profit that may be made.

Mr. Puttonen: It is divided. For the research in the universities, the intellectual property rights are owned by the scientist. In our institute, in the government institute, it is the institute or basically the government that owns the rights, and the institute can sell them, can hold the patents and so on. In the case of Forestcluster Ltd, they own the work done with their money. The forest industry will own the new innovation. That is a simplified answer.

Senator Mercer: I was interested that you said that you had a shortage of workers and that you need to acquire workers or be more innovative or more advanced in your technology. As a member of the EU, an opportunity exists for people from elsewhere in the EU to come to work in Finland. Is that your main source of new labour? If so, do they come trained, or do you have to train them when they come to Finland?

Mr. Puttonen: Most of the workers have come from Estonia, some from Russia, and some from the old Eastern bloc countries. Unfortunately, we have to train them for the work we do because ours are reasonably high-skilled jobs using highly mechanized equipment. One solution is through training, but it appears that further mechanization is the way to go, at least in much of the silviculture work.

Senator Mercer: That is the first time you have used the word "silviculture" and made any direct reference to reforestation. Could you tell us what you are doing with respect to silviculture in Finland?

Mr. Puttonen: I have avoided that word because I am the chair of silviculture in the university, so I avoided my discipline so far. Thank you for your question.

A lot of silviculture is done after the harvesting. We have the planting or natural regeneration. We have the early weeding and thinning. We do a number of stages in silviculture. We try to avoid the costs of silviculture and try to make all the thinnings somehow profitable. In the last couple of years, because we have to increase the renewable energy, early thinnings also produce energy wood. There is a sort of reasonable stumpage for that type of wood that compensates for the expenses of those treatments. Compared to many Canadian practices in the provinces, we have more intensive silviculture, with thinnings and treatments throughout the growing cycle.

Senator Mercer: Your description of the national strategic agenda in forestry was interesting. How was it developed? Who chaired it? Does it have a time frame? Do you renew it every so many years, or is it an evolving agenda?

Mr. Puttonen: It was done through a participatory process. At least 40 different organizations were involved in that. It was then discussed in the 13 regions of Finland. It was led by the ministry of agriculture and forestry. It is usually done for a period of 10 years, but the changes in the last two or three years forced us to update it earlier. The program was updated just a few weeks ago. Basically, it is for 10 years, but it is updated when necessary. It is a very slow process in the very Canadian way of a participatory process.

Senator Robichaud: Professor, I saw in your presentation that you aim to increase domestic use by 25 per cent. In what way are you looking to increase that use? Is it through buildings, new uses, biomass or whatever other uses you can find for wood?

Mr. Puttonen: Behind this 25 per cent, there is an international trade issue, which is basically the Russian export policy on wood. They have put a tax or levy on wood imported to Finland, so it has become unprofitable to import raw wood from Russia. Of the annual usage of wood two or three years ago, 20 per cent came from Russia or from the neighbouring countries. Since there is now a high tax on that wood, that wood needs to be bought from the Venice market. That is one part of that 25 per cent.

Our purposes are for further use in building, but also a much increased use of wood as an energy source. As a rough figure, in Finland, we harvest about 50 million cubic metres per year for industrial purposes. The plan is to have 15 million cubic metres of wood for energy purposes only, so basically burning. Those 15 million cubic metres of wood has to come from somewhere. It is from the domestic source, and it is the branches and the stumps of the harvested wood. That is where the increase is.

Basically this policy says that we have to increase the use of wood to meet the EU goals for the use of natural resources and energy requirements.

It is partly trade policy but also part of the Finnish actions in the energy sector.

Senator Robichaud: Professor, is it a challenge for industry and research institutes to recruit and keep young scientists, researchers and entrepreneurs in the forestry industry?

Mr. Puttonen: It is a challenge nowadays just because over the last couple of years young people have seen the industry go downhill. When I said earlier that it is difficult to get forest workers, it is seen first at the forest work level, forest technician level that people are not willing to be trained as drivers of harvesters or other machines. It is in the operations first and less so in the researcher level because we can recruit researchers, and even more nowadays, from other fields in forestry because the issues are not as tightly linked with forestry any more. There are more economic questions, more societal issues, and the expertise typically comes from outside the forest universities.

It is a challenge. In the last year, we have tried to hire economists for certain purposes and have not had any luck because economists see other fields more interesting or lucrative than forestry. It is an issue truly about how we will maintain the know-how and expertise in the field for the very challenges we face.

The Chair: With the mandate that we have to encourage value-added products, I was listening carefully when you talked about bio-economy.

This is a follow-up to Senator Eaton's question. Some countries have green building codes. Other countries, such as Canada, do not have these green building codes. I am wondering about the use of life-cycle analysis and assessments. What is the situation in Finland or in the EU with green building codes, and if you have them, do they encourage higher utilization of wood products?

Mr. Puttonen: Yes, this is very much ongoing work in Finland as well, as a part of the EU regulations. They are not yet mandatory, but these life-cycle analysis and assessments are being used to study the use of wood in the buildings, and so far all the results are fairly favourable when combined with other green building solutions such as geothermal heating of houses, solar energy and so on. Much supports the idea of green buildings. Of course, here in the North, solar energy is not very reliable. However, there is a lot of focus on geothermal energy for use in heating or district heating.

One more added feature to the building code is that in Finland many townships or suburbs have a central heating system. They are not individual heating units in the houses but rather a central heating plant. It is a very efficient way to distribute and provide the energy.

The Chair: Thank you professor. Did I hear right that 60 per cent of the forestland in your country is private woodlot owners?

Mr. Puttonen: Yes, that is correct.

The Chair: What percentage of your reforestation on private land is done by planting or natural regeneration?

Mr. Puttonen: Two thirds is by planting and seeding with the remaining 30 per cent by natural regeneration. Of course, there is a large difference between the north and south in Finland, so a natural regeneration is used in the north in the less fertile soils.

The Chair: Finally, what percentage of Finnish seedlings is genetically modified?

Mr. Puttonen: Mr. Chair, none are genetically modified. It is not allowed in the EU. We do not have genetically modified plants.

This summer, we had the first genetically modified organism, GMO, potato experiment in Finland. However, the EU is very conservative on this issue and very conservative in the forestry. Of course, these techniques or technologies are used in research, but they are not targeting to produce GMO seedlings.

The Chair: Professor, the clerk has informed us that you have been in Canada before, so we welcome you back to Canada to visit us on this topic. Your comments and presentation have been very enlightening, and we, at the Senate, sincerely thank you for your participation.

Mr. Puttonen: Mr. Chair, thank you very much. I have been in Canada and lived in British Columbia for close to 10 years, so I am very pleased that I had the opportunity to talk to you.

The Chair: Now we move from Canada to Norway; good morning in Canada, and good afternoon in Norway.

I will introduce honourable senators to our two witnesses from Norway: Jørn Brunsell, Managing Director, Norsk Treteknisk Institutt (Norwegian Institute of Wood Technology); and Jostein Baardsen, Former Managing Director, Norsk Treteknisk Institutt (Norwegian Institute of Wood Technology). The witnesses are appearing from Oslo, Norway.

The Chair: Mr. Baardsen and Mr. Brunsell, please introduce yourselves and then either one may start their first presentation. Thank you, again, for accepting our invitation.

Jørn Brunsell, Managing Director, Norsk Treteknisk Institutt (Norwegian Institute of Wood Technology): I am Jørn Brunsell, Managing Director, Norsk Treteknisk Institutt (Norwegian Institute of Wood Technology). I have been the director since January of this year. I have asked the former director, Mr. Baardsen, to present the information for you today.

Jostein Baardsen, Former Managing Director, Norsk Treteknisk Institutt (Norwegian Institute of Wood Technology): I am Jostein Baardsen. I was the managing director for this institute for 17 years, until January of this year.

If it is okay with you, I can start with a presentation of our institute and our activities.

The Chair: We appreciate that. Please do, and then it will be followed by a period of questions from the honourable senators.

Mr. Baardsen: The Norwegian Institute of Wood Technology is the research and development, R&D, centre for the Norwegian wood industry. We are a private research association, established in 1949. We have 38 employees and our annual budget is approximately $37 million Norwegian kroner, which is about U.S. $6.2 million.

We have 145 member companies along the value chain, including sawmills, which are the dominant members, but also glue laminated timber — called "glulam" — manufacturers, roof truss manufacturers, the wood working industry, the wood preservation industry and suppliers of machines and equipment.

The funding of the operation consists of R&D projects, contracts with industry, certification work and other income — for example, leasing of premises. The yellow area shown on the slide is the membership fee, which is only 10 per cent approximately of the budget. The rest of the income, we have to provide ourselves.

Our activities will change from one year to another, but last year, certification and testing counted for 35 per cent; contracting work for industry was 26 per cent; and R&D was 38 per cent. Roughly, it is one third in each sector of activities.

About 21 per cent of all contracts and projects came from abroad in 2009. The main countries were Sweden, Finland and Austria. Much of this income is connected to certification work, which I can talk more about later.

As a member association, we also have many self-financed tasks for which we are not paid. We have to provide the funding for these tasks ourselves. The main activities are at the bottom, as you see on the slide. Diffusion of knowledge is where we use most resources, along with development of competence. We have to finance this by our own revenues. As you can see, it amounts to $14.2 million and the membership fee is only $3.5 million. We have managed to finance this and made a profit as well.

Our main activities are R&D projects, dissemination of knowledge, contract work, certification and quality-control schemes, and documentation of properties and quality. We have accredited laboratories. We do a lot of standardization work, both national and international, that is, European. We are also active in international networks.

With respect to our competence, we want to say that we have a leading-edge competence in three areas: the gluing, drying and grading of wood.

We have several laboratories. We have one laboratory for mechanical testing, where we test load-bearing timber, glulam beams, solid wood elements — that is, cross-laminated timber — finger joints, engineered wood products, mechanical connections, glue joints, et cetera.

We have a laboratory for chemical analysis, where we analyze preservatives, formaldehydes, fire retardants, surface coatings, et cetera. We have a laboratory for kiln drying of wood, where we do kiln experiments and try to develop optimal drying processes for the industry for various products and wood species. We have also a laboratory for gluing, where we test different glues. We have many foreign glue manufacturers as our customers.

We have a laboratory for surface treatments, with weathering equipment, colour measuring, gloss measuring and abrasion measuring. We test paints, stains, furniture varnish and floor varnish. We even have a testing field just outside of Oslo where we test both surface-treated wood and impregnated wood. We also have a laboratory for wood anatomy.

We do a lot of quality documentation. We conduct tests according to approved standards, which could be European standards, British standards, German standards or whatever. We are the only laboratory in Europe that is approved as a certification body, according to the Japanese Agricultural Standard, JAS. We have many foreign customers for this certification scheme. We do testing inspection for Holland, according to the requirements there, and the same for Germany. There is also a special certification in Europe called CE marking, and our institute is an authorized body for this as well.

I mentioned the Japanese market. Actually, 82 per cent of the total import of glulam worldwide in Japan has been certified through our institute. As you can see on the slide, there is an increase compared to last year.

We have many quality-control schemes. I will not go through all of them, but they include a glulam control, a technical approval for building elements and a special drying control for sanitary conditions. The industry has to document that the timber or wood have been treated to avoid micro-organisms. We also have a stress-grading inspection scheme and a scheme for preservative-treated wood.

Our institute has been doing a lot of work to enhance new market possibilities for the industry. One of these areas is timber bridges. We know about timber bridges from a historical perspective, but what we mean here is modern timber bridges for heavy-duty traffic.

The picture at the top left of the slide shows the world's largest timber bridge, which is in Norway. The picture on the right is inspired by Leonardo da Vinci. It is a bridge for pedestrians, crossing a main road.

The bridge in picture in the middle is mainly for military traffic. This bridge can take a load of 110 metric tonnes, and that is for military tanks. There is almost no limit to what you can solve with timber construction.

This is an area where we have had a leading position in Norway among the Nordic countries. We initiated a Nordic research program in the early 1990s, which has been very successful.

Another target area is new building methods. For example, we have been working with solid wood units, which that is cross-laminated timber. I do not know whether you are acquainted with this method, but it has been successful in Norway and in several other European countries, such as Austria, Germany and Sweden.

This building method enables the industry to erect multi-storey, non-residential buildings, as well as multi-storey, residential buildings. It is very efficient for fire resistance and is a competitor to the concrete elements. The weight of this timber element is only one fifth of the weight of the concrete element, so we can erect buildings with more storeys than is possible with concrete elements where the foundation is poor. We think this has great potential.

We have been working with urban timber construction and wood in modern buildings. The example I am showing you is a street quarter in Trondheim that burnt down, and a timber construction was erected for a big commercial building. You can see some of the construction; it is big.

The pictures at the bottom of the slide show the new opera building in Oslo, designed by Snøhetta, which is a famous architectural company in Norway. This is not a timber construction, but the use of wood is quite extensive indoors. We had a pretty large contract in securing the quality in this connection.

Of course, it will also be an important area to work with wooden facades, especially durability and service life.

Lastly, I will give you an idea how we work as a research organizations together with other organization. Five industry-oriented organizations in Norway work in close cooperation toward common goals but through different roles and activities. One is the sawmilling industries association. We have our institute, which is the R&D institute for the wood industry. Then we have TreFokus, which is wood focus and deals with wood information. We also have a technical college specializing in education for the wood industry. Our institute was one of the founders of this. We have TreSenteret, which is wood centre and is the door between industry and the technical university in Trondheim. We have invested much in developing education in this university when it comes to wood and timber construction. The common goal for us is to increase the consumption of wood in Norway up to .75 cubic meters per inhabitant.

This concludes my presentation.

The Chair: Thank you, Mr. Baardsen. Your presentation is very accurate and in line with the mandate that we have in our committee at the Senate. We will now start the line of questions.

Senator Eaton: That was fascinating and interesting because you seem to be far ahead of us in some respects.

We have been wrestling with our building code. I noticed, in one of your slides, that you do a lot of testing and new innovations, whether it is glulam beams or other products. Do you work with your building codes? Do you set your building codes? Is it completely separate? Are your building codes conservative? Do they work in advance or with you or alongside you? How does that work?

Mr. Brunsell: I can try to give you an answer on that one. The research institutes, not only our wood institute but also other resource institutes, give valuable input for the building code. In Norway, we have an official entity that gives out the building code, and the codes are performance-based. We give input to the building code, but we also give input to the industry and ask them to give solutions for the performance-based code. In that way, we work with the building code.

Senator Eaton: If an architect comes to you with a new, interesting plan, is he using stuff that has already been tested by the building code, or do you set about testing some of his theories and give them to the building code?

Mr. Brunsell: Maybe we talk a little bit differently about building codes. I am talking about building regulations.

Mr. Baardsen: These are building regulations from the authorities.

Mr. Brunsell: Yes, the building authorities in Norway. If that is not the case, I am not sure that I understand you correctly.

Senator Eaton: In this country, if an architect, for instance, wants to build a six-storey or seven-storey building and the official building codes in the province and the country have not faced that dilemma, or have not faced a six-storey wooden building before, then the architect has to go through incredible hoops to prove that a six-storey building is viable because it has not been done before. Are you ahead of the architects, or do you follow alongside or behind the architects?

Mr. Brunsell: Often we are ahead of the architects, I think. Sometimes the architects have very good ideas. When they come to us, we have to come up with the technical solutions, proving that these solutions could fit the building code of Norway. We help the architect, as you say, yes.

Senator Eaton: Has dissemination of information created a sort of wood-first program? Do you have any wood-first legislation in Norway, or is it just traditional to use wood more often than you would concrete or steel, or are all three used in equal measure?

Mr. Baardsen: We can say that we do not have any legal obligations to use wood, but there is encouragement from the government to use more wood, and that is mainly based on the climatic impact and environment. Based on that, there is an encouragement from the government, and there are also programs for assisting this development or supporting this development.

Senator Eaton: What kind of programs do you have?

Mr. Baardsen: For example, the organization Innovation Norway has a program. That is a wood-based, innovation program in which companies can apply for support to use wood in an innovative way. They can get up to 50 per cent or 60 per cent support from the government, depending on European State aid rules. That will vary from one type of project to another. As an R&D institute, we will often be engaged by the company in this work. That is one example.

We also have an R&D program within our national research council. There is a nature and business program that includes the forest sector and wood industry.

Senator Mahovlich: Congratulations to the witnesses for a wonderful presentation. A few years ago, I visited Norway. I was up in Tromsø.

In 1974, I was also in Sweden in a town called Örnsköldsvik, with MODO Hockey, and it is a pulp and paper town. Many towns here in Canada, especially in Northern Ontario, have had a very difficult time. Some of the pulp and paper mills have closed, and others are having a very difficult time as we are in transition, very similar to you.

How are these pulp and paper mill towns doing in Sweden and Norway? Are they conforming to the changes? Are they doing well?

Mr. Baardsen: I can try to answer that even though I am not so well acquainted with the pulp and paper industry. In Norway, we have a very large company called Norske Skog, Norwegian forests, which is one of the biggest when it comes to paper for newspapers, and they have suffered quite heavily during recent years. I think conditions are a little better now, but the problem is the same. I think the production capacity has been too large in several sectors of this pulp and paper industry, and we know, of course, that there have been problems both in Finland, Sweden and other countries.

The mechanical wood industry in Norway is thriving and successful. Of course there was a downturn during the financial crisis, but we are lucky in Norway that we were not affected much by that. Today I think the mechanical wood industry has a very positive view on the near future.

Senator Mahovlich: I noticed that you built an opera house out of wood. Have you built any hockey arenas out of wood? We did so during the Olympic Games here in Vancouver, and it has been very successful. Everyone is impressed with it.

Mr. Baardsen: I must correct you a little because the opera building is not made of wood, but the interior of the building widely used wood. I think we have some hockey arenas made of wood construction as well.

In connection with the Olympic Games, in Norway in 1994, we erected quite a few large sports arenas using timber construction. One of the most famous is the Viking Ship. I do not know whether you heard about that, but it looks like a Viking ship turned upside down, and that is the shape of the building. Many world records in skating have been recorded in that hall.

There are also ice-skating rinks in two cities, Lillehammer and Hamar, 100 kilometres to 200 kilometres north of Oslo.

The Chair: I have to share with you, witnesses, that when the Honourable Senator Mahovlich asks about hockey or arenas it is because he is one of our hockey superstars from the 1960s and 1970s who played with the Montreal Canadiens and the Toronto Maple Leafs.

Senator Ogilvie: You mentioned the structure built as an upside down Viking ship. In fact, one of our early Nova Scotia architects constructed a hockey arena at Acadia University based on the idea of an upside down ship model because of the structural integrity, the tremendous strength that comes from using that kind of structure in an inverted fashion on land. That is just an observation in passing.

I was impressed with the use of wood in the bridges, structural components requiring great strength, and obviously you have advanced the techniques. An earlier question dealt with approvals and meeting regulations when using wood as a structural component. Very clearly you have met advanced requirements with respect to structure.

Am I correct that a 17-storey building is being constructed or is in some stage of construction in one of your towns in Norway?

Mr. Brunsell: It is correct that you have seen drawings of such a building. It is in the planning stage at the moment, and we do not know at this moment if it will be built. It is called Barents House and is in Northern Norway in a city called Kirkenes. We are trying, but we do not think wood will be used in that tall a building in the future as the main construction material. We think that if we can overcome the technical problems as we see them today in 18 or 20 storeys, we can certainly build buildings of 6, 8, 10 storeys with wood as the construction material.

Mr. Baardsen: We were consulted when it came to the feasibility of building this high-rise building of 17 or up to 20 storeys. The conclusion is that this is feasible with no major problems.

Senator Ogilvie: Thank you for putting it in perspective. The building is in the conceptual stage. In terms of the issues that you are facing, obviously we would quickly recognize that the building materials and the processes you are using have to meet standards and have to be approved. However, in terms of opposition to using wood in a structure of that size, is there any organized resistance from competitive material industries? Are the steel and concrete industries watching this with interest, or are they watching it aggressively?

Mr. Baardsen: They are worried. We have not met an organized opposition, but the concrete industry is especially worried because we are entering their domestic arena, if you like — timber bridges, for example. Traditionally, it has been a market for concrete and steel. The same applies to urban multi-storey buildings. I think they see the wood industry as a threat, per se.

Senator Ogilvie: My final question on this goes back to your clarification of the project stage. Do you foresee the project receiving final approvals, and, if so, what would the time frame be?

Mr. Brunsell: There is a good chance that they will receive approval. That is not the challenge. The real challenge is how to lease this huge building in a small city. That is the greater challenge.

Senator Ogilvie: It comes down to a question of economics.

Mr. Brunsell: Yes. Technically, I do not perceive a problem.

Senator Mercer: Thank you, gentlemen, for your very good presentation. I have a couple of quick questions on your research and development. Who owns the research? Is it owned by the institute or by the partners involved in the research? How is your research brought from conception to implementation and the marketing stage?

Mr. Baardsen: The ownership will depend on the kind of R&D projects. In principle, we have three different kinds of R&D projects in Norway. The first category is innovation projects, in which the industry applicant must provide at least 50 per cent of the funding. The industry owns the results of the R&D. The second category is knowledge-building projects with user involvement. For these projects, industry must be co-funded with 20 per cent in cash. The applicants must be R&D institutes and the ownership is divided between the R&D institute and industry. The third category is researcher projects, for which only R&D institutions can apply. The funding is 100 per cent public, and the R&D is owned by the R&D institute.

Senator Mercer: My second question is about silviculture. I did not hear you say much about silviculture and reforestation. How is that handled in Norway?

Mr. Brunsell: Could you repeat the question, please?

Senator Mercer: In your presentation you did not talk about reforestation or silviculture. How is that handled in Norway?

Mr. Baardsen: Our institute does not deal with forestry. We have the Norwegian Forest and Landscape Institute situated outside Oslo where they mainly do R&D related to forests, soils, fields and landscapes. This institute typically will take care of the area that you mentioned. We start with timber and do not work with forestry aspects as such.

Senator Mercer: Thank you. You referred to certification throughout your presentation. I am a little confused about that. Could you explain the certification and how the process works?

Mr. Baardsen: There are different kinds of certification. Certification is a type of assessment of properties to ensure that they meet certain requirements. That is the principle. We certify according to standards. I am sure you have the same certification based on Canadian standards or U.S. standards. We have certification of wood products based on European standards and certification based on Norwegian standards.

I mentioned in particular certification according to the Japanese standards, which is an important part of our activities. We certify according to certain requirements.

Senator Robichaud: I was very interested in and impressed by the pictures you showed us of bridges with wooden superstructures. In the province where I live, we used to have many wooden bridges for highways that crossed rivers. All of these wooden bridges are being replaced by concrete structures.

Were special provisions made for the use of wood on these projects? Were they demonstration projects? Were there incentives to promote the use of wood for those structures? Were they cost-competitive?

Mr. Baardsen: Of course, they have to be competitive in economic terms. The success of timber bridges in Norway and Sweden is a result of our long-term Nordic R&D program. The program ran for approximately 10 years. In conjunction with these projects under the program, we also had Norwegian road authorities as participants. This was key to our success because the road authorities were engaged in development and testing. They became enthusiasts of timber bridges. Norwegian road authorities are excellent ambassadors for timber bridges; but we have to compete with concrete and steel in every case.

Senator Robichaud: What is the life expectancy of a timber bridge? Is it competitive?

Mr. Baardsen: A requirement independent of the material used for these bridges in Norway is a life expectancy of at least 100 years. We had to comply with that.

Senator Robichaud: I suppose you needed to use specially treated wood or glues for the structures?

Mr. Baardsen: Yes, you are quite right. In order to meet the life expectancy requirement, we treat the timber with a preservative — either CCA, which is chromated copper arsenate, or creosote.

Senator Robichaud: That was the old way, was it not?

Mr. Baardsen: That was the old way. Now the challenge is to ensure life endurance using other methods. In principle, we can protect the timber by using a kind of curtain, also made of timber. We can replace this curtain with another, if needed, but the structure will be intact.

We also have a new preservative called Kebony. Actually, I think it is a Canadian invention. It is a process whereby you use sugar by-products to gain better endurance. We have industrial activity on this in Norway for the time being. We currently have a project running for the road authorities, which deals with this wood preservation so that timber bridges comply with environmental requirements.

Senator Fairbairn: Of all the issues you have spoken about, my eyes popped a bit when you spoke about the Japanese. Could you give us an idea of what you are doing with their activities in your work?

Mr. Baardsen: The Japanese market is interesting. They used to build approximately 1.5 million new dwellings each year, and half of these dwellings were made of wood or timber. That is about 750,000 wooden buildings in Japan. Of course, building activity in Japan has decreased substantially. Now we speak about fewer than 1 million new dwellings in Japan. However, the share of wooden houses is increasing, and it is still a very big market.

Also in Japan, they use quite a lot of glulam in their housing construction. We have been certifying that glulam from Europe to meet the requirements of the Japanese standards, and that is a must. You cannot use glulam without this JAS certification. This has been quite a successful business for us. We have no Norwegian customers in this scheme. All our customers are from abroad. As I said, we are the only authorized laboratory in Europe.

The Chair: You mentioned that you are looking forward to increased utilization of wood to .75 cubic metres. What is the volume that you now have per inhabitant?

Mr. Baardsen: I think the last figure I saw was .66 cubic metres per inhabitant.

The Chair: In our mandate, we are also looking at new ways of utilizing wood in non-residential construction. When we look at the United States, California and other states are following a green building code.

Do you have any comments on what would happen by using the life-cycle assessment? I know that other countries are looking at this and implementing it as per the industry code or standardization.

Today, in Canada, we do not have a green building code. What is the situation in Norway and in Europe on green building codes? What would be your comments on that particular endeavour in the wood construction industry?

Mr. Brunsell: The most important element of green building codes in Europe is linked to energy use in buildings. Mainly, the building code provides requirements for the maximum heat loss from each building.

In Norway, and throughout the European countries, we see a lot of development toward passive house construction. For instance, in Norway, we need walls with thicknesses of 400 millimetres, with insulation inside. It is clear that we cannot use one piece of wood. A two-by-four stud cannot be used in such a construction. We have to find solutions for the wood industry to address these challenges — perhaps a double-stud wall, some kind of I-beam or something similar — to come up with this energy-efficient construction. That is one part.

On the life-cycle assessment, in Norway, we do not have a requirement for such analysis in the building code today. However, I think in the near future this will also be taken into account.

Mr. Baardsen: We are at the beginning of a large R&D project in Norway called "climate wood." This is a total accounting of the climate impact in relation to all the different wood products we produce in Norway and in relation to the value added. It is climate accountancy and economic accountancy. The theory is that there is a positive correlation between those two accountancies.

The Chair: Dr. Brunsell and Mr. Baardsen, thank you very much for your presentations and your comments. It has been very interesting, enlightening, informative and educational for our committee. We will extend our invitation to come to visit us in Canada, and we will visit you in your country. On behalf on the Senate of Canada and our country, thank you for your information.

Mr. Baardsen: Thank you for being part of this small conference. We also want to invite you to Norway so that you can see our construction and development, and we would certainly like to come to Canada to visit you.

The Chair: The feeling is mutual. Thank you very much.

Honourable senators, I declare the meeting adjourned.

(The committee adjourned.)