Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 7 - Evidence, February 11, 2003
OTTAWA, Tuesday, February 11, 2003
The Standing Senate Committee on Agriculture and Forestry met this day at 6:32 p.m. to examine the impact of climate change on Canada's agriculture, forests and rural communities and the potential adaptation options focusing on primary production, practices, technologies, ecosystems and other related areas.
Senator Donald H. Oliver (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, we are continuing our study on how agriculture and forestry must adapt to climate change.
We have two witnesses today. First we will hear from Mr. Lazar, then Mr. deMarsh.
Mr. Avrim Lazar, President, Forest Products Association of Canada: I would like to introduce my colleague, Mr. Jean-Pierre Martel, who is also with the Forest Products Association of Canada. He is an accomplished forester who will help to answer questions too technical for myself.
This topic is of great interest to the forestry industry. The Forest Products Association is the voice of Canada's wood, pulp and paper producers, both nationally and internationally. We represent an industry responsible for 1 million jobs, which is a substantial economic contribution to 1,200 communities and is pretty well the sole source of support for another 350 communities. When we talk about the impact of climate change on the forest industry, we are talking about the impact of climate change on the livelihood of a million Canadians.
The Forest Products Association of Canada represents 75 per cent of the industry operating in Canada's forests. It is the only association on the globe that requires members to meet international forest certification standards and the association does so with third party audit and attestation.
We want to say three things. First, we believe climate change is a real phenomenon that needs to be addressed in a serious manner. Second, we are concerned about the impacts of climate change on the forests and communities that depend on the forests. Third, we think the policy emphasis on slowing down climate change is erroneous. There must be a balance between the need to slow climate change and the need to adapt to and understand the impacts of climate change on Canadians and Canadian communities.
The management of carbon dioxide is not new to the forestry industry; in fact, it is the essence of our business. Forestry is the removal of carbon dioxide from the air, the sequestration of that carbon in fibre and the transformation of that fibre into paper, wood and other things we use every day. Managing carbon is not a novel idea.
We have not waited for government regulations, nor have we waited for the government to ratify Kyoto. We acted on climate change early on. Our current emissions are 26 per cent below the 1999 level. Kyoto requires only 6 per cent; we have gone more than four times that. At the same time, we have increased production by 20 per cent. If you take a piece of paper, we produce it with 38 per cent less CO2 than we did in 1990.
We did not wait for government regulation, nor did we particularly want it. We acted. If you look at this graph, the green line represents our emissions from the pulp and paper industry. The red line represents what the Kyoto Protocol requires. We are proud of what we have done but we also hope that what we have already done is fully recognized in any climate change mitigation scheme the government puts into place for implementing Kyoto.
Forests obviously offer an opportunity to reduce the CO2 in the air, through sequestering it in trees. The approach to forestry has a big impact on how much gets sequestered. More intensive silviculture leads to more sequestration. Of course, if you put all the carbon dioxide in the tree and use that tree to build a house, the carbon is still sequestered in the house. You can grow another tree to sequester much more carbon dioxide. Active silviculture can help in dealing with carbon dioxide in the air.
Whether we act aggressively on Kyoto or not, climate change will happen and is happening. We are talking only about how much. The impact of climate change on Canada's forests will likely be severe. An ecosystem is like a finely balanced clock. If you move one piece, all the others fall out of balance. If you change the temperature by one to one- and-a-half degrees, then that will change how certain insect species live. It changes how certain diseases live, and the distribution of trees and plants. Each time you shift one of those things, you shift the ecosystem and you get a chain reaction. We have not seen any research to say exactly what those shifts will mean. Scientists say it is likely that we will have a great deal more insect and disease devastation of our forests. We have seen early signs of that with the mountain pine beetle. There will also be changes in where species are found and what species are found there. During that adjustment period, we expect severe interruption in the livelihood of Canadians who depend on forest ecosystems.
The heating up of the climate is only part of the problem with climate change. The other part is severe climatic effects including floods, droughts, deep cold and extreme heat. These changes also have a dramatic impact on ecosystems. With droughts, the chance of forest fires increase dramatically. In a forest fire, not only do we lose what could be useful forest but huge amounts of carbon dioxide are released into the air. Ice storms, as we have seen, destroy huge amounts of timber. With floods, the impact is obvious.
The bottom line is that as the climate continues to change — and we are only talking about slowing it down because it will change regardless of what we do — the forest upon which our rural communities have depended will change. Because this is an agriculture as well as a forestry committee, it is worth remembering what forestry means to rural communities. It means not only 1 million jobs but also jobs that pay, on average, double the average Canadian wage. Ask in a rural town how many jobs pay double the average wage. You can bring in tourism but you end up changing bed sheets or working in McDonald's. It has been a long time since agriculture returned the wages or profits that farmers would like to get for a decent living. We in the forestry business have provided high-paying employment. The forestry industry uses more high-tech equipment than the automobile, aerospace, chemical and transportation industries combined. Most of that high-tech forestry equipment goes into the rural economy.
This issue is important to Canadians in the rural economy. The forest upon which the forest industry depends is certain to be disturbed by the change in climate.
Our conclusion is simple. We know something will happen, but no one knows exactly what. Government should dramatically increase research into ecosystem changes that will come with climate change, and strategies for adaptation. The preoccupation with implementing Kyoto, which is sound and good policy, must be balanced with an equally strong preoccupation with the effects of climate change on Canadian rural communities.
Senator Day: Mr. Lazar, you stated that you felt that Kyoto was a good, sound policy. Do you feel that Kyoto will make a difference with respect to global warming?
Mr. Lazar: I have to be clear: I said ``implementing Kyoto.'' Whether or not we ratify Kyoto, we will leave to the political drama. However, we think that every country and every industry has a responsibility to act on climate change, which is why this industry did. Kyoto is a different issue because it sets out the specifics of an international agreement. We do not pretend to be experts on the specifics of international agreements. When it comes to doing something about an environmental problem, we think we are experts and we have acted on it.
Senator Day: Are you convinced that there is a warming trend with respect to global temperature?
Mr. Lazar: The science that we have indicates that climate is changing. It indicates that the most likely cause is human behaviour.
To finish with the question, will acting on Kyoto have an impact on climate change, the answer is only if it is done on a global scale and only if it is done more rapidly than one expects at the moment.
To simply rely upon the mitigation, that is, implementing Kyoto, is to ignore the fact that the problem is still coming at us.
Senator Day: Although people are saying different things, you have balanced the science. You and your industry are satisfied there is global warming. If it is not caused by human activity, it is at least being enhanced by it. There are various processes and recommendations you have made to deal with that.
Mr. Lazar: One should not confuse industry with scientific opinion. The vast weight of scientific opinion is that climate is changing, that its course is not predictable or understood but that it probably involves greater warming in the North than in the South and severe climatic effects and climate change is contributed to by human activity.
The vast majority of scientific opinion used to say that the earth was flat and the sun rotated around the earth. Scientific opinion on global warming could be wrong, but so far it is right. I cannot say that our industry has a scientific opinion about it. This is what we have seen as the centre of scientific opinion, and we have acted upon that.
Mr. Jean-Pierre Martel, Vice-President, Sustainability, Forest Products Association of Canada: In the research and recent studies, there is some weight of evidence that there is a change in climate. The rate and pace of that change could vary. It depends with whom you speak.
We are saying that it does not matter if we implement Kyoto or not, that CO2 in the atmosphere will increase. We should look at mitigation measures, as well as a reduction in emissions. We need a strategy that will look at both these things: How do we reduce emissions with an approach that will help the overall competence of our sector? We could prove the approach by having a reduction of 26 per cent since 1990. We want to ensure that what we do in the future will help to provide opportunities as well as improve our overall competitiveness through energy efficiency, energy substitution, and so on.
Senator Day: Did the forest industry make the improvements before the Kyoto discussions came along? If you have already made the changes, will you be able to make more changes?
Mr. Lazar: We have done four times what is required by Kyoto.
Senator Day: Will you get credit for that?
Mr. Lazar: Government has said that we will not be penalized for it. It is better not to be penalized for being responsible.
The way we understand it, if you believe what the government originally said, is act early and your action will be recognized. We then should have more than $150 million of carbon credits to sell. I have not heard anything from the government saying that the investment industry has made will be repaid with carbon credits to sell.
The next way to look at it is this: Will we be asked to do less, given we have done so much already? We have received ambivalent answers to that question from the government.
The reason we are distressed with the ambivalent answers is that each time you take a step to improve energy efficiency, that step becomes more expensive. If you want to improve energy efficiency by 5 per cent in a house, you could caulk the windows and doors, which does not cost very much. If you want to do something else and go another 10 per cent, then you have to increase your insulation. That takes you from a $14 investment to a $500 one. If you want to go one step further, you are talking about changing the furnace or digging out the basement.
The industry has already caulked the windows, changed the insulation and installed the new furnace. We have a 38 per cent improvement rate in efficiency. Thus, when the government comes to us and says, ``We are starting anew and we expect you to improve just like everyone else,'' it is punishing us for having acted early. If we act today as we did 10 years ago, we would have $150-million worth of carbon credits to sell. We do not regret acting early. We operate under a social licence. We work in communities. If we are not environmentally responsible, we will be put out of business. There is no question that going ahead of regulation was the right thing to do, both from a social and a business point of view. We do not want to be punished for that.
Senator Day: I have two other questions with respect to adaptation. I would like you to share your views in relation to forest management versus letting natural growth take place. I ask that from the point of view of using up carbon dioxide and contributing to a reduction in global warming.
Mr. Martel: If you look at a land base, such as a forest, we can do more than a couple of things to increase carbon sequestration. First, we minimize losses to forest fires. There will be increased temperatures, droughts and more risk around forest fires. Thus, we can improve our fire protection activities.
Second, the same applies to insects and disease. There will be problems related to new insects in some cases or insects that we currently have in our forests as a result of expanding into new areas. Currently, there is a problem in British Columbia with the mountain pine beetle. We have had mild winters. As a result, the cold did not kill the insects. Thus, their number has expanded over millions and millions of hectares.
We must ensure that when we harvest there will be regeneration right after the harvest, which we are doing currently.
Another aspect is how we use intensive silviculture to increase the growth of the trees on a land base. That can be done through thinning and fertilization. That is a good way to improve carbon sequestration of that forest or land base.
Senator Day: If trees are managed and you thin them out, will the trees grow more rapidly?
Mr. Martel: Exactly. If you look at an older forest, you will see the overall growth is stagnant. There is actually more loss due to canker, having snags and so on. A healthy, young, growing forest will absorb more CO2. Through managing the land base properly you can actually increase the sequestration of carbon.
Senator Day: That is helpful.
Mr. Lazar, when you began your comments you indicated that each member of your association must have third party certification. Does that include these forest management techniques we have just talked about, such as silviculture and replanting quickly?
Mr. Martel: There are three certification systems for sustainable forest management. The three systems recognize the promotion of good forest management, good regeneration, and one specific system makes reference to climate change and doing a carbon balance for that forest. Some systems go further with respect to climate change.
Senator Day: For the record, would you name the three sustainable forest management certification techniques?
Mr. Martel: One is under the Canadian Standards Association, or CSA; the second one is the Forest Stewardship Council and its head office is in Mexico; and the third one is the Sustainable Forestry Initiative.
Mr. Lazar: We allow all three because we are an exporting industry, and we need certifications that meet the highest international standards that our customers also recognize. Rather than use just the Canadian standard, which is applicable to Canadian conditions, we accept the other two because they are more widely recognized internationally. However, all of them exceed the ISO requirements.
Senator Day: Is the ISO 14000 more of a management technique as opposed to a forest management process?
Mr. Lazar: It is less specific, and for forestry, less rigorous. Most members are ISO, and we have taken a collective decision to go beyond the ISO and become still more rigorous.
Senator Day: In relation to mitigation, is the forest industry at the stage where it can recommend to members that they plant a new kind of tree because, in 60 years, the tree that will grow there naturally or that you plant after you have done some harvesting will not grow properly after the next 60 years?
Mr. Lazar: The science is not yet close enough to make that detailed recommendation. That is why our basic recommendation is that we need an intense research effort to understand what is likely to happen.
The Chairman: Is that research being done now, and if so, where? Who is doing it?
Mr. Lazar: I know the Department of Natural Resources was funding a group.
Mr. Martel: A network of excellence through the Canadian Forest Service has been focusing on climate change and potential impacts on the forest. Research is being done by the federal government and some provincial governments as well.
The Chairman: Do you have names of particular researchers who are doing that specific work?
Mr. Martel: On climate change, Dr. Mike Apps and Dr. Werner Kurz are both based in Victoria. I believe Dr. Gordon Miller, director general for science from the Canadian Forest Service who appeared here as a witness in November, would be a good source of information as well.
Senator Wiebe: You talked about the need for research, the size of the forest industry and the involvement so far of some minor players, such as the government, in research. Is the industry itself funding or doing any research in terms of what may be a problem 60 years down the road? Is it the responsibility of the government, industry or a combination?
Mr. Lazar: The basic science of what will happen to Canadian forests is the responsibility of government. The application of that science and how we change forestry techniques is more the responsibility of industry.
Industry cannot do much without a more detailed understanding of what the likely impact on forests will be. That being said, in almost all government research programs in the forestry area, we partner and participate.
The public good of the science is to understand the future of Canadian forests. The good that goes to individual companies and communities is how to adapt forestry techniques on the basis of the science. Both would be a partnership, but the big effort now is trying to understand how the forests will change.
We were asked to talk from the point of view of the forest industry. The forests have many more values than the production of wood and creation of jobs, and the changes to the forest will have an impact on those values as well. As climate changes, clean air, clean water, recreational values and spiritual values will be affected, not just the commercial-use values.
Senator Day: They could be commercial as well.
Senator Fairbairn: So far, we have been focusing on the agricultural area, which many of us within the committee are close to. What we are hearing from you tonight is an important addition to our study. What strikes me is the degree to which you have made the connection with not just money, exports and so forth, but with the communities that live off the benefits of your industry. You discuss 1,200 communities overall and a million Canadians. Then you go into a potential impact on the communities, which will suffer quite dramatically, it would seem from your paper, should much of what is being discussed now come to pass, and we do not know exactly when.
In the work you have been doing, the changes that you have been bringing about and the impetus for those changes, are you already seeing the stress on communities, for instance, in terms of an anxiety about the ability to sustain communities? This is a big issue we face in the agricultural area. If climate change develops the way it is being seen to develop, we are looking at enormous change in the social structure of this country and the human issues that go with that. Your trees and forests are very much a part of that. Could you take me through your observations or concerns along this line of survival of towns and rural Canada?
Mr. Lazar: In agriculture you close one farm at a time. When we close the mill, that is it.
Senator Fairbairn: It is finished?
Mr. Lazar: It is done for the grocery store, the hardware store, the garage and the hockey team. For 350 towns, that is it. If we can open it again, that is great. We have a hard time getting the government's attention except at that moment. We can come to town shouting and screaming, saying, ``Economics do not work. We need more research.'' We are not asking for subsidies. We have never asked for subsidies, but we have always asked for policies that recognize what it takes to do business as an exporting nation.
We have no trouble getting everyone's attention in Ottawa when we close a mill. The money flows, there are huge policy discussions, Cabinet discusses it three or four times with respect to giving assistance. When we say there are preconditions to not closing the mill, we get almost no hearing at all.
Are people anxious?
Anyone who lives in a mill town knows anxiety. Anyone who lives in a mill town watches the prices. Anyone who lives in a mill town knows that a mill 500 miles away has closed down and people are going home and saying, ``Dear, we are going to have to move.'' Of course, they are anxious.
Are they most anxious about climate change? They should be so lucky. The impacts of climate change we are talking about are a good distance down the road. The impacts of bad economics are much more proximate. There have been immediate changes in ecosystems that are most likely due to climate change. I am being cautious here because you cannot say for sure the pine mountain beetle is here because of climate change, but give us three weeks of minus 40 degree weather and they are gone. We have not had that for a few years and the forest is devastated, and the forest base for northern Alberta and southern B.C. towns is being undermined. That is a very immediate problem.
Overall, the anxiety relates to two orders of government doing environmental regulations on us, capital taxes, and a Competition Bureau that treats us as a domestic industry when we export 80 per cent of what we make. These things threaten those communities in a real way.
People say it is business asking for more money. It is not. It changes whether or not the mills stay open. Most of our members have mills in Canada and the U.S. Many have mills in Europe and Asia. When the market is down they look at each mill and say, ``What does it cost to do business? Can that mill produce paper or lumber at a cost below the market price?'' There is nothing ideological, nationalistic or sentimental about it. If you can produce at a profit, or at least without a huge loss, you will stay open. If you cannot — maybe this year, maybe next year, maybe in three years — the answer is inevitable. No one loses millions forever. The mill closes down.
Senator Fairbairn: You answered every question I might have asked.
You mentioned that your members have mills and operations in various other countries of the world. In terms of the discussion we are having now, how does Canada compare with other countries in its response or lack of response to the concerns you speak of tonight?
We can say that our government has not responded in certain areas such as research, until mills start to close down.
Mr. Lazar: We are far less responsive than most Scandinavian countries and most competitors from Europe. The U.S. takes care of its mills by putting up tariff barriers — that is what softwood is all about — and of course it is short- sighted. We are more productive every year and they are less productive, but that is how they protect them.
We fall down in three big areas. We are the only real forestry country that insists on small mills. Commodity prices are low. They always get lower. Unless you have big companies, you cannot compete in the global marketplace. Our competitors are much bigger than we are because the Competition Bureau does not believe in mergers. The impact of that policy on mill closures is direct and demonstrable.
Second, we have a tax structure that gives us a competitive disadvantage in two ways. The U.S. association did a comparative study of taxes of all the big forestry associations, thinking they were the most taxed. Henson Moore, the head of the U.S. association, called me up and said, ``Here, you take it.'' The U.S. study showed the Canadian industry was the most taxed forestry industry in the world.
My second comment with regard to taxes is that we are the only place where our investments are taxed. We understand that government should tax our profits — not too much, please — but the capital tax on our investments is putting us out of business because if we do not buy new machines we become uncompetitive. We know the Finns and Norwegians are buying new machines. The Russians and Brazilians are putting in state-of-the-art machines. Each time we buy a new machine, we increase our capital taxes. Capital taxes obviously are pushing us in the wrong direction.
Third, there is no clarity of federal-provincial roles. It is not that we have both federal and provincial governments involved in the environment. It is Canada. You have to expect it, but no one knows who is doing what. Sometimes we have regulators from both the federal and provincial governments coming to the same mill with different lists. In some areas the federal government will say, ``We will see if we like what the province does. If we do not like it, we will come in.'' All of that creates an atmosphere of business uncertainty. If you are sitting with a finite pool of money to invest, and if you think Georgia or New Brunswick, New Hampshire or Ontario, if you know what your return will be in Georgia and you have an uncertain climate in Canada, of course you will go to Georgia.
I am not pretending we have not done well, but our investments in new technology have gone down year after year, and for a simple reason: our return on investment has been below the cost of capital for the last several years. Those communities are threatened.
Senator Gustafson: The importance of the forest industry to the economy of Canada is obvious: 350,000 direct jobs, 450,000 indirect jobs, 350 municipalities affected, $34-billion trade surplus for Canada, 81 per cent of our product apparently going to the U.S. Can we maintain that? Can the forests maintain that kind of supply?
Mr. Lazar: The short answer is, If we so choose. We have enough trees. We have enough energy. From a competitive point of view, the forest resource is not shrinking at all. We have that stabilized. We replant and regrow at least as much as is harvested.
We have the people. Our people are skilled. We have a tradition of innovation and creativity in the industry. If you do not, you go out of business. In the commodity business, the price is just trimmed downward. If you are not light on your feet, you are out the door. We have those qualities.
We have the U.S. right next to us. It is the world's fastest-growing market and the world's largest market. The U.S. uses timber to build its houses, not concrete like many other places. They read a lot of newspapers. We are well situated.
Senator Gustafson: We should be kind to them.
Mr. Lazar: We are nice to them. They should be nicer to us.
Because this is a traditional Canadian industry, we take it for granted. We treat it like we used to treat fish. We try to collect rents from the industry beyond what international markets can support. If three mills can be kept open instead of one efficient mill, the government forces us to keep three open. It is great for those communities for a few years, but they go down. You cannot compete with international paper with inefficient mills.
When they go down, can we build a big, efficient mill? It will be too late. They have our customers. They have the capital. The industry needs renewal to maintain its share. We have the fundamentals but we need a business climate and a partnership with government for that renewal. I think we could sustain those jobs.
Senator Gustafson: On the global warming aspect, as the world warms up and the forests warm up, does the treeline move north?
Mr. Lazar: Yes. It is already going.
Senator Gustafson: Is that a positive?
Mr. Lazar: It depends on your values. If you are from Innu culture, having the ecosystem upon which your culture is dependent severely change is not positive. If you want to chop down trees and make paper, I suppose it is positive, but I cannot see much market there. I do not think we will start building mills up at the treeline.
Mr. Martel: You are talking about a long-term transition. Some models have shown that an increase in temperature of an average of one degree centigrade will increase the northern expansion of the forest by 100 kilometres, but the trees do not walk. It takes a while to have those trees move in and they need water and nutrients, so the soil may not be good enough to hold the forest, either. It is something that must happen over decades.
Senator Fairbairn: You also have to build the infrastructure to follow.
Mr. Martel: There is some adaptation as well, but that would be over many decades.
Senator Tkachuk: Supplementary to that one question, they tell us the temperature has increased one degree over the last century. Has it gone up over 100 kilometres?
Mr. Martel: I was talking the other day with scientists from the Canadian Forest Service. There are maps that show where you can grow certain species, and there has been a drastic change. If you compare 20 years ago on the maps we have, those zones have changed quite a bit. There must be an influence related to climate. If you look at the changes over the last 15 or 20 years, we have not been good at measuring those changes. This is why we need a good information system and inventory in place that will help monitor the changes currently taking place on those forest ecosystems. That way, we would be able to react in a more timely fashion.
Senator Gustafson: In terms of Kyoto, you said you had credits.
Mr. Lazar: I said we should get credits.
Senator Gustafson: You have not received them yet. There must be a reason for getting credit. Would you get those credits because the trees are absorbing carbon, or because of changes to your plants?
Mr. Lazar: We have changed our plants so that production of paper is 38 per cent more carbon-efficient than 1990. That has reduced the amount of carbon dioxide in the air by many megatons and, if the government were serious about carbon trading and recognizing early action, we should have credit for those megatons. At least, we should not be told to start as if at zero.
Senator Gustafson: One problem with Kyoto in the farm, energy and manufacturing communities is if the U.S. does not move. For instance, the automobile industry in Ontario is getting exemptions. I cannot say I really understand but I have read about it. If they do not get exemptions, they will move their plants to the U.S. if the cost of production is too great. The American agricultural department is saying it would cost them $20 billion to implement Kyoto. These credits will come or not come, if government chooses not to implement Kyoto. We really have not gone far until we convince the world that everyone has to do this.
Mr. Lazar: Kyoto has been ratified. It is a debate that we will not engage in. For implementation, which is far harder than ratification, we have done our part. We are willing to do more, but we expect the government to go ahead in a way that shows good faith. Climate change mitigation is a social contract. It is all players in society saying that, for our collective good, we wish to make changes. A social contract requires trust. If the government says act early and we will recognize what you have done, and then does not recognize it, it undermines the social contract that is essential for progress. If deals are given only to the people who complain loudest, the trust necessary for a social contract is undermined.
Senator Fairbairn: This question follows up on your comments about the carbon credits. I do not think there is any lack of interest on the part of the Canadian government regarding carbon credits. The other question is, will other countries buying into this accept the reality and the trading of carbon credits? I suppose this is another, not just industrial but diplomatic, battle down the road as implementation comes in.
Mr. Lazar: Yes.
Mr. Martel: If you look at carbon credits, credit is currently being sold and bought in the global marketplace. On the forestry side, the rules about carbon credits are not clear, which is why there is less activity around forestry and carbon credits. There is more activity on the energy efficiency and energy substitution sides. The reductions in our sector, of an average of 26 per cent, are mainly due to fuel switching. We moved to more use of biomass, which is carbon neutral, to replace fossil fuel and their emissions. We can sell those credits in the global marketplace.
Senator Wiebe: I have a quick editorial on carbon credits. I am reluctant to see us selling our credits to another country because it lets the other country off the hook. We have to pay carbon credits but it should come from the Government of Canada to the industry and farmers, rather than selling that credit to some other country.
Can you explain what you were saying with capital taxes on machinery? Is this just provincial tax and GST or is there another tax on machinery?
Mr. Lazar: The federal capital tax is tax on how much you have invested. Some provinces have capital taxes. Other provinces, such as Alberta and maybe Ontario and B.C., have either eliminated or will eliminate the capital tax.
The Chairman: It targets the financial services, telecommunications and forestry sectors.
Mr. Lazar: It hits the sectors that have huge expenditures in machinery.
Senator Wiebe: What is the percentage of that tax, and how is it calculated?
Mr. Lazar: I could not answer that.
Senator Wiebe: I will check into that further.
Mr. Lazar: We have a written brief which I will send to the committee.
Senator Wiebe: Going back to our study, whether Kyoto goes ahead or not, we will still have problems with climate change. What Kyoto will do is slow down the rapid climate change. Witnesses from Environment Canada have provided evidence to us that indicate that if things stay the same, then you will have extremes in weather. There will be longer heat periods and longer wet periods, for example, freezing rain in the wintertime, we have not had before. Have we learned anything?
You mentioned that our forest line is shrinking. Has the industry learned anything from some of the extremes that have taken place, for example the ice storm? What kind of effect did the ice storm have on trees?
Mr. Martel: The impact of the ice storm was felt mainly in southern Quebec, southern Ontario and part of New Brunswick. Your next witness, Peter deMarsh, could probably talk about this in more detail because it had a major impact on his membership and the forests of his members. Obviously, it had an impact on the growth and health of those forests because there were breaking branches, canker and disease coming to those trees as a result.
In our industry, most operations are up north. As a result, there was not a major impact on the productivity of those forests.
From the point of view of the forest products industry, this was not a major issue for us. However, it was a major issue for maple producers and Christmas tree growers.
Senator Wiebe: What would happen to the northern forests if, for example, you had mild temperatures during the winter months which were above normal — around 10 degrees above zero — and then a freezing frost? Would that damage the trees? I am thinking about my trees at home in the southern part of the province. We have mild winters because we are close to the Calgary Chinooks, after which we get a freezing spell. We have to replant our trees the next spring.
Mr. Martel: Do you remember when we talked about acid rain in the 1970s and 1980s? I was involved with the research at that time. We found out that pollution created problems, of course. However, there is a multi-stress approach. For instance, we have more droughts and extreme events like quick melts and then quick freezes during the wintertime. That creates a lot of stress on stands of trees and on forests in general. A forest under stress is more susceptible to insects, disease and other things. Overall, it is a combination of events which will create more stress on the forests. Potentially, it will reduce the growth and have some influence in the future. I have not seen any studies looking at the impact on the forest. When you say ``up north,'' are you talking mainly about the boreal forest?
Senator Wiebe: That is right.
Mr. Martel: It is all related to insects, disease and forest fires. Potentially, as we have milder winters and a milder climate, it may move up north as well. There is an assumption that if the temperature increases by one degree, the forests will expand north by almost 100 kilometre. These assumptions are currently being developed.
Mr. Lazar: If you think of the forest as an organism with all the pieces playing roles — plants, animals, insects and parasites — then it is not just what happens to the tree but what happens to the whole net in which the tree exists that creates the huge stress.
Senator Hubley: We have heard that in Canada we will have regional differences as far as our forests are concerned. In many presentations we have had, adaptation was fairly important. People have suggested theories or practices. For instance, for a warming trend, then we should look at species that live and thrive in a warmer climate. We should plant those species at this time so that, when they are mature, we will still have forests in place.
In your presentation, you state that the policy emphasis to date is on mitigation while focus on impact and adaptation is minimal. Could you tell us first whose policy this is? Is it government, company or industry policy?
Mr. Lazar: It is government policy. Government preoccupation has been: What can Canada do to contribute to slowing down climate change? Some 99 per cent of the preoccupation of environmental groups is: What can Canada do to slow down climate change?
Government scientists and environmental groups — everyone — agrees that even if we do heroic things climate change is coming, and it is coming hard and fast. Knowing that the train is coming down the tracks, a responsible government should not only be yelling at the train to slow down, which is great, it should be doing detailed studies and making detailed plans so that we can survive this. If that is done, then the impact on Canadian ecosystems, which are precious to all of us, and Canadian communities and Canadian jobs, can be managed and minimized.
There is a great deal more political drama in dealing with climate change by being seen to push it back. Everyone wants to be seen to be stopping a bad thing. There is a great deal less political attractiveness in accepting that bad things will happen and figuring out how to live with them. All the attention is focused on how to stop them. We should do our part in fighting them. However, if you look at the time, energy and money spent on how to slow it down compared with the amount of time and money spent on what we do about it, you will see it is way out of proportion. The cost of that will be borne by all of us.
Senator Hubley: If research money was available, would you recommend that it go to adaptation strategies?
Mr. Lazar: We recommend a proper balance. Of course, we should put research money into new technology to make industry more carbon efficient. However, that investment should be balanced with what will happen to us and how we can survive it with minimum negative impact on the things we hold dear.
Mr. Martel: Canada is responsible for only 2 per cent of the world's greenhouse gas emissions. What we do in this country will have a minimal impact. CO2 concentration in the atmosphere will still increase. We need to have a good monitoring system to know what is happening in our forest systems. We need to know about any changes and their potential impact on our forests. If we know that, then we can react in a timely fashion. At the same time, if those changes happen, we can look at what kind of mitigation measures we can put in place to prepare for those changes.
The Chairman: Mr. Lazar, you said you will send a brief on capital tax to the clerk. At the same time, could you get more statistics for us in response to the portion of your brief which deals with potential impact on industry? You say that there is decreased fibre supply. Could you tell us how much and in what amount? You also talk about growth and yield changes. What are the specific changes in yield and growth? What is the loss of fibre to natural disturbance?
That information will give us statistics to support arguments you have made on that subject.
Mr. Lazar: We will send the committee what is available. The sad truth is that most of these answers are not available in detail, which is why we say it is time for us to do the homework. How much less fibre will be available depends upon how and in what manner the forest ecosystems are impacted. You will ask: Can you figure that out? We cannot figure it out by studying the trees. We must study ecosystems under different climate.
If the government follows our recommendations, the answers will be available eventually. In the meantime, anything that is available we will send to you.
The Chairman: Several witnesses have talked about the mountain pine beetle. We have seen pictures of what this little pest has done to the forest, in particular in British Columbia. Is there a natural predator to this pine mountain beetle? Is there a known insecticide today that you can spray on these trees to save them because it is costing millions of dollars in lost fibre?
Mr. Lazar: I am not an entomologist, but I can tell you one thing: The natural control of it is called winter.
The Chairman: That is the case for many other insects as well.
Mr. Martel: To answer the other part of your question, no pesticide or insecticide can control it because these insects bore holes in the trees, and they go between the bark and the wood. They burrow into the tree. No water goes up to the crown and the canopy, and the trees die. That is why you have all those reddish colours. The only control is when the insect population is low and you know it is coming. You can identify orange or red trees and harvest those trees first.
The Chairman: You can still use some of the fibre if you get to them quickly enough.
Mr. Lazar: You can use the difference in shading in satellite pictures and GPS technology to locate them. Not only can you use the fibre if you get them quickly, you can also reduce the spread to neighbouring trees.
Senator LeBreton: Do they do that with the first buds?
Mr. Martel: They did quite a bit of salvaging. Budworms kill forests, but they do not last more for more than four to five years, depending on the species.
Senator LeBreton: Has the spruce budworm phased out now?
Mr. Martel: The last epidemic was in the late 1970s and early 1980s.
Senator LeBreton: Does the weather kill them off eventually?
Mr. Martel: It is to linked to an older type of balsam fir. When food, temperature and climate are right, the population goes up. When the food is gone and the temperature goes down, the budworm population goes down. There has been budworm infestation for over 100 years.
Mr. Lazar: All these manifestations will take care of themselves if you do not want to make a living from the forest. However, if you want to feed your family —
Mr. Martel: The salvage part of it is access to the fibre. When there is no road or access to it, you could start a small fire and expand very quickly. That is why there are areas in British Columbia where most of the harvesting for companies is done by salvaging budworm kill or where the pine beetle kills the forest.
Senator Gustafson: Has the discourse with the U.S. over the lumber settlements cut down on the amount of exports of Canadian lumber?
Mr. Lazar: It has had a perverse impact. There is a net decrease, but it is modest. They put antidumping charges on us. The antidumping charge is calculated on your cost of production. The only way to reduce anti-dumping charges is to reduce your cost of production. You are not going to slash wages, so you have to increase production to use your infrastructure more efficiently. Most of our guys have shut their inefficient mills. They run their efficient mills 24 hours a day and produce a huge amount of lumber, which we send to the Americans. Part of what brought the U.S. back to table is that anti-dumping charges backfired on them. Instead of making a killing, the prices are lower than ever, therefore, they are willing to come back to chat.
Senator Gustafson: What about unemployment? I had a gentleman in my office three hours ago who said that in his community in northern B.C., 60 per cent of the people were not working.
Mr. Lazar: We are shutting down the inefficient mills. We are able to move some employees to the ones that are running 24 hours. There is a limit to that. It is having an impact on the pulp and paper industry because you make paper out of the by-product of timber. You saw the two-by-fours out of the softwood tree, and you send the chips and sawdust to the paper mill, which turns it into paper. When the softwood goes down, the price of chips goes up and it affects the entire industry.
The Chairman: Your answers on the first round were so good that we will be able to use much of that in our report.
Mr. Lazar: If we can provide more detailed clarification, we would be happy to be more supportive.
The Chairman: Senators, our next witness is Mr. Peter deMarsh.
Mr. Peter deMarsh, President, Canadian Federation of Woodlot Owners: Thank you for the invitation to make comments to the committee. This committee, with Senator Taylor as chair several years ago, produced a valuable report. It gave a strong message of the many benefits of tree planting, and from the point of view of woodlot owners, in particular, it provided strong support for changes to the Income Tax Act. That report helped bring about changes in the budget of 2001. Along with Senator Cohen from New Brunswick who had taken the issue to heart, the support of Senator Taylor and the committee was crucial in bringing about the change much appreciated by woodlot owners. I want to review the key points in a brief statement of background information on woodlot owners I submitted earlier. As you have seen, there is a large number of us across the country, approximately 425,000 families. As individuals, most of us have a limited impact on the landscape and the rural economy. Collectively, we have a significant impact, especially throughout most of southern Canada. The forests that Canadians see most of the time are, in fact, family- owned wood lots. We have all the strengths and weaknesses of any other family-owned, resource-based companies and businesses.
On the one hand, we have the ability to care for the land. On the other hand, we have limited financial resources. We have pride of ownership and stewardship. However, we are prone to becoming stubborn when our private ownership of the land is not respected.
In some provinces, we have strong silviculture programs. In both Quebec and New Brunswick those programs include large afforestation components — that is, planting trees where forests did not previously exist, or had not for the previous 20 years. We are already doing significant work in planting marginal and abandoned farmland in several provinces.
Nine provincial associations collectively making up the Canadian Federation of Woodlot Owners.
We can tell you little that you have not heard from people with much greater expertise than ourselves with respect to the effects of climate change. You have heard about the insect and disease problems that are likely to become increasingly serious; increased risk of fire and drought; and more frequent severe weather, particularly ice storms and windstorms, which concerns us as woodlot owners. Existing tree species may have problems adapting to hotter and less stable climate. You have heard these concerns from people with more expertise than I have.
Our concern is to consider what we can do about this. What can be done to help? How can we adapt? Action is needed in a number of areas. I mention six in my outline. I will touch on the first three briefly, because you have had or will have witnesses with more expertise than I have in these areas.
One area is fire and pest control. These areas require increased investment. We share that concern with public and industrial forests.
Renewable energy is of interest to us. Low quality wood is a source of energy. When it is produced from silviculture thinning operations, which increase a forest's health and productivity, it is a source of energy that is carbon-neutral. We hope to see more markets for low-quality wood develop. A third program area is forest management strategies. Peter Duinker made the comment to you that many of us would support: It is important to maintain diversity of species and ages in our forests and woodlots. Do not simplify the forest. Do not put all your eggs in one basket. We do not know how individual species will respond to the changes. It is important to keep options open.
Where species are at the northern limit of their present-day range, it might make sense to favour those species since that northern limit is moving. A marginal species today may be an important one in a few years' time.
I want to talk about the next three program areas in more detail. Disaster assistance is a real concern to us, as ice and wind storms are becoming more frequent and perhaps more severe. The 1998 ice storm caused serious damage to thousands of woodlots, as well as to maple producers and farmers throughout eastern Ontario and southwestern Quebec. After many months of lobbying by woodlot owner associations and other groups, each of the two provinces developed a package of assistance in cooperation with the federal government. Over the past four years, about $8.5 million has been spent with woodlot owners in Ontario, working with about 2,600 owners, and about $19 million in Quebec, with something over 6,000 owners.
There is a four-year track record of these efforts to provide assistance, so it is possible to make a strong assessment of the strengths and gaps in the two programs. One need is to provide assistance in the area of technical advice. How much damage has occurred? What kind of damage? What should be done about it?
It is important to provide assistance to clear roads of fallen trees. This is both for safety reasons and to provide access to the forests so that other work can be done. It seems reasonable and important to provide assistance with the cost of re-establishing plantations.
We are talking about the ice storm of 1998. There was an ice storm in New Brunswick a week and a half ago, on February 2. While I do not have any statistics yet as to the extent of damage, we know a large number of plantations were absolutely devastated by the storm. Coming from New Brunswick, I have an acute interest in this particular program area.
A further component of a wise and well-planned assistance program is salvage of good quality wood. My colleagues in Quebec tell me much high-value hardwood veneer and sawlogs were lost because it was not possible to bring them to market quickly enough. They ended up as pulpwood and firewood. The need was for equipment and specially-trained crews able to work in the difficult conditions where trees have fallen over or tangled up.
A final area of direct assistance is in the form of compensation for damage and general compensation for the loss of the value of the asset. In Ontario, 12 owners who were particularly aggressive in promoting their case received this kind of assistance. I can tell you that we do not have any consensus on the merits of this.
The other areas I mentioned are clear and obvious and at this point that is where the emphasis is needed.
A final measure around disaster assistance is in the area of tax policy. As an owner affected by an ice storm, I may lose thousands of dollars of timber. I will try to salvage that over a period of one to two years before its quality makes it unmarketable. That gives a big lump of income, with serious tax implications.
The two associations in Quebec and Ontario lobbied both levels of government for an income averaging arrangement so the big surge of income could be spread over a number of years. The federal government did not agree to allow that, but the Quebec government did, and allowed the averaging over five years. From our point of view, this averaging was an extremely helpful measure. It is something that we would like to see incorporated in other cases.
That is my bottom line in placing so much emphasis on this area. The 1998 storm response was a totally ad hoc arrangement. We anticipate an increasing frequency of these severe storms. What we need, is an ongoing program so that woodlot associations and other groups do not have to spend months and months lobbying for something that will be designed from scratch.
The next program area is education and information services for woodlot owners. We call this forest extension. It is primarily a tool to encourage woodlot owners to improve their practices and the quality of forest management on our woodlots.
With the elimination in the mid-1990s of the federal-provincial forestry agreements, most provinces cut back or cancelled their forest extension staff. Some have restored the programs, others partly and others not at all. As we look to the unknown and serious implications of climate change, we have to place a high priority on providing owners with good information and advice. We need to raise awareness and do everything we can to reduce uncertainty. From what you heard from other witnesses, this needs to be done on a regional, and probably provincial, basis. Each region will have a different pattern of changes in temperature and precipitation. Different species will be impacted. The advice will need to be tailored to specific circumstances in each region.
One positive contribution that woodlot owners can make to long-term adaptation is that we are many eyes and ears across the landscape. As we learn to identify insects and diseases, we can contribute and offer a large network of observers to help government officials and the scientific community to spot new problems and help track them.
The final program area is tree-planting programs. There is a serious consideration at the present time of establishing large-scale tree-planting programs. The Canadian Forest Service, CFS, is conducting five pilot projects across the country, several of which are in cooperation with woodlot owner associations. We are interested in the development of programs for two primary reasons. One is that most of the targeted land is private; the other is that many of us are keen on getting involved. There is a large reservoir of interest and commitment, on the part of private landowners, to make a contribution to both mitigate and adapt to climate change. As these programs develop, if they are well designed, we will see a tremendous level of participation by people who see it as an opportunity to make a contribution and get involved.
The question, however, is not whether we can plant trees and develop programs to assist owners to plant trees. The question is, can we do it on a large scale? Two and a half years ago, we provided Natural Resources Canada with an estimate that the potential for planting on private land is about 35,000 hectares a year over a period of 10 years. That is a big program. To achieve that, it will take a well-designed and carefully thought out plan. I have shared with the committee a report by Mr. Tony Rotherham. In the report, he provides a useful discussion of the issue of how to design an effective large-scale program. The first issue he touches on is choice of species. There is a tremendous interest in hybrid poplar as a species that can grow quickly and produce large sequestration of carbon over a period of 20 to 25 years. While it does well in some parts of country, especially the Prairies, it does not do as well in the East. It is not as easy to grow as the white spruce, which is more frequently used on old fields in eastern Canada. There may be new varieties of hybrid poplar that overcome some of these difficulties, but we are keenly interested in having some choice in the kind of species supported by a program.
The land that will be used is a prime issue for us. It will be largely private land. The question is, which land? In the east, we talk about marginal and abandoned farmland, that is, land that perhaps never should have been cleared for agriculture. On the Prairies, it is more correct to talk about suitable land. Hybrid poplar, for example, does best on higher quality land. However, when you take higher quality agricultural land and turn it into a tree plantation, there are obvious implications about opportunity costs, from the point of view of the landowner. That will need to be taken into account when the financial package is put together.
We are also interested in ownership rights and the perception that those rights will be respected by a program. Again, I emphasize that the program will need to be carefully designed.
Financing is a real challenge. The federal government, up to this point, has made it clear it is unwilling to re- establish the federal-provincial forestry agreement-type arrangements, where the two levels of government shared 80 per cent of the cost of silviculture planting work. The landowner paid the remaining 20 per cent. We found that 20 per cent is the maximum that the vast majority of landowners can afford to contribute to what is an expensive activity. As you go beyond 20 per cent, the participation rate declines rapidly. There are some woodlot owners with enough private resources to pay a considerably higher percentage, but that number is low. There is an effort to find other ways to raise money; not just public money, but private sector, energy company money. Investment fund and insurance company money have been considered. The challenge is to find a way to ensure that private investors get a return that they find satisfactory and to make the funds available to a large number of owners in an efficient and effective way.
Program delivery is also raised by Mr. Rotherham as a key issue. Woodlot owners must trust the agency that handles the promotion and supervision of the program. In most cases, there should be a central role for our association in these programs. In some provinces, we have over 25 years of efficient program administration. Elsewhere, it will be more appropriate to look at partnerships between woodlot owner groups and other agencies. However, the associations need to play a central role in all provinces and need to be consulted as to how a large-scale program can be designed to work. We are interested in offering our advice and helping to bring about a serious large-scale program across the country.
In conclusion, the three program areas of disaster relief and assistance, education and tree-planting, are important in adapting to climate change. They are also important for other reasons. Even if climate change were not a central concern, they should be done anyway. We need disaster assistance. We especially need it as climate change makes disasters more frequent, but we need it anyway. We need improved educational services. There are other technological, economic and social changes that we have to adapt to, in addition to climate change. Finally, tree-planting has many benefits in addition to carbon sequestration. It is an important contributor to reducing runoff and soil erosion. It contributes to wildlife habitat. It provides short-term employment and long-term employment security in the forest industry by strengthening the wood supply. It stabilizes rural communities, through diversified income. For all those reasons, it is an important initiative and we are pleased that the federal government is looking at it carefully.
The Chairman: Mr. deMarsh, thank you for an excellent presentation.
Senator Day: This committee visited with some of your members in Sussex, New Brunswick about this time last year. We visited with the Southern New Brunswick Wood Co-op. The committee is familiar with the small woodlot owner. In fact, some western farmers were surprised at the small size of the small woodlot owners and how important that is to their livelihood.
Can you tell the committee about the different types of land ownership of forests? Let us take New Brunswick, for example. It is not all small, private woodlot owners. Can you describe ownership so the committee will have a feel as to who is handling the problems down there?
Mr. deMarsh: New Brunswick is the most heavily forested province in the country. Over 90 per cent of our land area is in forest. That forest has three types of ownership. We represent about 30 per cent of the forest, that is, slightly under 40,000 families. Several large companies in the forest industry own slightly over 20 per cent. The remaining roughly 50 per cent is owned by the provincial government as Crown land. There is a small amount of federally owned land in the form of parks and First Nations land. I believe that is the information you are looking for.
Senator Day: Yes, it is.
Is the province involved in either providing management or direction for its forests? The large industrial companies that run mills also manage some of their own forests. Your group is made up of the smaller woodlot owners, which is a diverse group. Is the issue with your group the fact that you do not have the resources to work your woodlots like the large industries and the province would have?
Mr. deMarsh: Our woodlots are our profit centres. If we spend or invest money, by and large we have to find the revenue from the products we sell. We do not have mills where we do the processing. If I owned a mill, that is my profit centre. My forest is a cost centre. It is a source of expense, but also of tax deductions. In that sense, yes, we are different.
In several provinces, as I have mentioned, we have had successful cost-shared programs with public money. The justification for the taxpayers of Canada investing in woodlots is this. While we certainly benefit from those investments, we have a woodlot that is more valuable and which will produce more timber eventually. The public benefits through the various governments that collect taxes, through the mills where the wood is processed and through all the businesses that provide service to the mill employees. The public also benefits by virtue of the improved wood supply.
In a nutshell, that is the justification for what might appear at first glance questionable: How can you justify putting taxpayers' dollars into private land? Generally, this argument has become pretty well accepted. In Quebec, New Brunswick and to some extent Nova Scotia, large numbers of woodlot owners are allowed to improve their woodlots through planting and various types of thinning, for an ongoing investment.
Senator Day: In your outline you gave us some good suggestions with respect to disaster assistance. Part of our problem is to convince the public and the government that global warming is a slow death by a thousand cuts as opposed to a major catastrophic event like an ice storm, a wind blow that knocks down many trees, or a flood, perhaps. However, that makes it much more difficult to trigger some of the federal government programs, and perhaps some provincial government programs, that you have talked about.
From the point of view of global warming, and the changes that are inevitable but slow, what role do you see for the various stakeholders and participants in the forest sector? I refer to universities, federal and provincial governments, private woodlot owners, industry and any others you can think of. What role do you see those players playing in that challenge?
Mr. deMarsh: The focus is the area of disaster assistance and how we can bring it more centrally on to the public policy radar screen. People like me have to do a better job of explaining the need. It becomes easy, of course, when a disaster has hit, which is not the most pleasant time to try to establish how important it is, but it is when it is easiest to do.
There has been a serious incident in New Brunswick in less than the two weeks that have just passed. As owners of a significant part of the landscape, especially across the south of the country, we are being asked to do more and quite legitimately so, in terms of future wood supply, wildlife habitat, endangered species, ensuring clean water, providing a nice landscape for the tourist industry and so on. We need to explain to Canadians that we do not do these things for free; they cost money. In a broader sense beyond disaster assistance we need to make the case that mechanisms have to be established through which Canadian society contributes to those costs. Economist type jargon refers to these things as non-market public goods. They are goods that the public enjoys but for which there is no market by which the producer, namely, us, can collect some of the costs of producing them.
In Europe, there is a more advanced effort to provide tax relief, direct subsidies and other forms of doing what the market is unable to do in the case of these products. Disaster relief has to be seen as part of this growing awareness that what we do benefits society and society has to be a partner in covering the costs.
Senator Day: This committee had the opportunity to explore in Ireland the multi-functionality concept that fits closely into what you are saying. It was not in the forest industry. It was extremely helpful for us to understand what we might call subsidies. Over there, it is not called subsidies at all. It is a social value for which society at large must pay. Is that the kind of mechanisms we should try to develop for the forest industry?
Mr. deMarsh: I cannot remember which senator made the comment in a earlier session, but I noted in one of transcripts a reference to farmers needing help to look after the landscape. I would add woodlot owners as well. We are committed to doing our part and doing a better job. However, we would love to be able to do it for love alone. Unfortunately, we cannot.
We will do everything we can to accept a large role and a large share, but we cannot do it all.
Senator Wiebe: As woodlot owners, you farm the soil, but you do not qualify for any programs that other farmers qualify for in terms of AIDA, CFIP and this sort of thing. Is that correct?
Mr. deMarsh: Largely speaking, that is correct. We see areas where there is a real need to expand the definition of farmer. One good example is the income tax change in the 2001 Budget, where the provision for deferral of capital gains on intergenerational transfers was extended to woodlot owners with conditions attached. We felt the conditions were legitimate. It was a tremendous boost for us in terms of encouraging more owners to invest greater effort in looking after the woodlots, knowing the next generation will be able to carry it on without a big tax burden. For that kind of thing, we see the policies applying to farmers having a useful role in helping us do a better job.
Senator Wiebe: Once a woodlot is established, would a program like NISA, for example, help the woodlot owner?
Mr. deMarsh: Is that an income stabilization program?
Senator Wiebe: Yes.
Mr. deMarsh: We have taken a look at that. We need to pursue that with the federal department. I am not sure how they would react to significant numbers of owners expressing an interest in that, but as a concept, it interests us.
Senator Wiebe: If climate change continues as rapidly as it has been, this is one area that maybe we should look at to provide some kind of guarantee to the woodlot owner.
Senator LeBreton: I did not have the benefit of being at the previous meetings in Sussex, New Brunswick, or even the Irish experience. I will ask some questions, bearing in mind I was raised on a dairy farm in eastern Ontario.
You say you have 425,000 families or woodlot owners. What is the average size of a family-owned woodlot?
Mr. deMarsh: The statistic is 45 hectares per owner. In Eastern Canada and the Maritimes, the typical woodlot is 100 acres. The second most frequent size is 50 acres, which is usually 100 acres that have been split in two.
Senator LeBreton: That is like the size of an average farm in Eastern Ontario.
Mr. deMarsh: On the Prairies, a typical woodlot is a quarter section. It varies from one part of the country to another, but it is roughly that size.
Senator LeBreton: Other than the tree planting and the reforestation, what are the major costs to woodlot owners? Is it insurance for fire and insects?
Mr. deMarsh: Most costs, other than silviculture costs, have to do with the operations around harvesting. Part of that is building roads, bridges, culverts and so on. It is increasingly expensive to meet environmental guidelines.
Senator LeBreton: Are there any costs in terms of access to mills? Would some woodlot owners have their own mills?
Mr. deMarsh: The exceptions prove the rule. A few of us have small portable band sawmills, as they are called. That is rare. By and large, wood is sold to sawmills and pulp mills.
Senator LeBreton: If woodlot owners wanted to move into marginal and abandoned farmland, is it necessary to buy the land? Can they lease the land or make an arrangement where they do not have to buy the land in order to harvest it for wood products? Is it more often that they buy the land?
Mr. deMarsh: Harvesting is increasingly being done by full-time logging contractors who buy the standing timber. We call it stumpage. They do not buy the land outright; they simply buy the standing timber. Often the result is a clear- cut. There is increasing competition for wood supply in a number of regions across the country. Wood is becoming more expensive. We as landowners know that. Even though the market for pulp and paper and lumber may be in a period of decline, we hate to let the stumpage fees drop. As a result, when contractors bid for stumpage, the prices creep upward consistently.
To justify their investment, contractors must move the wood as quickly as possible. That results in clear-cuts that are often not acceptable from environmental, social and economic points of view. That is a real challenge which we must face. Many owners cut their own wood. They do a careful job in the tradition of their fathers and mothers and grandparents. There is a great diversity of practices, a mixture of good and bad and everything in between. That is not a simple answer to your question but there is no one simple picture here.
Senator LeBreton: When you talk about markets for low-quality wood, what do you mean by low-quality wood? What is it used for and what are the markets for that type of wood?
Mr. deMarsh: Mr. Lazar pointed out that closing a sawmill often has an impact on pulp mills because the pulp mills are getting wood from the sawmill as a by-product in the forms of chips. We still sell pulpwood to the pulp mills in many cases. That is relatively low-quality wood, wood that is too small or too crooked to turn into lumber. In the hierarchy of quality, you have pulpwood, lumber and then good quality wood that can be turned into veneer, especially hardwood.
Below pulpwood, firewood is an obvious example. Even below that, when a silviculture thinning is done in a young stand, say at the height of this room, the same principle is followed as when you thin carrots in a garden. Small trees are removed to allow the better trees, properly spaced, to grow as quickly as possible. Today those smaller trees are left on the ground. That is a potential source of both revenue and energy that could help finance the cost of the silviculture and provide an additional source of income.
If the low-quality wood is the result of that kind of silviculture operation, where the forest will grow better and faster, then that will not contribute additional carbon to the atmosphere. In some cases, it may even be a plus in terms of reducing carbon. At the least it will be neutral, unlike fossil fuels which are a total addition to carbon pollution.
In that sense, I am giving you the best possible spin on wood as a source of energy but with proper policies and conditions attached. It is an important area that needs to be included as more effort is directed toward alternate sources of energy.
Senator LeBreton: In terms of climate change, we in Eastern Ontario know what you are talking about with wind and ice storms. I saw the pictures from New Brunswick, where the ice reminded me of the situation here. You talk about compensation for damage from a storm such as the ice storm and the surge of income. Obviously, you have to deal with the damaged wood so you take down more wood than you would normally plan to in a year; therefore, you have a surge of income.
Did you say the provincial government allows you to phase the income over a number of years, but the federal government does not? Are you still trying to reach some resolution on that issue?
Mr. deMarsh: In the case of the 1998 storm, the Quebec government agreed to an income averaging arrangement. It was an ad hoc arrangement just for that situation. The federal government, however, did not agree to that. That was unfortunate. However, it was purely associated with that event. Our point is that we need policies that do not have to be reinvented every time there is a disaster.
Senator LeBreton: With regard to insurance, we had considerable damage ourselves in a small, 150 by 100 lot here in the Ottawa area. Did insurance cover any damage from this ice storm, which I think is directly related to climate change? Did the insurance companies cover the cost? If not, or if so, have insurance rates gone way up?
Mr. deMarsh: There are two parts to the answer. It is impossible to get affordable insurance for forests.
We need to invest more effort in developing policies with companies that are willing to look at ways in which policies can be designed that are affordable and provide useful protection.
Our colleagues in the States, whose organization is known as the American Tree Farm System, developed a special policy that appears to be relatively affordable, in the range of $50 to $100 per 100 acres. The special policy applies particularly to fire, though one assumes it could be modified to include wind and ice as well. That is more than many of us would choose to spend, but it is a price that an owner may decide is worth investing, especially for a high value plantation. We need to make products like that available in Canada.
Senator LeBreton: Are sugar maple woodlot owners part of your association?
Mr. deMarsh: They may be, but, as maple producers, they have their own organizations as well.
Senator LeBreton: Their trees do not last forever, either. I do not know how long a maple tree produces. Do they sell the trees after they are no longer productive? Do they then contribute to the wood production part of the industry?
Mr. deMarsh: The maple tree produces for three or four generations. For the individual, it is not really an issue. The big production of wood comes when a maple — a sugar bush — is developed and the unwanted and lower quality trees are removed. In the ice storm, there were tremendous losses for the maple producers and much wood was removed and lost as well.
Senator LeBreton: Was the wood of any use?
Mr. deMarsh: It tends to be less valuable than wood from forests that have been managed as timber.
The Chairman: It has holes in it where they tap it.
Mr. deMarsh: Also, what you want in an ideal maple sugar tree is not what you want in an ideal sawlog or veneer tree.
Senator Fairbairn: I come from the deep south of the south of Canada. When you talk about the trees in southern Canada, it would be in the southwestern area of Alberta. People may not equate that area with trees so much, but there are trees in the foothills, the river valleys and, of course, the mountains.
As a preview to what may come, not a great deal of media attention was given to this year's drought. There is no question it was severe in Alberta. The researchers said that unless something terrific happens this spring, 90 per cent of the productive land in Alberta will not produce. That is extreme.
However, in our area, we have been having drought off and on now for the last two decades. Most recently it has been for four years. In the 1980s it was substantial and harsh. It was all over the province, in areas that are not usually in a drought situation.
From your perspective, to what degree already are your woodlots in those areas, whether in Alberta or Saskatchewan, under severe stress in terms of production?
Mr. deMarsh: I cannot offer you any statistics or comprehensive answer to that, other than where private forests are owned in areas subject to that kind of stress — drought, mountain bark beetle, the ice storm problem in the East — to the extent that it is legitimate to lump all these things together as evidence of climate change, yes, we are being affected now.
These problems have existed in the past on a smaller scale, less frequently. It is difficult to say when they became a manifestation of climate change and not normal patterns, but in the future people may look back at the mid-1990s and say, that is when it became clear. I do not know. I cannot answer that. You said it yourself: We are obviously being affected now.
Senator Fairbairn: You were here for the earlier witnesses. I will not go into my rant, but will only ask you for your views. Even though this is different from a forest, nonetheless you produce something around which towns are built. People count on what you are doing as a major part of the economy and a social guarantee of the validity of their communities.
Again, to what degree do some of the changes we have been going through provide a real potential for loss of community?
Mr. deMarsh: I have suggested three key areas where public programming needs to be strengthened. One might be accused of repackaging an agenda to fit the climate change concern that is foremost today. The same problem arises with the precarious state of many rural communities. How much of that current uncertainty and lack of confidence is due to concern about climate and climate problems? How much is due to economics and other long-term social trends? It is hard to separate. It is clear that climate is one more source of stress for us, both as producers and as citizens. We need to get past the debates and start taking action.
Senator Fairbairn: When you say it is one more level of stress, it is also one that we do not know a lot about. People in rural communities would not know a lot about it, even in terms of agriculture.
Mr. deMarsh: It is the uncertainty, perhaps, as much as the actual evidence of change that is upsetting and disturbing.
It may be self-serving to say these three program areas will help climate change. I say that with sincerity, and I do not argue that they have the merit of providing other benefits. We need to take action that will produce a range of benefits, including a sense of greater confidence that we are doing what we can.
Senator Hubley: Your presentation indicates that people in your industry are aware that there is climate change and that changes will have to be made in the way we do things, or there may be a greater impact from climate change than we would like. How informed are the woodlot owners, generally speaking?
Mr. deMarsh: Other than the important advantage over folks who live in larger cities of having a more direct connection with natural processes, both in the way we make our living and the places we live, our views and our level of understanding are no different than any other Canadian's. We have the full range of views on the pros and cons of the Kyoto Protocol, for instance, and what should be done. We might differ on whether the ice storm is evidence of climate change or part of natural patterns. We have atypical range of views on the questions.
Senator Hubley: Climate change is something they are all aware of in the industry.
Mr. deMarsh: You wonder sometimes. Everyone complains about how cold the winter is in New Brunswick. I tell them that, when I grew up in central New Brunswick in the 1950s, every winter had three or four nights below minus 40 degrees Fahrenheit. I was in Toronto through the 1960s, back in New Brunswick in the 1970s and 1980s. Typically, every winter had three or four nights below minus 30 degrees Fahrenheit. In the 90s, it rarely went below minus 20. This winter, we have not seen minus 20 degrees Fahrenheit. It is cold, and it gets colder with each added year, but there is clearly a change going on.
Senator Hubley: The farming communities, the foresters and the fishermen would be the ones to see and feel it first. Information is available, as we have found out from the wonderful presentations on climate change. There are people who are always able to predict, and those predictions seem to be consistent. We now know that there will be regional changes and that forestry may be affected differently in different parts of the country. How real are the effects of climate change to the people actually on the ground, who will be most affected?
Mr. deMarsh: We do not relate well to climate at all. We relate to weather; it is awfully cold out, it is a terribly cold winter. We desperately need good quality information on a regional basis to tell us, as best as scientists can, what we can expect in terms of temperature and precipitation, invasive species and what will happen to the ones we have now. We know the information will be imperfect, but we need it.
Senator Gustafson: I am intrigued by the parallel between woodlot owners and farmers in the Prairies, where I come from. You say you face the same problems. Do a lot of woodlot owners hold off-farm jobs, to try to make a living?
Mr. deMarsh: With an average ownership of 100 acres or 45 hectares, there is an annual income of about $4,000. That is not, in most cases, an annual source of income. It comes more sporadically. At 100 to 150 acres, it is clearly a part-time source of income.
Senator Gustafson: It seems that some move is needed on the environmental approach and how we do these things. The Europeans, and there is reference made to that in Ireland and the United States, seem to be talking about environment, rural development, agriculture or woodlots. This morning, Archer Daniels Midland advertised on CNN that we have to take the responsibility of feeding the third world in agriculture. To do that, we need things cheaper. We cannot do it any cheaper. There must a whole new approach to these four or five areas of environment by the country. That is what the Europeans have been trying to do. The farmer or woodlot owner alone cannot carry the responsibility of those important factors. I guess it is impossible to answer the question. How do we communicate that to the urban population, to our governments and to the people of Canada, because we will all end up either gaining or losing from the way we approach this situation?
Mr. deMarsh: We face two obstacles to developing a dialogue with urban Canadians on this subject. First, why should we pay for something that we now get for free? As landowners, you do not own the water. It is a publicly owned resource. The same is true for wildlife and the air.
Second, why should we pay you as landowners for doing the right thing, that is, looking after your land properly?
The Chairman: It costs money to do that.
Mr. deMarsh: We know that. Those are the two attitudes that we have to carefully, gently and as aggressively as needed, get the folks in the cities to understand, that is, these things are not free. Somebody is paying blood, sweat and tears to make them available to you. In the case of family farms, the difference between reducing production for stewardship reasons, setting land aside, may be the difference between surviving and not. There are precarious finances — and I am sure there are senators who understand that much better than I do — across the farming community in this country.
The amazing thing to me is how much stewardship is going on without any compensation, or limited and imperfect forms of it, simply because people who own the land which has been in the family for generations are not prepared to treat it any other way. I think it can be called a miracle. It needs higher levels of recognition and respect.
Senator Wiebe: Of the 425,000 woodlot owners, how many actually manage and harvest their woodlots?
Mr. deMarsh: I can give you reasonably good information for eastern Canada, that is, Quebec and the Maritimes. We consider that roughly 25 per cent of owners harvest each year. If you take a five-year time frame, it goes from 25 per cent to about 50 per cent. There are no woodlots in the Maritimes or Quebec that would be called virgin forests. They have all been harvested at some time over the past 200 years.
Further west, the situation changes. There are still parts of Canada where there are significant subsidies to turn forests into agriculture land. Often, the trees are still being burned because they have limited market value.
Clearly, the tradition of forest management is younger in the Prairies especially. Some dedicated woodlot owners throughout the Prairies do a wonderful job of managing. We hope that their associations, which are small and young, will develop and grow as forests become better appreciated as both an environmental benefit and a source of diversified farm income.
The Chairman: You mentioned earlier the growing of hybrid poplar. You said that one of the reasons is that it grows quickly. In places where it is being planted, are the effects of climate change being taking into consideration? If so, what are the effects of climate change that they are keeping in mind when they plant that particular species?
Mr. deMarsh: I should not try to answer that in any detail because people from whom you have already heard can give you a much better technical answer than I can.
The big advantage of hybrid poplar is that it grows so quickly it can be harvested in 25 years. That is an advantage from the point of view of the change of climate which, presumably, will be less in 25 years than in 50 or 60 years, which is the typical age of merchantable white spruce or other trees that we have planted in the past. The other advantage of 25 years is that if you are determined to find private investors to invest money in these plantations, you can begin to show an interesting return on investment more quickly. Even at 25 years, though, it is impossible to show a return that is anywhere close to being sufficient to interest private investors. There will have to be public money, certainly for the first 10 or 15 years, to create an opportunity for a private return, if we can find private investors.
The whole issue of carbon credit trading is another element which changes the equation. It is a source of considerable promise in terms of finding a way to develop a financial formula that will work.
In terms of the technical issues around hybrid poplar, in Eastern Ontario significant experience goes back a number of years. It is difficult to plant. It requires a tremendous amount of care. Serious insect and disease problems have to be looked after during the lifespan of the tree. That is why many woodlot owners are sceptical about it.
It has been suggested that new varieties may be an improvement and our scepticism should be tempered with the possibility that better varieties will be available.
It is a tricky tree. As climate becomes more uncertain, you want to grow things that are easier to grow, not more difficult to grow.
The Chairman: On behalf of the committee, thank you for coming to Ottawa and letting us have the benefit of your views and experience.
The committee adjourned.