FPAC Presentation to: Greening Industry Network Conference Waterloo, Ontario June 16, 2007

Presentation Overview 1)Industry Background 2)The Forest Industry. Climate change and Sustainability 3)Capital Investment: The Driver of Competitive and Sustainable Renewal 4) Enabling Renewal: The Role of Public Policy

Shipments of $88 billion in 2006 Source of over 820, 000 jobs - 320,000 direct Over 300 forestry dependent communities High productivity, high wage sector Leading source of business and economic opportunities for Canada’s Aboriginal peoples Canada’s Forest Industry – An Overview

Source: FAO February 2007 The Leading Exporter of Forest Products

Source: StatsCan March 2007 One of Canada’s Leading Industrial Sectors

Source: StatsCan April 2007 Key Sector in Each Region of Canada

Presentation Overview 1)Industry Background 2)The Forest Industry. Climate Change and Sustainability 3)Capital Investment: The Driver of Competitive and Sustainable Renewal 4) Enabling Renewal: The Role of Public Policy

The wealth and prosperity generated by the industry almost entirely dependent on the ecosystem. Significant risks and implications associated with a changing climate: - Insect Infestations: Mountain Pine Beetle - Fires - Forest Management Canada’s Forest Sector and a Changing Climate

Climate Change Impacts & Adaptation: A Conspiracy of Silence? Changing practices today to minimize risks and take advantage of opportunities: -Insect disturbances: can we anticipate the next epidemic? -Forest Fires: How a changing climate will impact on their frequency, location and severity -Forest Management: Impacts at the stand level of a changing climate on growth, yield and other variables Need a climate change adaptation effort proportional to the magnitude of the challenge Critical Impacts and Adaptation Issues for Canada’s Forest Sector

Industry takes pride in its record both of leadership in reducing emissions and proactive collaboration with government and other stakeholders: -Since 1990, Canada’s pulp & paper sector has reduced emissions 44% while increasing production volume 20% -In November, 2003 the forest industry became the first to sign an MOU with the Government of Canada on climate change Canada’s Forest Industry and GHG Emissions Mitigation

Pulp & paper sector largest industrial energy user in Canada - 24% of Canadian total 60% of total self-generated from renewable sources – about 1700MW of installed biomass cogeneration capacity Potential to become net source of green power by 2020 through reinvestment & technological innovation Canada’s Forest Industry and Bio-Energy Climate Change

Can Superior Sustainability Performance Confer Competitive Advantage

Presentation Overview 1)Industry Background 2)The Forest Industry. Climate Change and Sustainability 3)Capital Investment: The Driver of Competitive and Sustainable Renewal 4) Enabling Renewal: The Role of Public Policy

Source: Statscan April 2007 Forest Industry an Major Source of Private Sector Innovation in the Canadian Economy

Source: PwC, CIBC World Markets, April 2007 Globally Canada’s Forest Products Companies are not as profitable as others

Source: StatsCan Jan 2007 The Forest Products Industry is Making Significant Investments

Much of Canada’s Production Capacity is Older and Less Efficient Than That of Leading Competitors Source: Jaako Pöyry, March 2007

Presentation Overview 1)Industry Background 2)The Forest Industry Climate Change and Sustainability 3)Capital Investment: The Driver of Competitive and Sustainable Renewal 4) Enabling Renewal: The Role of Public Policy

Attracting Capital Investment Ultimately the Responsibility of the Industry Itself But Public Policy Plays a Critical role in Shaping the Investment Climate - Government determines the slope of the playing field Renewal through Reinvestment

Source: CD Howe, OECD 2006 Canada’s tax regime discourages manufacturing investment

A robust emissions pricing regime, with appropriate recognition for early actors Market – based renewable energy incentives can contribute to the solution but have potential for unintended consequences Strengthened Public –Private Partnerships in Support of the development of Breakthrough green technologies Greater commitment of resources and policy focus to impacts & adaptation issues Priorities for Addressing Climate Change in a Pro- Competitive Manner

Can we compete? - Yes! We have done it in the past. The key is shifting our expectations to reflect the rigours of the new global market place If we shift- quickly– we can do it again Conclusion