Canadian government gives paper industry green incentive

The Canadian government is buoying up the ailing pulp and paper sector by earmarking Can$1bn (£529m) from its green stimulus package for those companies making environmental improvements.

The Federal Pulp and Paper Green Transformation Programme will award the money this year. To qualify for the funding, companies working in the paper industry must undertake projects such as upgrading co-generation units, improving the energy efficiency of recovery boilers and producing ethanol from forest biomass.

Rewards to companies will be quantified by the amount of black liquor produced by their mills. This substance is a byproduct of paper production, and can be used as a form of fuel. Companies stand to receive 16 cents per litre for the liquor they produce.

The move attracted praise from industry groups. The Forest Products Association of Canada said that it would facilitate much-needed capital improvements.

"This will save jobs and help us maintain our edge as the 'greenest' suppliers of pulp in the world," the Association said. "Canadian pulp and paper mills have already dramatically reduced fossil fuel use and in a precedent-setting effort, have succeeded in ensuring 60 per cent of their energy supply is from renewable fuels."

The financial incentives will come none too soon for an industry that has found itself on the ropes. The sector, which employs 250,000 people across the country, is deteriorating faster than expected due to the broader economic crisis.

One interpretation of the Canadian government's move is that it counters an existing US subsidy for black liquor production, which is making the Canadian sector less competitive.