Investing in Canada’s Forest Sector – Expanding Market Opportunities Program and Forest Innovation Program

Investing in Canada’s Forest Sector – Expanding Market Opportunities Program and Forest Innovation Program (Voted)

Start date

March 12, 2009

End date

March 31, 2017

Fiscal year for terms and conditions

Approved in 2008-09, subsequently amended in 2009-10, in 2011-12 and in 2012-13.

Strategic Outcome

1 – Canada’s Natural Resource Sectors are Globally Competitive

Link to department's Program Alignment Architecture

1.1 – Market Access and Diversification and 1.1.2 – Forest Products Market Access and Development; 1.2 – Innovation for New Products and Processes and 1.2.2 – Forest Sector Innovation

Description

Expanding Market Opportunities (EMO) – aims at maintaining and growing international wood product markets, expanding wood use in the North American non-residential and mid-rise construction market, and promoting the strong environmental credentials of Canadian forest products.
Forest Innovation Program (FIP) – aims at supporting the goal of sustainable natural resource development by enhancing the long-term economic opportunities for Canada's forest sector through increased investment in forest innovation.
This transfer payment program does not have any repayable contributions.

Results achieved

Expanding Market Opportunities
EMO exceeded two out of four performance targets. The first target – increasing the value of wood in non-residential construction by 10% over the 2011 base year value of $130.3 million – was significantly exceeded. In 2015-16, the increase was 67.7% over the 2011 base year. The second target relates to a bi-annual survey of stakeholders across North America, Europe and Asia. The survey confirmed that ongoing efforts to brand Canada as a supplier of legal and sustainable forest products are effective, as 64% of stakeholders continue to have a positive perception of Canadian wood products; well over the target of 51%. In addition, EMO supported the development of science-based information to strengthen boreal science knowledge, which also supports the environmental reputation of Canada's forest sector.

In fiscal year 2015-16, offshore market conditions were different from region to region. Consequently, this impacted two EMO targets: the diversification of end markets which is measured using the Herfindahl Index; and, export levels to targeted and emerging offshore markets. The Herfindahl Index measures the diversification of Canada’s wood product exports away from one core market (i.e. the United States) towards a greater number of offshore markets over time. The closer the value is to 0 the greater the diversity of end markets. The Herfindahl Index score rose to 0.556 in 2015 from 0.397 in 2011 (the baseline value), as the recovery of the US economy resulted in this market taking a bigger share of Canadian exports relative to other offshore destinations.

Market growth in targeted offshore markets (China, Japan, Korea and EU 28) was incremental last fiscal year. China, in particular, saw a significant slowdown in GDP growth, declining from 9.5% in 2011 to 6.9% in 2015. In response to our analysis of trends and growth opportunities, market development activities in China are shifting away from promoting utility grade lumber and moving towards higher value wood products, as well as targeted wood construction applications such as infill walls.

Emerging markets (India and the Middle East) are price sensitive which may be contributing to pronounced annual fluctuations in sales. In fiscal year 2015-16, export levels to India and the Middle East did not meet the target of a 10% increase over the 2011 base year value of $99.3 million. However this shortfall is mitigated by the fact that India and the Middle East represent less than 1% of Canada’s world exports of wood products. Even so, these regions show good potential for future growth with sustained market development activities.

Forest Innovation Program
FIP has met one of its two performance targets and exceeded the second target. The first target – endorsement of the FPInnovations research plan for 2015-16 by the organization’s National Research Advisory Committee – has been met. The research plan was endorsed in June 2015. 

The second target – 10 new higher-value Canadian forest products or processes that lead to new technologies produced by March 2018 – has been exceeded. FIP is tracking more than 10 technologies that have been developed. Some examples of these include passive house technology, next generation cross-laminated timber applications, applications for cellulose fibrils and for cellulose nano-crystals, forest operation decision support tools, tree genetic markers for improved wood attributes and LiDAR and analytical tools for enhanced forest inventory.

Comments on variances

In fiscal year 2015-16, EMO provided a $600,000 contribution to market development activities in India, increasing the planned value of transfer payments (operating funds were exchanged for contribution funds for this project). This variance was partially offset by a minor reduction in proponent actual expenditures versus planned spending (less than 1% of overall authority).

Audits completed or planned

An internal audit of EMO is underway in fiscal year 2016-17. A recipient audit of the primary stakeholder receiving FIP funds is planned for fiscal year 2016-17.

Evaluations completed or planned

An evaluation of EMO was completed in fiscal 2015-16 and the final report is presently available. An evaluation of FIP was completed in 2014-15, as part of Forest Sector Innovation sub-program. No further evaluation is currently planned.

Engagement of applicants and recipients

EMO staff regularly engages with funding recipients throughout the year. The Canadian Forest Service management and program managers attend Canadian wood product association events supported by the program such as trade missions, conferences and training seminars. In addition, program officers remain in regular email and phone contact with funding recipients; attend annual general board meetings; and liaise with stakeholders during the annual request for proposals process.

Under the FIP, as FPInnovations is the primary recipient, regular meetings were held between senior FPInnovations and NRCan officials to discuss program strategy and delivery. In addition, all research activities funded under the FIP are vetted through the FPInnovations program advisory committee process, which ensures industrial relevance and alignment of the funded work with industry priorities. FIP R&D activities are also aligned with academic initiatives.