My Clean Break column this week reports on a new study out of the Richard Ivey School of Business, which takes a look at the state of the bioproducts industry in Canada. The researchers behind the report analyzed Statistics Canada data between 2003 and 2009 and what they found was a disturbing negative trend — the industry is shrinking, not growing, at a time when bioproducts are desperately needed as part of a strategy to reduce our dependence on fossil fuels; also at a time when the United States and other regions are showing a strong commitment to bioproducts and are enjoying the associated growth.
What’s going on? Well, for one the bulk of bioproducts made in Canada are first-generation biofuels, such as corn ethanol, or other forms of bioenergy. We don’t give enough support to biochemistry research and product development, or higher value non-fuel markets such as alternative plastics, which in my view are much more exportable down the road. We are throwing money at corn ethanol and not doing enough to support and help commercialize next-generation biofuels produced from algae or cellulosic conversion technologies.
I’m pasting my column below, though before you read there are some caveats here. The data analyzed doesn’t cover the past two years, so there may be some positive signs not accounted for in this report. Also, Ontario appears to be doing much better than the rest of Canada, though this is not to suggest there’s enough being done in Ontario. Anyway, I think this report is an important wake-up call for Canada. Sure, we’re blessed with forestry and agricultural resources, but are we satisfied just growing and selling commodities? Are we going to continue down the path of selling our raw natural resources to other countries, only to purchase it all back in the form of higher-value products? Once again, Canada lacks a vision and has no real plan to lead the world on bioproduct development, even though it has the capacity to do so. Click below to read the full column:
Canada — and Ontario specifically — has a number of innovative companies that are turning agricultural and forestry biomass into new products, and in doing so reducing our dependence on petroleum.
Ottawa-based Ensyn has developed a system that converts wood waste into a form of renewable oil used to make transportation fuels and food products. GreenCore Composites of Toronto creates “biocomposite” materials out of wood residue and agricultural fibres, such as hemp and flax, to make everything from automotive parts to patio furniture.
GreenField Ethanol of Toronto has grown to become the largest independent corn ethanol producer in the country and leading developer of cellulosic systems that make ethanol from agricultural and wood waste. California firm Rentech, meanwhile, has chosen Ontario to open a new plant that will turn forest residue into green jet fuel.
The list goes on. Mikro-Tek of Timmons can make trees grow faster, and therefore store more carbon, by inoculating the roots of seedlings with naturally occurring fungi. EcoSynthetix of Burlington makes a “biolatex” product out of corn and potatoes that is a direct replacement for oil-based latex, such as plastic coatings used on consumer product packaging.
These companies are all part of an emerging sector with huge potential, given Canada’s immense natural resources. Unfortunately, the sector is shrinking, not growing, and has been for several years.
It’s a worrisome trend against a backdrop of global growth, one that a trio of researcher led by David Sparling, chair of agri-food innovation and regulation at the Richard Ivey School of Business, highlighted in a recent report titled Not Enough Green in Canada’s Bioproduct Industry.
Taking data from Statistics Canada collected between 2003 and 2009, Sparling and colleagues found that the number of companies in the sector dropped to 208 from 239, revenues from bioproducts fell by more than 60 per cent, export revenues plunged, and R&D spending dropped by nearly half.
“The significant declines in bioproduct revenue, exports and R&D present a disconcerting counter-point to the general perception that Canada is moving rapidly toward a new bioeconomy,” according to the report.
It gets worse. In 2003 the sector employed nearly 8,000 people. Six years later that number dropped to near 3,000 workers. Firms in the sector were also starved of capital, raising barely 60 per cent of what they needed to execute on growth strategies.
So something is clearly wrong. “The survey results to 2009 can only be described as disappointing and suggest that somehow Canada is missing its potential in bioproducts,” Sparling and colleagues wrote.
They pointed out that the bulk of Canadian activity – slightly more than two-thirds – came from ethanol production. This dependence on a single product suggests we are neglecting the huge global potential of the bio-based chemical market.
“The current estimate of worldwide market potential for these chemicals is $164 billion (U.S.),” they wrote. “Yet, as the global industry begins to take shape, making strategic investments in technologies, companies and locations, the landscape in Canada remains stagnant.”
One possible reason is that we have failed to create market demand within our own borders, even with respect to next-generation biofuels – that is, the stuff not made from corn.
This week, for example, it was reported that the U.S. Department of Energy and Department of Agriculture, in partnership with the U.S. Navy, would invest half a billion dollars over the next three years to speed up production of biofuels made from non-food inputs, such as algae.
But this deal is more than just stimulating supply. As part of the deal, the Navy would be the customer. The White House is basically saying “Build it and we will come; make it and we will buy it.”
Canada has made no significant efforts to stimulate such demand. Our own armed forces, potentially one of the largest buyers of Canadian biofuels, are missing in action. So, too, is the federal government when it comes generally to bioproducts.
As Sparling concluded, Canada has failed to turn its natural advantages into a successful industry because it lacks a vision and a plan. “This lack of vision leaves Canada vulnerable to others who can move quickly to seize its natural resources and turn them into value-added commodities and products that Canadians will ultimately buy as foreign-made good.”
There is a silver lining, however. Ontario isn’t doing as badly as the rest of the country. The number of firms producing bioproducts has actually grown, and Ontario firms continue to increase patent filings, creating a base of intellectual property from which to exploit.
It’s something to build on.
Tyler Hamilton, author of Mad Like Tesla, writes weekly about green energy and clean technologies.