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Canada Needs to Get Tough on Wood Pellet Exports

Ottawa should learn from the UK’s energy mistakes and change its approach to the biomass industry.

Bertie Harrison-Broninski and Richard Robertson 29 Apr 2024Policy Options

Bertie Harrison-Broninski is senior editor of Land and Climate Review. Richard Robertson is a forest campaigner at Stand.earth. This article was originally published in Policy Options.

Two years ago, BBC journalists visited Canada to investigate the wood pellet industry. Their findings, broadcast in the documentary Drax: The Green Energy Scandal Exposed, sent shockwaves through climate politics in the U.K.

Both the BBC and the CBC’s Fifth Estate — in a separate documentary called The Big Burn — reported that energy company Drax Power was shipping wood from rare, previously unlogged forests in British Columbia across the North Atlantic to be burned as fuel for the United Kingdom’s largest electric power station.

At the same time, the company received hundreds of millions of pounds a year in U.K. green subsidies.

In February 2024, the BBC published a followup story highlighting claims Drax had continued burning wood from these ecologically important forests in 2023. The reporters documented the use of tens of thousands of tonnes sourced from forests which are designated by the B.C. government as critical areas where logging should be avoided.

Drax did not dispute these findings or that it is still sourcing wood from old-growth forests, but it claimed to be undertaking work to stop sourcing wood from official “old-growth priority deferral areas.”

Both Drax and the U.K. energy ministry have faced regulatory audits and investigations, as well as parliamentary scrutiny, prompting renewed debate about whether to continue the subsidies.

However, it is primarily up to Canadian authorities, not foreign nations, to investigate and regulate the country’s biomass industry.

Ottawa should exclude the utility-scale wood pellet industry from federal funding of forestry programs because much of it is already subsidized by other countries. The B.C. government must toughen environmental law enforcement, particularly in regard to the rarest, or “old-growth,” forests.

Where to count emissions?

Drax Power began burning wood instead of coal in 2012 and fully phased out fossil fuels last year. The power plant remains the U.K.’s largest source of carbon dioxide pollution, but controversial international rules mean that if the wood is sourced from abroad, no emissions need to be counted in Britain.

The British government officially considers Drax’s power carbon neutral, although hundreds of scientists recently argued that there is an urgent need to stop burning forest wood for energy because it undermines international climate and nature targets. Instead, clean energy such as wind and solar should be used, they say.

Even Drax’s own scientific advisers recommended that the company stop using the term “carbon neutral.”

British politicians have become increasingly concerned that their renewable energy subsidies are being spent on greenwashing. An investigation by the U.K.’s National Audit Office recently concluded that the government cannot demonstrate that its biomass supply chains are sustainable.

A separate investigation by the state energy regulator into Drax’s compliance with the subsidy scheme is ongoing.

Parliamentarians from the Conservative, Labour, Green, Scottish National and Liberal Democrat parties have all raised concerns about publicly funding Drax’s supply chain.

This includes two of the country’s last three energy ministers. Kwasi Kwarteng was recorded admitting that Drax’s supply chain “is not sustainable” and “doesn’t make any sense,” while Jacob Rees-Mogg went further, publicly describing Drax’s “ridiculous” carbon accounting as “barmy in-Wonderland stuff.”

The ball is in Canada’s court

Despite this, British authorities do not have the resources to effectively monitor biomass sourcing in foreign countries, as the National Audit Office has made clear.

Instead, the government relies on forestry laws in source countries and third-party certification schemes to check sustainability compliance.

Source countries such as Canada profit from industrial logging, leading to concerns about conflicts of interest with regulatory enforcement. Certification schemes are based on risk assessment rather than verifying that sustainable wood is used and do not cover all forests where biomass fuel is sourced.

Drax is currently waiting on the U.K. government for two stalled funding decisions — one about renewing its bioenergy subsidy when its funding contract expires in 2027 and a second about adding carbon capture technology to the plant.

Right now, it’s a lose-lose decision for the U.K. government — continue funding a controversial and expensive power plant or lose a large source of supposedly carbon-neutral power.

Academics and environmental organizations, including in Canada, have written to British ministers with concerns about continuing subsidies.

This may not be enough. As long as these certifiers and Canadian authorities agree that Drax’s forest practices are sustainable and legally compliant, criticism from the British parliament and independent experts may not justify the U.K. government rethinking a major part of its decarbonization strategy.

Public funding subsidizes Drax’s empire

Public funding from both countries has enabled Drax to build a sizable wood pellet empire in Canada.

In just three years, the company has bought 66 per cent of B.C.’s market, as well as two pellet mills in Alberta, according to an analysis by the Canadian Centre for Policy Alternatives.

It not only exports more than a million tonnes of wood from Canada to the U.K. each year to burn, but it also ships pellets to Japan and South Korea, helping to make foreign power stations an increasingly large part of Canada’s forestry sector.

Canadian regulators do not seem to recognize the weight of this responsibility.

Last year, Land and Climate Review — a publication covering investigations, academic news and policy analysis in the climate sector — alerted Environment and Climate Change Canada to the fact a Drax plant in Alberta had ignored requirements under federal law to report pollution data.

ECCC replied that it would contact Drax and noted that companies failing to report this data face penalties of up to $1 million.

This made headlines in the U.K., but we have no update from ECCC on whether it has made any findings or decisions.

Many pellet mills in B.C. have a history of repeated rule-breaking, but fines have often been waived or reduced. Drax Group has faced more than £30 million (more than C$51 million) in fines over the last decade in the U.K., along with several million dollars in the United States.

The few fines Drax has received in Canada have never exceeded five figures — sums of little significance to a company that earned more than £1.2 billion (C$2 billion) last year.

Silence from Canadian authorities

While British authorities investigate biomass supply chains and Drax’s compliance, Canadian authorities never even replied to Canadian experts and union leaders who raised serious concerns about Drax’s growing monopoly in the pellet industry.

Canada’s problems go beyond one company. Current logging practices risk devastating ecosystem collapse.

A recent report by leading Canadian NGOs offered dire warnings: key animal populations face existential threats, areas are not being regenerated after logging, and Natural Resources Canada uses “misleading” carbon accounting. The report identifies the wood pellet industry as a “dominant” driver of forest degradation.

Canada could help the U.K., as well as learn from its mistakes, but instead appears poised to make matters worse. The federal government’s 2023 fall economic statement lauded biomass as “clean” electricity, despite it emitting more CO2 at the smokestack than coal. Ottawa plans to introduce legislation this year to expand clean energy tax credits to include biomass power.

If Canadian policymakers want to avoid the political mess that the U.K. government now faces over biomass, they should heed the warnings from Canadian environmental organizations. While U.K. investigations are ongoing, it would be shortsighted for Canada to commit to industrial-scale biomass in the long term via new subsidies in the federal budget.

Excluding big biomass companies from the forest industry transformation program, the forest innovation program and the clean fuels fund could free up sorely needed money for Indigenous-led stewardship, restoration projects, and wind and solar power.

At the provincial level, authorities should toughen environmental law enforcement. B.C. must not enter another election cycle without passing the protections for old-growth forests that were promised in 2020.

More than 30,000 hectares of the most at-risk old-growth forests have been logged since then, according to Forest Eye, a satellite monitoring tool developed by Stand.earth, an environmental advocacy group.

Averting a crisis in B.C.

Protecting these old-growth forests would offer reassurance to authorities abroad and ensure that Canadian forestry is environmentally and financially sustainable. Experts have already warned that without better regulation, the B.C. forestry sector is headed toward a financial crisis.

Canadian policymakers will influence the direction of the entire biomass industry this year, along with its place in climate planning, knowingly or not. If they take their responsibility for climate change seriously, they should tread cautiously, while working with experts and Indigenous nations.

Politicians may feel their hands are tied, but inertia and industry spin make a loose knot. There are many options for clean power, carbon removal and forestry jobs if people take the time to listen.

The scale of action needed to address the crises we are facing — ranging from mitigating the impacts of climate change and industrial forestry, which have contributed to larger more intense fires and floods, to ensuring a stable, abundant future for forest communities and workers — requires that Canada reject short-lived greenwashing schemes.

Instead, it should take meaningful action to support an economy that will align with a climate-safe future.  [Tyee]

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