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Canada's forest products industry must move quickly to embrace the so-called "bio-economy" if it is to once again become an engine of growth in the post-recession era, says a new study.

Called "The Future Bio-pathways Project," the study recommends that a key to the recovery of the recession-ravaged forestry business is the integration of bio-products and bio-energy into existing lumber, newsprint and pulp-and-paper operations.

Among the options highlighted by the study - conducted for the Forest Products Association of Canada - is the conversion of wood fibre into a broad variety of high-value-added products such as bio-fuels to heat homes or power vehicles. Another green technology promoted in the study is the use of bio-chemicals to make cosmetics, solvents, food additives and renewable plastics.

"The results are clear - integrating the production of bio-products and bio-energy into the existing industry is a winner on all fronts," FPAC president and chief executive officer Avrim Lazar said in a statement.

The study, which involved more than 65 top Canadian experts in several different fields, urges Ottawa to step up efforts to make the recommended changes a reality.

Canada must develop a domestic clean-energy action plan that will help the country become a clean-energy economy and advance Canadian technology, says the study. Ottawa should also create tax incentives, such as a capital investment tax credit similar to the U.S. approach, says the study.

The forest products industry has been devastated by the impact of the global recession, as well as a dramatic drop in demand for newsprint, and lumber for the U.S. housing sector.

The Conference Board of Canada recently forecast that employment in the forestry sector in Canada will fall to 77,000 jobs this year from 82,000 in 2009.

Forestry companies have been slashing capacity in the face of the steep decline in demand. Dozens of mills have been shut.

Cumulative losses over the past eight years are estimated to be in the $4-billion range.

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