Risks and Opportunities
We recognize climate change poses both potential risks and opportunities, and we have strategies in place to address these
challenges and capture future opportunities. We closely monitor developments in the area of carbon markets and are developing
our capability to assess the opportunities and risks of participating in those markets in the future. Given our commitment
to reduce greenhouse gas emissions 40 percent by 2020 relative to our 2000 emissions, we anticipate we will be well positioned
to respond to and comply with future governmental requirements to reduce emissions.
Although some of the carbon sequestered in our forests or products may be eligible as carbon credits under future regulation,
they should not be considered so at this time. We have not yet engaged in any forest or wood product carbon offset projects.
In 2011, we generated about 168,900 Emission Performance Credits in Alberta after our Grande Prairie cellulose fibers mill
surpassed its legislated greenhouse gas reduction requirements.
Our operations are largely based in countries that have yet to implement mandatory programs for reducing greenhouse gases.
But in all cases, public policy is moving toward adopting a mandatory approach to address the challenges of climate change
through programs that will likely require the reduction of greenhouse gas emissions. We have designed our climate change
strategy to meet likely future regulatory obligations. We recognize, however, that there are other risks, such as physical
and cultural, that may be related to climate change.
ADAPTABILITY OF FOREST OPERATIONS
Severe weather or other natural events capable of affecting the company's assets—standing timber and manufacturing
facilities—have long been at the focus of our business risk management practices. We manage our timberlands for a
variety of risks, including losses from storm blow-down, pest infestation, fire and drought. We locate our forestlands in
geographies that experience manageable incidence rates of storms, drought and fire. We use regionally adapted sustainable
forest management practices to reduce the effects of drought on regeneration, and we use thinning to reduce the potential
effects of drought and insect attack. We also plant our forestlands with tree species and varieties that are best able to
withstand the regional extremes in climate that can occur over the multi-decade growth period for forests.
We continue to build on more than five decades of long-term growth and yield research to understand growth trends over time
and their relationship to local and regional climate. This information forms a basis for adaptive management planning tools
to address possible shifts in our growing environment. We have invested in ongoing monitoring of our plantations that can
provide an early indication of change in adaptation and reforestation success. Our bio-mathematical models of tree growth
in response to growing environment, climate, and cultural practices enable us to assess possible vulnerabilities to shifts
in climate that may affect our forests.
We regularly update our forest timber inventories, growth projections, harvest schedules and planting activities to account
for potential and actual annual losses from extreme weather. Logging and replanting schedules are also adjusted to account
for weather-induced conditions that could delay either activity. In making these adjustments, we are able to draw on more
than 100 years of silvicultural research and experience, as well as the most up-to-date statistical methods to quantify
these risks by region.
ENERGY SECURITY
Our manufacturing operations utilize biomass to supply approximately 77% of their energy needs, providing a secure and sustainable
source of energy. Additionally, some of our cellulose fiber mills are able to generate excess renewable power and occasionally
sell renewable energy to the grid.
