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The Canadian manufacturing industry: Investments and use of energy-related processes or technologies

Energy consumption
Energy-related process or technology use by the manufacturing sector
Energy-intensive industries: are they doing more?
Summary

Sheri Vermette, Environment Accounts and Statistics Division

Energy is essential in all facets of today’s society. However, energy use is one of the primary contributors to environmental degradation and climate change. In Canada, total energy production and consumption accounted for over 80% of its greenhouse gas emissions in 2006.¹ As a result the Government of Canada has committed to reducing the country’s GHG emissions by 20% from 2006 levels by 2020.²

The use of energy-related processes or technologies (Text box: Concepts and definitions) enables businesses to reduce their GHG emissions in one of two ways: by reducing the amount of energy used by improving energy efficiency, or by using ‘cleaner’ energy sources that produce fewer pollutants and GHG emissions for the same amount of energy use.

In 2006, the manufacturing sector accounted for 23% of the energy used in Canada.³ This article will focus on the manufacturing sector’s use of energy-related processes and technologies and related investment.

Within the manufacturing sector the largest investor in energy-related processes and technologies was the paper manufacturing industry, followed closely by the wood products industry. Combined, these two industries accounted for over 40% of the total capital invested by the manufacturing sector in energy-related processes or technologies for 2006.

Energy consumption

Canada is one of the largest energy users in the world. The vast distances, cold climate, energy-intensive industrial base, and relatively low energy prices all contribute to the country’s high energy consumption.⁴

Within the manufacturing sector, the paper manufacturing, primary metals, and petroleum and coal products manufacturing industries were the largest energy consumers. Combined, these three industries accounted for 65% of the total energy used by the manufacturing sector in 2006.⁵

The paper manufacturing industry used more energy than any other industry in the sector, consuming 678,627 terajoules (TJ) of energy in 2006. One thousand terajoules equals roughly the amount of energy required to operate the Montréal subway system for one year. A large portion of the energy used by the paper manufacturing industry is in the pulping process.⁶

However, it is not enough to simply look at the total amount of energy consumed by an industry. There are a number of factors that can influence the amount of energy used by a particular industry, such as its level of economic activity, its structure and how efficiently it uses energy.⁷

The manufacturing sector is composed of a diverse range of industries which can make comparisons difficult. But one way to do so is to look at the “intensity” of energy use.

Energy intensity, for the purpose of this study, is the ratio of the amount of energy used by an industry per million dollars of GDP it produces. Industries in the manufacturing sector have been classified according to their energy intensity in 2006 as follows:

• Energy-intensive industries used over 40 TJ per million dollars of GDP. The petroleum and coal products, paper, and primary metals manufacturing industries are included in this group.
  
  
• Moderately-energy-intensive industries used 10 to 39 TJ per million dollars of GDP. Included in this group are the non-metallic mineral products, chemicals, and wood products manufacturing industries.
  
  
• Non-energy-intensive industries used less than 10 TJ per million dollars of GDP. This group is composed of the food, fabricated metal products, beverage and tobacco products, and transportation equipment industries, as well as the ‘other manufacturing’ category.

The petroleum and coal products manufacturing industry was by far the most energy-intensive industry in the manufacturing sector, consuming on average almost 200 TJ of energy per million dollars of GDP (Chart 1). In 2006, this industry had an energy intensity three times higher than the next most energy-intensive industry, paper manufacturing.

Chart 1 Energy intensity of 'intensive' and 'moderately-intensive' manufacturing industries, 1997 to 2006

In comparison, non-energy-intensive industries used less than 6 TJ per million dollars of GDP in 2006 (Chart 2). To put it another way, these industries each used less than one thirtieth of the energy used by the petroleum and coal products industry for the year.

Chart 2 Energy intensity of 'non-intensive' manufacturing industries, 1997 to 2006

Energy-related process or technology use by the manufacturing sector

In 2006, almost a quarter of establishments in the manufacturing sector used some form of energy-related process or technology (Table 1). The most widely reported were the use of waste energy recovery technologies, energy management or monitoring systems, and the implementation of an energy audit.

Table 1 Distribution of energy-related process or technology use by the manufacturing sector, by industry, 2006

Renewable energy technologies were less likely to be reported by the manufacturing sector. One notable exception was the use of biomass energy technology in both the wood products and paper manufacturing industries. Biomass, in the form of sawdust, bark and other wood wastes, is produced as a by-product during the manufacturing processes used by both these industries, making it a convenient source of alternative fuel.

The manufacturing sector spent close to a billion dollars on energy-related processes or technologies in 2006 (Table 2). Most of this amount was allocated to day to day operations. Businesses in the manufacturing sector that reported high operating expenditures (over $5 million), also reported the use of cogeneration and waste energy recovery technologies.

Table 2 Total operating and capital expenditures on energy-related processes or technologies by the manufacturing sector, by industry, 2006

The capital this sector invested on energy-related processes or technologies represented 1.8% of the total capital spent by manufacturers on machinery and equipment in 2006 (Table 3).

Table 3 Capital expenditures for the manufacturing sector, by industry, 2006

Drivers and obstacles to improving energy efficiency

The adoption of energy-related processes or technologies is one way industries can reduce energy consumption and the resulting GHG emissions. However, these are not the only reasons a business would adopt such practices. High energy costs may also motivate businesses to look for alternative, cheaper sources of energy, or to adopt energy-saving technologies. Some studies have shown that businesses with a history of investing in practices such as using alternative energy sources and reducing waste and emissions tend to perform better then those who do not.⁸

Manufacturers reported that a sufficient return on investment was the most important driver when deciding to adopt a technology to improve their energy efficiency, while the high cost of equipment was the most important obstacle. Overall, a higher percentage of energy-intensive industries reported drivers to improve energy efficiency than moderate or non- energy-intensive industries. Interestingly, the same was true for the obstacles.

Energy-intensive industries: are they doing more?

Overall, 46% of establishments in energy-intensive industries used an energy-related process or technology, compared to just under 20% in non-energy-intensive industries. Energy-intensive industries tended to use several different energy-related processes or technologies. Over 20% of each of these industries used more than two energy-related processes or technologies (Chart 3). In particular, over 12% of the paper manufacturing industry used five or more technologies.

Chart 3 Distribution of establishments in the manufacturing sector using energy-related processes or technologies, 2006

Combined, the petroleum and coal products, paper, and primary metal manufacturing industries accounted for 38% of the total capital invested by the manufacturing sector for energy-related processes or technologies. These industries represent less than 10% of the businesses in the manufacturing sector, and account for approximately 14% of the sector’s GDP.

However, the paper manufacturing industry was the only energy-intensive industry to direct over 2% of its total capital spending to energy-related processes or technologies (Table 4). Less energy-intensive industries, such as wood, chemicals and food manufacturing, directed a larger proportion of their total capital spending for energy-related purposes than both the petroleum and coal products, and the primary metals manufacturing industries.

Table 4 Investments in energy-related processes or technologies by energy intensity and industry, 2006

Petroleum and coal products manufacturing

The energy intensity of the petroleum and coal products manufacturing industry decreased by 0.2 TJ per million dollars GDP from 1997 to 2006 (Chart 1).

Almost 60% of this industry indicated the use of at least one energy-related process or technology in 2006. Between 21% and 36% of businesses in the petroleum and coal products industry reported using waste energy recovery, energy management or monitoring, fuel substitution and the implementation of an energy audit (Table 1).

The petroleum and coal products industry invested $34 million in energy-related processes or technologies in 2006 (Table 2). This amount represents 1.4% of the total capital the industry spent on machinery and equipment for the year. However, reducing energy consumption is not the only competitor for this industry’s environmental investment dollar.

Pollution prevention is also a priority for the petroleum and coal products manufacturing industry. The 2006 SEPE results show that investments in pollution prevention by the petroleum and coal industry totalled $533 million in 2006,⁹ representing 89% of their total overall investment in environmental protection. The industry is required by federal regulations to produce cleaner fuels with lower sulphur and benzene content. In 2006, new restrictions were introduced, setting gradually more restrictive limits on sulphur content of diesel fuel starting in 2007 through to 2012.¹⁰

Paper manufacturing

Between 1997 and 2006, the paper manufacturing industry reduced its energy intensity by 17 TJ per million dollars of GDP (Chart 1). This was mostly achieved through the substitution of biomass for fossil fuels and the use of small hydro-electric facilities.¹¹ This industry reported the highest use of cogeneration technology. It was also one of the few industries to use renewable energy sources, using both biomass and hydroelectric energy technologies (Table 1). For more information on use of renewable fuels by the pulp and paper industry, please see Text box: Pulp and Paper.

The paper manufacturing industry spent a total of $336 million on energy-related processes or technologies; most of this was operating expenditures (Table 2). However, the industry did make the largest capital investment in these technologies accounting for 23% of the capital invested by the manufacturing sector. For every $100 of investment this industry made for machinery or equipment in 2006, almost $6 was made for energy-related processes or technologies (Table 3).

Wood products manufacturing, a moderately intensive industry

In 2006, the wood products manufacturing industry used approximately 11 TJ of energy for every million dollars worth of GDP it produced; a reduction of 3 TJ per million dollars from 1997 (Chart 1). Although it has been classified as a moderately intensive industry, almost 50% of businesses in the wood products manufacturing industry used an energy-related technology (Table 1). This industry was the second largest user in percentage terms of cogeneration technology and the largest user of biomass energy technology. In 2005, 46% of the industry’s energy was from biomass energy.¹²

This industry spent $217 million in 2006 on energy-related processes or technologies, second only to the paper manufacturing industry (Table 2). Paper manufacturers used over five times more energy to produce a million dollars of GDP than wood products manufacturers. Capital investments in energy-related processes or technologies made by the wood products industry accounted for about 5% of its total capital investments in machinery and equipment in 2006.

Like the paper manufacturing industry, the wood products industry converted a potential waste product from their manufacturing process into an alternative fuel source.

Summary

The energy intensity of Canadian manufacturers in 2006 varied greatly within the sector, from a high of almost 200 TJ per million dollars of GDP in the petroleum and coal products manufacturing industry, to a low of 2 TJ per million dollars of GDP in the transportation equipment manufacturing industry. Similarly, investments in energy-related processes and technologies also varied.

Waste energy recovery technologies, energy management or monitoring systems, and the implementation of an energy audit were most widely reported by businesses throughout the manufacturing sector. Technologies related to renewable energy sources were used more by energy-intensive industries but were less commonly used throughout the rest of the manufacturing sector. The one exception was the wood products manufacturing industry. Although a moderately intensive industry, it was the most frequent user of biomass energy technology.

In 2006, the largest investor in energy-related processes and technologies was the paper and manufacturing industry. For every $100 of capital this industry invested in machinery and equipment, almost $6 was for energy-related processes and technologies. The wood products manufacturing industry followed, investing $5 out of every $100 for energy-related processes or technologies. Combined these two industries accounted for over 40% of the total capital invested by the manufacturing sector in these types of activities.

Notes

1. Environment Canada, 2008, Canada’s Greenhouse Gas Emissions: Understanding the Trends, 1990–2006, Catalogue no. En81-4/2006-2E (accessed November 4, 2009).
2. Environment Canada, 2009, A Climate Change Plan for the Purposes of the Kyoto Protocol Implementation Act – May 2009, Gatineau, Quebec (accessed November 4, 2009).
3. Statistics Canada, CANSIM table 128-0009 (accessed July 15, 2009).
4. Environment Canada, 2002, Environmental Signals: Canada’s National Environmental Indicator Series 2003, Catalogue no. En40-755/2002E (accessed April 7, 2009).
5. Statistics Canada, CANSIM table 128-0006 (accessed July 15, 2009).
6. Natural Resources Canada, 2008, Industrial Consumption of Energy (ICE) Survey, Summary Report of Energy Use in the Canadian Manufacturing Sector, 1995-2005, Catalogue no. M144-154/2007E (accessed November 4, 2009).
7. Natural Resources Canada, 2006, Energy Efficiency Trends in Canada 1990 to 2004, Office of Energy Efficiency, Catalogue no. M141-1/2004 (accessed November 4, 2009).
8. Mahler, D., J. Barker, L. Besland, and O. Schulz, 2009, “Green” Winners: The performance of sustainability-focused companies during the financial crisis (accessed April 15, 2009).
9. Statistics Canada, 2008, Environmental Protection Expenditures in the Business Sector 2006, Catalogue. no. 16F0006X.
10. Canadian Environmental.com, 2006, Canadian Environmental Regulation and Compliance News, Vol.17. no 2 (accessed November 4, 2009).
11. Natural Resources Canada, 2007, Canadian Industry Program for Energy Conservation, Annual Report 2007: Seven ideas that can change your world, Catalogue no. M141-3-2006E (accessed November 4, 2009).
12. Natural Resources Canada, 2007.