Forest industry officials urged Ottawa on Monday to help the sector reinvent itself as a driver of renewable energy and sustainable jobs.

A worker prepares a packing slip for a shipment of softwood lumber at a mill in Richmond, B.C. Ottawa must drive investment in the sector, an industry group says. (Richard Lam/Canadian Press)

"Integrating the production of bio-products and bio-energy into the existing industry is a winner on all fronts," Forest Products Association of Canada president Avrim Lazar said.

In a comprehensive study released Monday, the FPAC worked with 65 experts from fields as diverse as biotechnology, carbon pricing and investment banking to forge a strategy for the embattled sector.

In spite of the bankruptcies and closures that currently plague the sector, the industry is confident that co-ordinated action from government can turn the industry into a driver of 270,000 sustainable jobs and produce energy to power the equivalent of 2.5 million Canadian homes annually.

"We're calling on the government, in the next budget, to recognize the potential of green renewable energy by stimulating the necessary investment in the transformation of the industry," Lazar said.

Among the strategies are the creation of a repayable revolving fund to provide for capital investment and a revised tax structure to keep up with tax credits available in the U.S. and abroad.

The group says a "redeployment" of existing funds can go a long way toward achieving results. "We can do a lot more with less," Lazar said, but added that an additional $250 million annually would pay for itself in terms of job creation and economic output.

The Tembec softwood lumber plant in Senneterre, Que., is shown. The industry employs 270,000 people across the country. (Jacques Boissinot/Canadian Press)

The group says its proposals would take Canada well beyond being merely a "hewer of wood and drawer of water."

An integrated mill — one that produces pulp and paper as well as bio-energy and bio-materials — produces five times as many jobs as a stand-alone operation, the group notes.

"We can now rapidly convert wood fibre into a wide variety of high-value products such as bio-fuels to heat homes or power vehicles," Lazar said.

Speaking to reporters in Ottawa on Monday, Liberal Leader Michael Ignatieff expressed solidarity with the proposal.

"We are very much in favour of new investments because we believe in the future of that industry," Ignatieff said.

The study predicts a bright future for the forestry industry, despite 50,000 job losses and collapses in the demand for lumber and paper.

Lazar said that demand for paper will continue to wane, but most of the industry sees good future demand for lumber, pulp, bio-energy and other new wood products.

"In the U.S. and Europe, governments are investing in the future," he said. "This race to the future is going to be won by the country that invests in the future."