Mercer Peace River wins C$20m Canada grant for mill upgrade
Mercer International's Peace River pulp mill in northern Alberta has secured C$20 million (approximately US$14 million) in federal support from the Government of Canada, channelled through Prairies Economic Development Canada (PrairiesCan) under the Regional Tariff Response Initiative. The funding is structured as a C$1 million non-repayable grant and a C$19 million repayable contribution, with repayment starting no earlier than 2031.
The capital is earmarked for a broader transformation plan at Mercer Peace River Pulp (MPR), covering productivity improvements, mill modernisation and preparatory work to expand bio-energy production and carbon capture and storage (CCS). The release notes a carbon dioxide capture demonstration unit is already operating at the site, though Mercer provided no capacity figures, no projected CCS tonnage, and no completion timeline for the broader upgrade programme.
The deal
The announcement was made in person at the mill by Eleanor Olszewski, Canada's Minister of Emergency Management and the minister responsible for PrairiesCan. Her statement framed the funding explicitly as a response to US-Canada trade tensions, describing the support as standing up for "workers, businesses and communities under pressure." That political framing places the grant in the context of ongoing tariff disputes between Ottawa and Washington, which have applied pressure to Canadian goods-exporting sectors including forest products.
Juan Carlos Bueno, Mercer's president and chief executive, said the investment "supports improvements to the mill's productivity and competitiveness" and reflects MPR's role in the regional forest products economy. The mill has operated in northern Alberta for more than 35 years, according to the company.
Market context
Pulp mills sit at an interesting intersection in the bioeconomy. Residual fibre from sawmilling, including chips and bark, feeds both pulp production and on-site energy generation, making integrated forest-products sites credible candidates for bioenergy with carbon capture and storage (BECCS). If a mill is already generating heat and power from biomass, retrofitting CCS onto that flue gas stream can produce a carbon-negative energy flow, which is increasingly attractive under voluntary and compliance carbon market pricing.
The broader policy environment for Canadian clean-industrial investment has been shaped by federal programmes targeting trade-exposed industries, and the Regional Tariff Response Initiative is explicitly designed to support competitiveness in sectors facing cross-border tariff pressure. Several Canadian pulp and paper operators have announced bio-energy and low-carbon transition investments over the past two years, reflecting both federal incentive design and pressure from corporate buyers seeking lower-carbon fibre inputs.
Mercer itself reports 230,000 metric tonnes of annual biofuel production capacity across its global operations, suggesting the company has an established internal rationale for expanding renewable energy output at its mill sites. However, the release does not quantify the incremental bio-energy capacity this grant will unlock, nor does it name any offtake counterparty for CCS credits or low-carbon energy output. Those details will be the key milestones for investors tracking whether the Peace River site becomes a genuine carbon-removal asset or remains primarily a productivity play.