OTTAWA (Reuters) - Most of Canada’s largest forestry companies announced a groundbreaking deal with environmental groups on Tuesday that will restrict logging in the country’s vast northern forests.

The Alaska Highway is surrounded by boreal forest running north towards Whitehorse, Yukon in this file photo taken June 21, 2007. REUTERS/Andy Clark/Files

The agreement covers 170 million acres (690,000 square km) -- an area nearly twice the size of Germany -- and ends years of battles over logging in Canada’s massive boreal forest, which environmentalists say helps fight global warming by absorbing large amounts of carbon dioxide.

The forestry companies will stop all logging immediately on 75 million acres to protect woodland caribou herds under pressure from development. The two sides will then spend three years working out which restrictions to impose on logging in the remaining 95 million acres.

In return, as the agreement comes into force, the green groups will end international “Do not buy” campaigns against Canadian lumber. The deal took two years to negotiate.

“This is the way everyone hoped the world could work. Instead of fighting and having polarized discussions ... the way of succeeding tomorrow is going to be through constructive good faith engagement,” said Avrim Lazar, chief executive of the Forest Products Association of Canada.

The U.S.-based Pew Environment Group, which brokered the deal, said it was the largest commercial forest conservation agreement ever concluded.

Lazar, saying the forestry industry had to modernize and become greener to thrive and win new markets, described the agreement as a business strategy.

“We know where the future is ... we’re doing this not just because we love the boreal,” he told a news conference.

The deal includes forests in seven of the country’s 10 provinces. A similar agreement was reached four years ago to end a dispute over logging in the rainforest on Canada’s Pacific Coast.

“It really is a truce, after many years of fighting each other ... This is our best and last chance to save woodland caribou in the boreal forest,” said Richard Brooks of Greenpeace Canada.

The boreal forest region, which stretches across much of Canada, consists mostly of coniferous trees such as spruce, fir and pine, as well as large areas of lakes, rivers and wetlands.

In all it covers an area of 1.37 billion acres (5.7 million square km), of which 766 million acres are forested, with remaining regions made up of peat lands and treeless areas.

The deal won praise from the Communications, Energy and Paperworkers Union, whose members have been hit hard by the slump in the forestry industry.

“It is time now to make environmental leadership a value-added advantage for Canadian forest products,” union President Dave Coles said in a statement.

The green groups include Greenpeace, Canopy, the Nature Conservancy, ForestEthics, the David Suzuki Foundation and the Pew Environment Group.

Among the 20 firms involved are: Canfor Corp, Tembec, Tolko Industries, West Fraser Timber, Weyerhaeuser, Mercer International, Kruger Inc, AbitibiBowater and NewPage Corp.