How Canada could try to capitalize on U.S. retreat from technologies of the future

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Amid the suddenly all-encompassing push to build massive new infrastructure projects, largely around resource extraction, Prime Minister Mark Carney is being served a reminder that Canada also has a prime opportunity to capitalize on the United States’ retreat from commercializing technologies of the future.

The Commission on Carbon Competitiveness (C3) – a coalition of prominent policy experts and advocates focused on low-carbon economic growth – is set to release a report Thursday that, drawing off a collection of past domestic and international examples, lays out a detailed proposal for how Ottawa should select and then strategize around a few sectors where Canada has potential to build competitive advantage.

The report, titled The Right Move at the Right Time: A New Canadian Industrial Strategy, is primarily inclined toward clean technologies. C3’s members hail largely from climate-oriented think tanks such as the International Institute for Sustainable Development, the Transition Accelerator, the Canadian Climate Institute and Clean Prosperity.

That makes it particularly timely, since the U.S. House of Representatives just voted to scrap existing subsidies aimed at building up new battery, renewable-energy and other low-carbon sectors, lending Canada what C3 chair Aaron Cosbey called a “once in a generation” opportunity to attract investments that might otherwise have gone south of the border.

But the report’s recommendations could also have broader relevance – to industries ranging from health sciences, to agri-food, to artificial intelligence – when it comes to making this country more innovative and productive, and less of a branch-plant economy.

C3’s fundamental proposition is that Canada needs to embrace a more focused form of industrial policy than it has attempted in decades. It would involve placing bets not just on specific sectors, but on specific technologies within them that Canadian companies could lead on, then systematically removing both supply-side and demand-side obstacles to their growth.

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The report gets rather granular about what form this would take, with a roadmap that draws from examples of successful industrial policy internationally (including Taiwan’s semiconductor dominance, electric-vehicle success in China and South Korea and the modernization of Chile’s fishing industry) and slightly longer ago in Canada (including the initial development of the Alberta oil sands, the canola industry and aerospace).

First, the report says, Mr. Carney’s government should establish a task force of industry leaders and experts to help the government settle on between five and seven opportunities to prioritize, based on existing strengths, market opportunities and other transparent criteria. (It cites batteries, mass biofuels, mass timber and carbon capture among examples of sectors where the task force might identify some component of the supply chain or sub-sector to dominate.)

Then, while the task force remained in place to monitor progress and adjust targets as needed, Ottawa would establish arm’s length bodies for each priority area, to co-ordinate between government and industry on everything from regulatory policy to financing mechanisms to the establishment of markets through domestic procurement policies.

The exact form these bodies would take would vary depending on the sector, C3 suggests, running the gamut from establishing new Crown corporations to relying on existing non-governmental organizations.

Meanwhile, within the government, a central mechanism would be established – through a cabinet committee, the Privy Council Office, or some combination thereof – to co-ordinate implementing supportive policies across departments.

Even with that level of detail, there are some obvious questions about the proposed structures that Mr. Carney would have to work through, such as how to avoid creating excessive new bureaucracy, how to minimize regulatory capture by target sectors and how to establish a geographic mix of target technologies without becoming totally hostage to regional demands.

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But more fundamentally, what the Prime Minister is being asked to consider is whether he is prepared to unabashedly move beyond a national aversion to prescriptive industrial policy that Canada has held since the 1990s, if not earlier, even as other countries have embraced it.

The closest that Canada has come, of late, was probably the five so-called superclusters – essentially non-profits meant to develop regional innovation ecosystems – that were launched with some fanfare under former prime minister Justin Trudeau. But they have since fallen largely off the radar and, with broad targets such as “advanced manufacturing,” were much less prescriptive than what C3 is proposing.

In interviews, contributors to the report were ready to push back on the most likely objection to their recommendations: that government should not be trying to pick winners and losers between technologies and sub-sectors, if not between individual companies.

“The fantasy is that we’re not already picking winners, that we’re not already making failures,” said Bentley Allan, a principal at the Transition Accelerator, a research organization, and an international industrial-policy expert. “We are already doing that, a lot. We’re just not having an honest conversation about it.”

The argument is essentially that Ottawa has just been doing the winner-and-loser picking through technology-agnostic programs such as the Strategic Innovation Fund, which distributed many billions of dollars in grants under Mr. Trudeau. The effect is to “spread the peanut butter too thin,” report author Travis Southin suggested.

“Canada has to realize that it has a certain number of resources and it needs to focus,” added Barbara Zvan, the University Pension Plan Ontario president and chief executive officer and a C3 member.

On that note, an additional contention from all concerned is that the approach they’re putting forward – revolving around sophisticated co-ordination and barrier-removal – could actually be much cheaper than indiscriminately throwing money at whatever companies or industries most successfully lobby for it.

Not that they’re claiming it would be all winners and no losers; inevitably, some bets would pay off and others would fail. The idea is that Ottawa and industry, informed by their intermediary bodies, would then learn from their mistakes and pivot.

Whether that’s a level of risk Mr. Carney would be willing to take on is an open question.

But compared with some of the much bigger bets that his government is currently negotiating toward with the provinces, this particular version of nation-building could be relatively low cost and high reward.