Prime Minister Mark Carney is rightly searching for big new ideas—nation-building opportunities to ensure Canadian prosperity in the face of American threats to our economy and sovereignty.
But in the rush to identify nation-building projects, the government’s renewed commitment to industrial strategy is being forgotten. The wish list that’s emerging is an assembly of predictable, traditional infrastructure projects submitted by the premiers, which mostly include expansions to shipping routes, new ports, and more oil and gas pipelines.
Notably missing are any opportunities in transformative new sectors and technologies—projects that require a focused, all-of-government push in partnership with innovators and entrepreneurs to see the light of day, but which come with huge and lasting payback if they succeed. A recent report from the Commission on Carbon Competitiveness and The Transition Accelerator argues that such support must be part of this country’s new approach to industrial policy.
The standard response to such advice is that governments are terrible at picking winners—that industrial policy is a fool’s pursuit. But history shows otherwise. There are plenty of success stories from abroad (EVs in China, salmon farming in Chile, semiconductors in Taiwan) and from our own past (satellite technology, canola) to show that industrial policy done right can lead to big results.
Our report surveys these often under-appreciated cases. Even the technology behind this country’s oil sands—which, while environmentally problematic, have contributed hundreds of billions of dollars to our economy—was only developed after more than a decade of persistent support by Alberta’s then-premier Peter Lougheed who committed almost $2-billion (in today’s dollars) to R&D and had to fight skeptical opposition from conventional oil producers.
With similar foresight and determination, Canada could unlock the enduring prosperity behind the next wave of energy innovation, but this time we could our throw support behind technologies and sectors that actually improve the environment, fulfilling our goal to be a clean energy superpower.
Even one or two successes would make the costs of the inevitable failures pale in comparison. Our resources and expertise position us to be a leading exporter of new goods and services, with credible potential to meet increasing global demand for low-carbon iron and steel (made from our abundant high-grade iron ore and renewable energy), carbon fibre (made from our unique bitumen reserves), or geothermal energy (derived from our drilling expertise in the oil patch). The market for bitumen turned into carbon fibre, for example, is estimated at multiple times the value of the revenues we now get from selling that product to be combusted.
These sorts of opportunities are already being actively pursued by other governments, including in the European Union, China and—until recently—the United States. In fact, the recent unfortunate retreat by the U.S. administration from supporting climate-related technologies opens a wide door of opportunity for other countries to step in.
One of the lessons from the case studies, of course, is that successful industrial policy is not easy. Drawing from those cases, our recommendations for addressing the challenges include three key steps: 1) choose a small number of sectors/technologies for long-term commitment at the highest levels of government; 2) create independent implementing bodies that work closely with the private sector; and 3) employ a wide variety of supporting measures that go well beyond R&D to include cooperative science, regulatory reform, support for demonstration projects, support via government procurement, export promotion, and other policies.
Importantly, smart industrial policy also requires the ability to accept inevitable failures. Some avenues will be dead ends, so it’s important to have objective measures of success, and quick off-ramps for support where they’re not met. Bureaucrats, politicians and the general public must be able to accept a few stumbles on the path toward progress, rather than assuming it’s only embarrassing evidence of incompetence.
Our recommendations do not require a substantial overhaul of this nation’s government machinery, nor do they necessarily involve massive new spending. In large part they can be achieved simply by better coordinating and focusing the institutions and resources that already exist. Canada—like every other major economy world-wide—is already engaged in industrial policy through institutions like the Strategic Investment Fund and the Canada Growth Fund. While these are critically important, they are too passive, not strategic enough in their support. Those same resources, focused on specific missions, could have payoffs that ensure prosperity for decades to come. That would be real nation building.
Aaron Cosbey is a senior associate with the International Institute for Sustainable Development. He is also chair of the Commission on Carbon Competitiveness.
The Hill Times