What could Canada’s industrial strategy for de-carbonization look like? A team of researchers has laid out their plan

In the 1970s, the Alberta government under Peter Lougheed set up the Alberta Oil Sands Technology and Research Authority (AOSTRA). It was a crown corporation with the very specific purpose of developing technologies to make the extraction of oil sands deposits economically viable. It co-financed R&D projects and ran demonstration projects with industry partners. And they succeeded in their efforts—AOSTRA initiatives included steam-assisted gravity drainage and many other technologies related to extracting crude oil from tar sands.

Today, Bentley Allan, a research fellow at the Transition Accelerator, argues that Canada needs the same kind of public-private partnerships and focused industrial strategy to take advantage of the opportunities of a net-zero world.

He points to other examples of government action to support pipelines, such as the creation of the Major Projects Management Office that tracks milestones for resource projects. "We clearly have an industrial strategy to support the traditional natural resource sectors," said Allan.

For the transition to a net-zero economy, however, he argues that while investments through the Strategic Innovation Fund (SIF) and the Net-Zero Accelerator are welcome, but they are passive instruments that wait for applications to arrive. It's a bottom-up industrial strategy that is often spread too thin, he says.

"We don't give anybody enough to really become a scalable, homegrown, Canadian company," he said.

Allan at the Transition Accelerator, Derek Eaton at the Smart Prosperity Institute and a team of other researchers are pushing for a stronger government approach in the report Canada's Future in Net-Zero World, which lays out seven areas where Canada has opportunities in a net-zero economy. It was a collaboration between the Transition Accelerator, the Smart Prosperity Institute and the Pacific Institute for Climate Solutions.

The team took all of the technologies in a dataset from the International Energy Agency (IEA) and winnowed them down based on where Canada had capacity to contribute, and then conducted an expert survey. To get the final list, they evaluated whether Canada had natural resource advantage, whether Canada had an innovation advantage, and whether there was large downstream market potential.

Their list of priority opportunities is:

• Medium- and heavy-duty vehicles
• Alternative proteins
• Green aluminum
• Mass timber
• Green chemistry
• Hydrogen
• Carbon capture, utilization, and storage

The idea was to construct a list of areas that could theoretically be weaved together into a coherent national strategy, according to Allan. The clear roles for government in building these supply chains are setting clear priorities and targets, using public finances to develop technology, and coordinating supply chains, the report says.

Current EV strategy focuses on foreign investment

Allan said that medium- and heavy-duty vehicles is the only one of the areas where the government has made real progress.

Francois-Philippe Champagne, for example, recently announced that BASF SE, a German company, would build a battery materials facility in Canada that will be the "first pillar" of the battery ecosystem. And General Motors and South Korea's POSCO Chemical have also announced that they are building a $400-million plant in Quebec to produce battery materials.

"Champagne is clearly out there building an electric vehicle supply chain," he said. "But again, what are we doing? We're providing public finance for foreign companies, BASF and POSCO, to set up facilities."

That makes the approach a "foreign direct investment-led strategy" — and that only works if Canada uses these investments to strengthen its own electric vehicle supply chain, he added.

Allan admits that there are political challenges but argues that Canada can learn from the European Union in how to deal with federal and provincial fragmentation. The EU has helped to resolve coordination challenges with an organization called EIT InnoEnergy, a large private-public partnership that connects with national infrastructure banks but can also go deep into sectors because it has domain expertise, he said.

"In order to innovate over energy transition, we need institutional statecraft," he said. "The key is that there's an external public-private partnership that can help to formulate the strategy and vet the strategy with industry."

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