This chapter focuses on green innovation in Canada’s rural areas. It starts by analysing the current climate implications across different Canadian geographies and then investigates if the existing business support ecosystem for green innovation sufficiently addresses rural regions. It identifies potential gaps for support and barriers to enhance green innovation. The chapter then proposes a set of different policy actions that can enhance green innovation in rural Canada, including clear market signals, clear definitions of and work towards rural opportunities, better policy co‑ordination, green support streamlined into general programmes and the need for more granular data.
Enhancing Rural Innovation in Canada
OECD Rural Studies
4. Green innovation in rural Canada
Abstract
Key messages
Rural regions in Canada are pivotal to the fight against climate change. Contrary to most OECD countries, in Canada, rural remote regions contribute more to production-based greenhouse gas (GHG) emissions in total than any other regional type. The same is true for estimates of per capita emissions. Canadian regions are not in line with the United Nations (UN) goal of reducing the per capita carbon footprint to around 2 to 2.5 tonnes of carbon dioxide (CO2) by 2030; most large regions (TL2) are also above the OECD average of 11.5 tonnes of CO2.
Emissions are highly concentrated within provinces and territories, with some small regions (TL3) emitting several times above the provincial mean. This is in part because of Canada’s industrial structure, which includes energy, heavy industry and transport components. This suggests that targeted actions to reduce emissions in small regions with specific sectors can have significant mitigation impacts but will also require substantive transition action.
The most remote regions in Canada’s arctic and coastal areas are particularly vulnerable to climate change. Some are warming at more than double the global rate. These places, in particular, are in need of quick, adaptive actions, including the rising risk of early thawing of permafrost that will cause arctic communities to face relocation, looking for new transport solutions, managing health risks and adapting their economies.
Canada’s rural places have a range of assets and opportunities that are underutilised in addressing climate challenges and where green innovation can play an important role in activating them. These include the utilisation and generation of renewable energy, production and application of emissions-free vehicles, carbon capture and carbon sequestration, including payments for ecosystem services, green hydrogen generation and more general applications of the bio- and circular economy and nature-based solutions.
Green innovation (defined as innovations that benefit the environment through product, service, process or business innovation) will not be sufficient to solve all of Canada’s climate challenges, yet it is necessary to enable the transition to a climate-friendly economy and address adaptation challenges. Green innovation is also a source of competitive advantage in the fast-growing environmental goods and services industry. Still, policy intervention for green innovation is needed because market mechanisms do not allow for enough green innovation.
Canada’s Indigenous peoples are essential to realising green innovation in rural regions. Not only are they more concentrated in rural places compared to Canada’s non-Indigenous population but they also govern significant amounts of land (modern treaties alone provide Indigenous ownership of over 600 000 square kilometres [km²] of land), hold constitutionally protected Aboriginal and Treaty Rights and participate in co-management regimes for natural resources, energy and transportation infrastructure projects. Recognising this, Canada has made firm commitments in plans and legislation to advance and support self-determined Indigenous climate action and climate leadership.
Some of Canada’s rural small and medium-sized enterprises (SMEs) face a range of general challenges in adopting green business approaches and engaging in green innovations. These include a lack of awareness, information and knowledge on changing environmental requirements, limited availability of resources for greening, such as skills, finance and technology and uncertainties in markets and policies. In addition, the COVID-19 pandemic and the recent price spikes in energy left some SMEs with limited resources. This makes them vulnerable and further reduces their capacity to engage in greening activities requiring investments. Some RDAs have made important advancements to address these challenges in their programmes.
The Canadian government has significantly increased its support and ambitions with regard to green innovation. Over the past 5 years, clean technology (in short cleantech) spending has more than doubled, reaching CAD 786.8 million. Key policy documents defining the country’s net zero pathway were released in 2022, including a focus on clean procurement, a positive signal for innovation. Despite these advancements, Canada is lagging behind other major OECD economies in terms of classical green research and development (R&D) spending and patent generation. The federal budget in 2023 earmarked further funding for a number of clean economy initiatives that included programming, financing and investment tax credits, as well as planned investment from the Canada Infrastructure Bank in major clean energy and infrastructure projects. Despite pressures on rural regions and existing rural opportunities, conventional green innovation support and strategies are largely space-blind and are likely to contribute more to urban economies. Many do not grasp the specific needs, opportunities and challenges existing in different geographies. At the same time, regionally specific federal programmes, like regional development agencies (RDAs), are often limited financially or lack a green/environmental dimension. For instance, on average, RDAs earmark only 4% of their budget on clean technologies and their Community Futures Program does not have an environmental dimension.
Policy priorities on green innovation are also fragmented across federal and provincial governments and their respective departments, causing existing funds to come from a variety of different sources and often in the form of one-off grants to individual firms. This generates mixed signals and reduces efficiency while increasing red tape for applicants. More complementary structured funding is important to address this issue.
Introduction
Rural regions are pivotal in the transition to a net zero-emission economy and in building resilience to climate change because of their natural endowments. Rural regions are home to around 30% of the OECD’s population and cover approximately 80% of its territory, containing the vast majority of land, water and other natural resources. These lands are needed for food and renewable energy production from wind, water and biomass. They are also where we find natural beauty, biodiversity and ecosystem services that produce clean air, detoxify waste, provide clean water, sequester carbon and allow for recreation. Forests and wetlands, for instance, function as natural carbon sinks: trees and other vegetation sequester an amount equivalent to roughly one-third of global emissions (IPCC, 2019[1]). Wind, water, biomass and waste present in rural lands are used to create clean energy. These fundamental values to our well-being are increasingly recognised, as is the duty to protect them for current and future generations.
At the same time, rural communities often struggle to adapt and prepare for the transformational challenges required to move to net zero emissions. Over the past decades, the benefits of globalisation and technological change have not reached many rural places, leading to territorial disparities. Rural economies are experiencing increased competition from less developed counties. The shift to a service economy has largely benefitted cities and important infrastructure, including broadband, is missing. An ageing population, limited economic diversity and dependence on external markets and transport often accelerate their vulnerability. Consequently, many rural communities feel left behind and exposed to a range of challenges they have to deal with (OECD, 2020[2]). Rural regions and their workers, specialised in economic activities which need to be phased out in the transition to net zero emissions, will need dedicated support.
While rural places are not without their challenges, they are also, unquestionably, places of opportunity that are key in delivering wider well-being to current and future generations. Rural policies have an important role in reaching net zero GHG emission targets while also generating benefits for rural communities. This can happen through more sustainable land management, higher valorisation of ecosystem services, making use of innovative production processes around agriculture, mining and renewable energies and new modes of transportation. At the same time, this requires a fundamental transformation of rural economies and societies.
Transitioning to net zero will require a massive deployment of alternative energy technologies as well as new technologies that are not yet on the market or currently in the demonstration or prototype phase. This means that significant innovation efforts must take place this decade in order to bring these new technologies to market (IEA, 2021[3]). Many of these innovations will need to occur or be adopted in rural regions where most emissions-intensive industries are located but also where renewable energy can be generated from sun, wind and water and where there is massive potential to develop the circular- and bioeconomy. Supporting innovation in these areas not only diversifies ongoing business activities but also creates new businesses while contributing to environmental and climate protection.
Transition to net zero in rural areas also requires the involvement of Indigenous businesses, peoples and communities. Approximately 1.7 million people in Canada self-identify as Indigenous, which is 5% of the total population. The Canadian Constitution Act (1982) recognises three groups: Indians (now referred to as First Nations), Inuit and Métis. In their position as governors of land, Indigenous peoples in Canada oversee over 40% of Canada’s land mass, much of it rural and remote. They also participate in co‑management regimes for natural resources, energy and transportation infrastructure projects, making them influential contributors to green innovation in Canada. The Government of Canada is moving to align its laws with the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) and has made firm commitments to reconciliation.
This chapter investigates how rural Canada can use green innovation to make climate change contributions and boost its rural development. To this end, it looks at regional differences in mitigation potential based on the distributive effects of emissions and highlights specific geographies that suffer distinct adaptation pressures, such as the arctic and coastal areas. It then explains the concept of green innovation and discusses rural-specific considerations for green innovation. Finally, it makes recommendations on how to improve and accelerate innovation in rural Canada that can contribute to climate change mitigation and adaptation efforts and support the resilience of rural communities.
Canada is facing a rural mitigation and adaptation challenge to address climate change
Emissions reduction: Remote rural regions and their industries are essential to achieving the net zero goal in Canada
Climate change is a global challenge threatening the foundations of human well-being. To limit negative impacts, most OECD countries aim for net zero domestic GHG emissions by 2050 (Box 4.1). Deep and broad transformations of economies will be needed. Impacts, local conditions and vulnerabilities vary across territories and by degree of rurality. In Canada, however, production-based emissions are a particular concern for rural regions and policy needs to focus on reducing emissions in rural places to achieve the national net zero emissions goal.
The typology used in this document identifies five types of small regions (TL3) based on the share of the population living in metropolitan areas and an accessibility criterion. It is used to assure OECD comparability across countries regarding the available climate data. The 5 types of regions include 2 types of metropolitan regions – large metropolitan (with a functional urban area [FUA] of more than 1.5 million people) and metropolitan (with an FUA of more than 250 000 people) regions – and 3 types of rural regions – regions near a large city (i.e. regions with access to an FUA of more than 250 000 people within a 60-minute drive), regions with or near a small/medium city (i.e. regions with an FUA between 50 000 and 250 000 people or with access to one within a 60-minute drive) and remote regions (see Chapter 3 for more detail). Throughout this chapter, reference will be made to “rural regions” when referring to the group of non-metropolitan regions. The terms “city” and FUA will be used interchangeably. The document uses the term “large city” to signify a city (FUA) with more than 250 000 inhabitants and “very large” city when referring to a city with more than 1 million inhabitants. The term “areas outside FUAs” is meant to be a comprehensive list of territories with settlements at a intermediate or low-density level, such as towns and suburbs, as defined by the UN Degree of Urbanisation. Remote regions are those in which 50% of its population do not have access to any FUA within a 60-minute drive. The authors acknowledge that the used definition of remoteness, as defined by the OECD, poses some challenges in the Canadian context, as differences between regions that fall into this category can be considerable. Terms such as “rural economy”, “rural places” and “rural communities” are used conceptually for policy purposes and are not meant to reflect any particular territorial definition.
Box 4.1. Canada’s net zero-emission target
Canada has joined over 120 countries in committing to net zero emissions by 2050, including all other Group of Seven (G7) nations (France, Germany, Italy, Japan, the United Kingdom and the United States). The Canadian Net-Zero Emissions Accountability Act, which became law on 29 June 2021, enshrines in legislation Canada’s commitment to achieve net zero emissions by 2050 and provides a framework of accountability and transparency to guide efforts in reaching this goal. The act establishes a legally binding process to set five-year national emissions targets and develop credible, science-based plans to achieve each target, as well as a series of progress and assessment reports. When developing an emissions target or emissions reduction plan, the Minister of Environment and Climate Change must provide the provinces and territories, Indigenous peoples, the Net-Zero Advisory Body and interested persons with the opportunity to make submissions. The act also established the Net‑Zero Advisory Body in legislation, a group of diverse experts from across Canada who engage Canadians and provide independent advice with respect to achieving net zero emissions by 2050.
A number of provinces and cities have already made net-zero-by-2050 commitments, including Guelph, Halifax, Hamilton, Newfoundland and Labrador, Toronto, Vancouver and, most recently, Quebec. Prince Edward Island has also pledged to reach net zero GHG emissions by 2040. Moreover, British Columbia and Nova Scotia have or plan to put into place, provincial net-zero-by-2050 legislation.
Furthermore, a range of First Nations, Inuit and Métis climate strategies have also been developed, striving for net zero emissions by 2050 in order to meet adaptation, mitigation and resilience-building needs in the face of rapid climate change. For instance, Resolution 05/2019 of the Canadian Assembly of First Nations (AFN) officially declared a First Nations Climate Emergency and has since set out to develop an AFN National Climate Strategy. Other examples include the British Columbia First Nations Climate Strategy and Action Plan, the National Inuit Climate Change Strategy and the Métis Nation Climate Change and Health Vulnerability Assessment.
Source: Assembly of First Nations (2019[4]), Declaring a First Nations Climate Emergency, https://afn.bynder.com/m/5a3de3c7f6cf08b5/original/05-2019-Declaring-a-First-Nations-Climate-Emergency.pdf; Government of Canada (2023[5]), Net-Zero Emissions by 2050, https://www.canada.ca/en/services/environment/weather/climatechange/climate-plan/net-zero-emissions-2050.html; First Nations Leadership Council (2022[6]), BC First Nations Climate Strategy and Action Plan, https://www.bcafn.ca/sites/default/files/2022-04/BCFNCSAP%20Final%20Draft%20%2822April2022%29.pdf; Inuit Tapiriit Kanatami (2019[7]), National Inuit Climate Change Strategy, https://www.itk.ca/wp-content/uploads/2019/06/ITK_Climate-Change-Strategy_English.pdf; Métis National Council (2019[8]), Métis Climate Change and Health Vulnerability Assessment, https://www.metisnation.ca/uploads/documents/MNCHVA%20FINAL%20Report.pdf.
Rural regions in Canada play a particularly important role in mitigating climate change. Production-based emission estimates indicate that both in total and in per capita terms, Canada’s remote rural regions have much higher emissions than metropolitan regions (Figure 4.1). Over half (52%) of total GHG emissions is due to production in remote regions in 2022. This is largely due to industrial, including energy exploitation and processing (19% of the total), and transportation activities (14% of the total). This is not the same across other OECD countries, where rural remote regions account for about 16.5% of production-based GHG emissions. In most countries, metropolitan regions emit more GHGs than remote regions in absolute terms (OECD, 2021[9]). In per capita estimates, however, rural regions always emit the most. In Canada, the biggest contributions to production-based emissions in remote regions come from:
Industry (combustion for manufacturing, chemical processes, iron and steel production, non-ferrous metals production, non-energy use of fuels, solvents and products use, non-metallic minerals production).
Transport (road transport, aviation, shipping, railways, pipelines, off-road transport).
Energy (power industry, oil refineries and transformation industry, fuel exploitation).
This already provides a certain indication of which industries should be targeted for emission reduction policies and where measures such as the implementation of green innovation can make a positive impact. It is also important to acknowledge that the historical GHG emissions directly attributed to Indigenous peoples in Canada are negligible compared to emissions from industry in rural areas. GHG emissions originating from Indigenous communities are estimated to be less than 1 megatonne per year, largely insignificant compared to 670 for the whole of Canada in 2021 (NIEDB, 2022[10]):
Figure 4.1. Contribution to estimated GHG emissions in Canada, 2022
Share of GHG emissions and GHG per capita
Note: The figures refer to OECD calculations based on estimated GHG emissions data from the European Commission’s Joint Research Centre (ECJRC). The ECJRC Emissions Database for Global Atmospheric Research the allocates national GHG emissions to locations according to about 300 proxies.
Source: Updated from OECD (2021[9]), OECD Regional Outlook 2021: Addressing COVID-19 and Moving to Net Zero Greenhouse Gas Emissions, https://doi.org/10.1787/17017efe-en.
Emissions in Canada are largely uneven across as well as within provinces and territories. For instance, emissions per capita in Saskatchewan are more than six times higher than in Quebec. Likewise, within these large provinces, disparities can be massive. Figure 4.2 demonstrates that in the most extreme cases, such as in Saskatchewan, emissions can vary as much as nearly 1 000 tonnes of CO2 equivalent per capita (tCO2eq/cap) between small regions (TL3). Overall, Alberta, British Columbia and Saskatchewan have the highest per capita disparities, while Manitoba, New Brunswick and the Northern Territories have some and Prince Edward Island, Nunavut and Yukon have next to no disparities. Overall, most GHG emissions per capita generated in large Canadian regions (TL2) are above the OECD average of 11.5 tCO2eq/cap. Only Ontario, Prince Edward Island and Quebec have lower values.
In 2018, the biggest GHG emitter in Saskatchewan came from Division 1 and specifically the oil production sector, which contributes 57% of regional emissions. In Alberta, Division 4’s energy production sector is the leading emitter, contributing 68% of regional emissions. In British Columbia, they are highest in Stikine, where the road transport sector produces 59% of regional emissions. In general, the top-emitting small region types (TL3) in all provinces and territories are rural and remote, and the top polluting sectors in each are concentrated in oil production, energy production and transportation (aviation and road).
Figure 4.3 shows the data covering all small regions (TL3) in Canada. It clearly identifies those regions where emissions reductions are the most urgently needed. Still, all Canadian regions are far from reaching net zero by 2050. The UN Paris Agreement commits to pursuing efforts to limit global temperature increase to 1.5 degrees and requires reducing emissions to a per capita lifestyle carbon footprint of around 2 to 2.5 tCO2 by 2030 and an even smaller 0.7 tonnes by 2050. Currently, no region is reaching this target in Canada; the lowest of all small regions stands at 3.2 tCO2eq/cap in L'Assomption, Quebec. Even if the more permissive target of 2.5 tCO2eq/cap is taken, it would mean an average reduction of 99% in emission in the most polluting regions (150 or more tCO2eq/cap) and an average reduction of 86% for all other regions between 2018 and 2030 to reach the climate goal in all small regions. Rural regions, which emitted more in per capita terms than metropolitan regions in 2018, would need to reduce per capita emissions by 93%, while the latter would need a reduction of 79%. Allowing for regional fluctuations, an overall nationwide reduction of 88% is needed.
Figure 4.2. Emissions estimate disparity between TL3 regions within TL2 regions (province/territory), 2018
Note: Analysis based on 13 TL2 provinces and territorials and 293 small TL3 regions in Canada in 2018. The OECD average is represented by the dashed line.
Source: OECD (n.d.[11]), OECD Regional Statistics (database), https://doi.org/10.1787/region-data-en.
A place-based emission reduction strategy is needed in Canada to address these inter-provincial disparities effectively. It will need to directly target large emitting regions and allow for transition according to local characteristics and configurations, considering each place’s unique opportunities and challenges. It also demonstrates that emissions cannot be ascribed to just a large region (TL2) such as provinces but need to be understood at a granular level. A more offensive policy response will need to focus on provinces and territories in combination with sectors, given that the main emitters vary by sector and small regions (TL3).
A placed-based strategy could support change in regions where most gains can be made by targeting the right sectors and putting in place economic transition programmes suited to local conditions. Place-based emissions-reduction strategies also need to recognise the rights of Indigenous peoples, including through a commitment to economic reconciliation and a net zero transition process that will benefit Indigenous communities. Innovation will be essential to reduce emissions, create new economic sectors with reduced negative environmental impact and reduce the negative effects of economic transitions on individuals and society as a whole.
Despite ongoing climate action since the signing of the Paris Agreement in 2015, emissions in Canadian regions keep rising across most regions. Box 4.4 depicts the evolution of the top and bottom ten emitters from 1990 to 2020. Only in three of the ten largest emitting regions can reductions be observed over the last ten years; these are in the provinces of Alberta and Saskatchewan. Others are on the rise. The majority of low-emitting TL3 regions are in Quebec, where 94% of its electricity supply is derived from hydropower (Canada Energy Regulator, 2022[12]).
Figure 4.3. Production-based emissions estimates per capita in Canadian TL3 regions
Note: OECD calculations are based on estimated GHG gas emissions to locations according to about 300 proxies. Based on 293 TL3 Canadian regions in 2018.
Source: OECD (n.d.[11]), OECD Regional Statistics (database), https://doi.org/10.1787/region-data-en.
Figure 4.4. Top and bottom emitters (total) per regional type (TL3) and time Canada, 1990-2020
Note: Emission level is given in million tCO2-eq. Based on 293 TL3 Canadian regions from 1990 to 2018.
Source: OECD (n.d.[11]), OECD Regional Statistics (database), https://doi.org/10.1787/region-data-en.
In this context, policy makers need to realise that delayed action raises costs globally and locally. The costs of delaying action to stabilise GHG at 1.5 degrees Celsius (°C) may be USD 5 trillion per year (7% of annual world gross domestic product [GDP]) (Sanderson and O’Neill, 2020[13]). Higher local costs may result from the requirement for faster expansion of new technologies. Moreover, if investment in long-lived capital goods and infrastructure is not consistent with the zero carbon transition, it could result in wasted investment spending. Stranded asset risks are particularly large in fossil fuel supply chain firms and regions (OECD, 2023[14]).
Box 4.2. Regional GHG emission data
In this report, regional emissions are estimated on the basis of the Emissions Database for Global Atmospheric Research of the ECJRC. Production-based or territorial emissions correspond to GHG emitted within a region and enable the setting of reduction targets. Emissions were estimated using the Emissions Database for Global Atmospheric Research (EDGAR), version 6 (Crippa et al., 2021[15]) and expressed in CO2 equivalent, considering the 3 main GHGs – namely CO2, methane (CH4) and nitrous oxide (N2O) – and a 100-year global warming potential.
National GHG emissions are attributed to locations according to about 300 proxies for 26 main sectors and subsectors, depending on the type of technology and International Energy Agency (IEA) fuel types, following Intergovernmental Panel on Climate Change (IPCC) reporting formats and guidelines. Locations of emissions are identified with various sources of spatial research (Janssens-Maenhout et al., 2019[16]). The proxies capture a substantial part but not all of the local emission determinants. For example, residential emission estimates capture buildings and population but not the degree of building insulation. Location estimates of agricultural emissions capture the number and species of ruminant animals but not how they are fed.
The emissions are attributed to five sectors:
1. The power supply sector contains all combustion of fuels for electricity and heat generation.
2. Industry covers the whole value chain from mining primary materials to manufacturing and recycling products. Its includes energy use process emissions and fugitive emissions.
3. Agriculture includes agricultural soils, agricultural waste burning, enteric fermentation and manure management.
4. The residential sector includes buildings and waste.
5. Transport encompasses freight and passenger ground, sea and air transport.
Some care is needed when looking only at production-based emissions as reductions can occur through the outsourcing/offshoring of carbon-intensive activities to other regions or countries, and subsequently importing the goods and/or services provided. Often, these shifts are made to countries/regions with more carbon-intensive production processes and less stringent regulations on carbon abatement. Currently, most OECD countries are net importers of GHG emissions (i.e. their consumption, including through imports, accounts for larger emissions than the emissions generated through their production of goods and services, including those for export markets).
Source: OECD (2021[9]), OECD Regional Outlook 2021: Addressing COVID-19 and Moving to Net Zero Greenhouse Gas Emissions, https://doi.org/10.1787/17017efe-en; OECD (2022[17]), OECD Regions and Cities at a Glance 2022, https://doi.org/10.1787/14108660-en.
Climate change adaptation: Arctic and coastal areas are particularly vulnerable and require increased speed in rural innovation to adapt
Alongside emissions reduction, climate adaptation is an equally important concern for rural Canada. The Canadian Arctic is experiencing climate change at ever faster rates. Projected future climate changes for the region are substantial. In 2021, parts of northern and most of eastern Canada were 2.5°C above the baseline average (defined as the mean over 1961-90) and most northern parts of the Arctic Archipelago exceeded the baseline average by 3.5°C (Figure 4.5). Overall, northern Canada is expected to warm at more than double the global rate, leading to reductions in Arctic Sea ice, snow cover and permafrost. For instance, Canadian Arctic marine areas, including the Beaufort Sea and Baffin Bay, are projected to have extensive ice-free periods during summer by mid-century (Bush et al., 2022[18]).
Rising air temperatures cause permafrost to thaw, which has serious consequences for inhabitants of the Arctic region (Jungsberg et al., 2019[19]), many of whom are Indigenous. Many communities face relocation pressures as infrastructure and houses start sinking into the ground and marine resources that comprise the basis of their livelihoods change. Furthermore, the local sea level is projected to rise, increasing flooding along most of the Atlantic and Pacific coasts of Canada and the Beaufort coast, and the loss of sea ice significantly increases the risk of damage to coastal infrastructure and ecosystem because of larger storm surges and waves (Bush et al., 2022[18]). Other impacts include the warming of seawaters, such as in the Gulf of St. Lawrence, where warming is combined with decreased oxygen levels, impacting marine species and commercial fishing. Together with the warming of the coastal areas, new species, such as lobsters, are expanding (Robert, 2022[20]).
Figure 4.5. Annual temperature departures from baseline (mean over 1961-90), 2021
Note: The temperature departures map shows that most of Canada experienced temperatures at least 1.0°C above the baseline average. Temperatures over 2.5°C above the baseline average were recorded in parts of northern and most of eastern Canada and exceeded 3.5°C above the baseline average in the most northern parts of the Arctic Archipelago. Annual temperatures were close to the baseline average in the southern areas of Yukon and northern British Columbia.
Source: Environment and Climate Change Canada (2021[21]), Climate Trends and Variations Bulletin - Annual 2021, https://www.canada.ca/en/environment-climate-change/services/climate-change/science-research-data/climate-trends-variability/trends-variations/annual-2021-bulletin.html.
With many rural communities situated on low-lying coasts, infrastructure built on permafrost and livelihoods in jeopardy, climate adaptation is required to happen much quicker than in other Canadian rural regions. The time pressure also requires a more sustained effort to support innovation from governments, the private sector and civil society to address challenges and make use of opportunities. Hence, climate adaptation needs to feature strongly in rural innovation support. Specifically, rural innovation has the potential to deal with:
Finding new solutions for making transportation infrastructure (roads, buildings, municipal facilities, industrial facilities, airports, ports) viable and more dynamic to retrofitting as effects of thawing permafrost an ice dynamics increase.
Making use of new marine transportation and tourism routes while not stressing the fragile ecosystem even further.
Dealing with aspects of health and well-being, including danger from new and emerging diseases due to thawing permafrost.
Dealing with changes to traditional fishing, trapping and berry picking due to species and harvest evolutions, as well as cultural impacts from loss of sites of historical or spiritual value.
The population in the Canadian Arctic adds to approximately 70 000 people living in 5 provinces and 3 territories. A large part of the local population is Indigenous and identifies as First Nations, Inuit or Métis. As such, these Northern communities have distinct socio-cultural characteristics. This also means that many Indigenous peoples are among the first to face the direct consequences of climate change due to their dependence upon and close relationship with the environment and its resources. Climate change exacerbates the difficulties already faced by Indigenous communities, including political and economic marginalisation, loss of land and resources, human rights violations, discrimination and unemployment (UN, n.d.[22]).
Adaptation currently takes place in response to climate impacts and prediction scenarios. Examples include disaster risk management, infrastructure systems and public health. An important step for Canada is the finalisation of Canada’s first National Adaptation Strategy (see also Box 4.3). Action is also taken at the territorial level. Among many others, the Inuvialuit Settlement Region, for instance, has its own climate adaptation strategy. Yet, challenges remain and largely evolve around limited resources and institutional capacity. Research specifically denotes challenges with municipal planning, limited capacity and low levels of funding, as well as institutional fragmentation (Ford et al., 2017[23]). In addition, extreme weather, long distances to markets, create difficulties in scaling innovations and attracting essential workers.
Climate adaptation innovation consequently requires co-operative partnership approaches between the private sector and different levels of government and governments, integrating a broad range of policies, for instance, on land use planning, resource management and health.
Box 4.3. Canada is finalising its first National Adaptation Strategy
In June 2023, the Government of Canada released its first National Adaptation Strategy. The strategy outlines a shared path to a more climate-resilient Canada. This includes a shared vision set across five interconnected systems: disaster resilience, health and well-being, nature and biodiversity, infrastructure and economy and workers. For each system, the strategy has long-term, medium-term and near-term goals and targets, with an evaluation framework to measure progress and plan for future scenarios. This would include a federally led round table with provincial and territorial governments and Indigenous partners that work towards disaster resilience. The strategy is accompanied by action plans for the federal government as well as bilateral federal-provincial/territorial plans and co-development of the Indigenous Climate Leadership Agenda with Indigenous partners.
Incorporating Indigenous knowledge into its guiding principles and future plans for action is a central pilar of the National Adaptation Strategy. It outlines, for instance, that adaptation efforts must respect the jurisdictions of local, provincial, territorial, national and First Nations, Inuit and Métis governments and act to accelerate and build upon their existing efforts. Furthermore, it identifies the Indigenous Climate Leadership initiative as the main pathway for identifying and supporting Indigenous communities’ adaptation priorities.
An assessment by the Canadian Climate Institute suggests that the effectiveness of the strategy can be improved in a couple of instances, notably through linking risks more clearly to goals and objectives to mitigate risks, identification of priority action to guide federal and other action plans, enhancing whole-of-government co-ordination and strengthening the monitoring and evaluation framework, aligning it closely to the objectives and targets of the strategy.
Source: Environment and Climate Change Canada (2022[24]), Canada’s National Adaptation Strategy: Building Resilient Communities and a Strong Economy, https://www.canada.ca/en/services/environment/weather/climatechange/climate-plan/national-adaptation-strategy.html; Canadian Climate Institute (2022[25]), “Expert assessment recommends improvements to National Adaptation Strategy”, https://climateinstitute.ca/news/expert-assessment-national-adaptation-strategy/.
Green innovation definitions
In light of challenges such as vast climate adaptation and mitigation challenges, green innovations are an essential component for managing the ongoing climate and environmental transitions. Green or environmentally friendly innovation generally means innovations that benefit the environment through product, service, process or business innovation. A more detailed definition is provided in Box 4.4. Policy incentives for green innovation are needed because market mechanisms do not allow for enough green innovation. This is because innovators may not reap all of the benefits of their innovation or because the environmental benefits may not be appropriately valued by markets (OECD, 2011[26]).
Canada does not have a definition for green innovation per se but works with the concept of “clean technology” (in short cleantech), which is defined as follows:
Any good or service designed with the primary purpose of contributing to remediating or preventing any type of environmental damage.
Any good or service that is less polluting or more resource-efficient than equivalent normal products which furnish a similar utility. Their primary use, however, is not one of environmental protection (Government of Canada, 2022[27]).
A more detailed breakdown of the Canadian context can be found in Annex 4. Use of the term cleantech in the context of green innovation can be misleading as it might suggest that it only captures technology-oriented innovation trying to address environmental challenges, even if the definition is broader. Particularly in the rural context, innovations going beyond classical technological innovations, such as social and service innovations, will be important. Consequently, this report will continue to use the term green innovation instead of cleantech.
Box 4.4. Definition of green innovation
Broadly, green innovation is characterised by its positive impact on the environment. However, positive impacts are not straightforward or easily measurable. For instance, many innovations, even if they are environmentally friendly, may cause unforeseeable consequences and result in rebound effects that create environmental problems. Considering this, the European Union defines green innovation as all forms of innovation that reduce environmental impacts and/or optimise the use of resources throughout the lifecycle of related activities. Following from these considerations, green innovation:
Compares favourably with relevant alternatives.
Applies to goods, services, manufacturing processes or business models. The concept in the United States includes innovative regulatory approaches for environmental protection.
Includes but is not limited to green technologies. It does not necessarily originate in the environmental field or have a technological component.
Can be radical and systemic (e.g. substituting polluting goods with environment-friendly services) or incremental (e.g. enhancing the resource efficiency of a particular product).
Various concepts fall under the concept of green innovation, including:
Eco-efficiency (defined as producing more goods and services with less energy and fewer natural resources).
Cleaner production (a strategy to continuously reduce pollution and waste at the source).
Eco-design (i.e. the redesign of a product or process to reduce its environmental impacts throughout its life cycle).
Source: OECD (2011[26]), Better Policies to Support Eco-innovation, https://doi.org/10.1787/9789264096684-en.
Support for green innovation comes in multiple forms. Many OECD countries have developed national strategies that define different support objectives. These include bridging the gap from the demonstration phase to commercialisation (e.g. in the field of carbon capture and storage or micro combined heat and power generation), improving consumer awareness (e.g. of bio-packaging), defining technical standards (e.g. for electric cars) and building a critical mass (e.g. for combined heat and power generation). They also cover a wide range of policies, including environment, science and technology, industry, transport, competition and energy policies. They mix very diverse tools and initiatives, from support for research and development to market creation and export promotion. They involve initiatives by public authorities at both the national and local levels and offer lessons regarding an appropriate split of responsibilities between them. Roadmaps provide a framework to assess the coherence of these policies (OECD, 2011[26]).
In Canada, growth of the environmental and clean technology sector is stable but regionally concentrated in three provinces. In 2021, GDP generated by environmental and clean technology products increased only slightly by 0.8%, following a decline of 2.9% in 2020 from 2019. The sector currently accounts for 2.9% of Canada’s GDP and the share has remained relatively stable since the first recordings in 2007. Regionally, British Columbia, Ontario and Quebec are the largest contributors to GDP shares. In 2021, Ontario (34.5%) accounted for over one-third of the sector, while Quebec (29.8%) accounted for over one‑quarter and British Columbia (15.1%) one-seventh. In 2021, just over half (53.5%) of the national environmental and clean technology products sector’s GDP was attributable to the production of environmental goods and services. The remaining 46.5% was attributable to the production of clean technology goods and services1 (Statistics Canada, 2022[28]).
At the national level, Statistics Canada conducts two business surveys that cover clean technologies: the Survey of Advanced Technology (SAT) and the Survey of Innovation and Business Strategy (SIBS). They provide insights on the adoption of green innovation on clean tech in companies. According to the 2019 SIBS, 8.6% of firms in Canada adopted clean technologies (compared to 10% in 2017), demonstrating a slight decrease. In the province of Ontario, adoption is highest at 10% and lowest in the Atlantic provinces at 6.7%. Most types of clean technologies used were, across all industries, linked to environmental protection (93.3%), sustainable resource management (72.8%) and waste management, reduction, or recycling (71.8%). Moreover, 42.1% of firms reported undertaking green-focused innovations aiming for environmental benefits between 2017 and 2019 (compared to 40.1% between 2015 and 2017). The largest share of these relate to innovations with environmental benefits related to the end user or consumer. At TL2 level, Quebec is leading with 45.3%. Compared to 47.5% between 2015 and 2017, 49.3% of firms undertook green innovations through changes in production processes, creating more efficient use of resources between 2017 and 2019. The SAT is working to release a new survey in July 2023, including detailed information on clean technologies at the TL2 level covering 2022. Rural-urban delineation for this data is currently unavailable.
In order to ensure support for green innovation fits with diverse local needs, it is important to consider that innovation in more rural areas goes beyond high-technology innovation, which is often present in regional centres or larger agglomerations. While research is limited, evidence suggests that some rural innovators take a different approach. They are experimental and strategic in that they take the time to steadily improve products and processes without pressure and acquire information to fill knowledge gaps. In this process, the meaningfulness of the work to the community and passing down knowledge through generations is also important as it ensures holistically following projects from beginning to end (Mayer, 2020[29]). In addition, rural regions face specific bottlenecks to innovate. These include reduced accessibility of networks, readily available knowledge and support, an outmigration of young people that is needed for business succession, interest and ability to innovate and design new products and processes, and reduced digital connectivity.
In order to benefit from the environmental and cleantech sector and the transition to a net zero carbon economy more broadly, Canadians will need access to the requisite infrastructure, which includes access to fast Internet. Canadians from all urban and rural communities rely on access to reliable, affordable, high‑speed Internet and mobile connectivity. It is essential for personal and professional communications, to grow a business, apply to jobs and access education and government services. Overwhelmingly, rural and remote communities have identified challenges accessing affordable, high-speed Internet as the number one issue impeding their economic growth.
Policy action to link up green innovation to rural climate challenge needs
Table 4.1 summarises important policy actions that can support green innovations in general and highlight specific considerations for rural places in relation to these areas of action, noting the need to also target small rural SMEs in climate innovation. The following section will address how far the needed policy actions are currently in place in Canada and what can be done to fill the remaining gaps.
Table 4.1. Policy actions to support green innovation for the rural context
Source: Based on OECD (2011[30]), Fostering Innovation for Green Growth, https://doi.org/10.1787/9789264119925-en.
Assuring clear and stable market signals to foster green innovation
The private sector, particularly SMEs, is considered a potential driving force for the zero-emission transition. They do that notably through innovation in their products and processes. Product innovations include design that replaces non-renewable materials and resources with renewable, recycled, permanent, biodegradable, non-hazardous and compostable materials and resources; and processes innovations involve the recreating processes so that products are made more easily disassembled, recycled, modular (replacement of parts, the recovery and reuse of systems and sub-systems) and repairable (OECD, 2020[31]).
A stable policy environment is important for innovation, especially in areas where innovation requires large, long-term investments that contain high risk. Major green investments, such as installing carbon capture technology, involve large capital costs and long lead times. Clear government signals, like carbon pricing or other market instruments, are essential signals for government commitments and important for SMEs embarking on the transition. These signals can significantly enhance incentives for firms and households to adopt and develop green innovation and will allow for establishing markets for green innovation. They are particularly relevant for SMEs, which have limited resources available to transition and can only embark on investments for innovations if they are sure they will not be disrupted by election cycles.
In past years, signals about the future direction of climate policy in Canada have been uneven between provinces and territories, and the climate aims of Canada’s federal government and provinces are divergent. Especially those provinces that heavily depend on fossil fuels and derive a large share of their revenue from resource extraction have challenged the federal government’s climate policies. For example, Alberta and Saskatchewan questioned the constitutionality of the federal Greenhouse Gas Pollution Pricing Act, which sets minimum national stringency standards for GHG emissions pricing, arguing that the federal government stepped outside the bounds of its powers. Canada’s Supreme Court rejected this argument in 2021. The country’s top court found that, as global warming’s impacts go beyond provincial boundaries, it is a matter of national concern (OECD, 2023[14]).
To date, considerable scepticism over federal climate aims still exists within subnational governments and reduces the stable policy climate needed for green innovation. This can manifest itself, for instance, in the uneven design of large-emitter schemes across provinces and create situations where large emitters easily face reduced carbon costs (Canadian Institute for Climate Choices, 2021[32]). Low-carbon cost also means reduced incentives for green investments and innovations. An example is natural gas-fired power plants, which are Alberta’s large-emitter scheme despite being shielded from competition by their remoteness to other plants, capacity limits on power imports and transmission costs involved in importing electricity from other regions (Olmstead and Yatchew, 2022[33]). As some areas within provinces contribute such a large share of national emissions, inadequate enforcement of carbon pricing rules could have a big impact on progress towards Canada’s emissions targets overall (OECD, 2023[14]). Other examples for disagreements between provinces and the federal government on dealing with industry-specific emissions can be observed in discussions about the proposed Oil and Gas Emissions Cap (see Box 4.5)
Confidence in the development of future carbon prices is another important factor for stimulating investments in green technologies needed for emissions reductions. As in other countries, future climate policies depend on decisions by future governments. Firms often delay cost-intensive investments in green technology in situations of regulatory uncertainty (Berestycki et al., 2022[34]). To work through this problem, Canada’s federal government is proposing to use a new Canada Growth Fund to offer “contracts for difference” as a means for reducing carbon cost uncertainty. Such agreements offer governmental compensation for firms making major green investments if the carbon price turns out to be lower than planned. Similarly, the business has to return surplus gains to the government if the carbon price turns out higher than expected. Similar arrangements are used to promote investments in clean electricity by removing risk around volatile power prices, as in the United Kingdom (D’Arcangelo et al., 2022[35]; OECD, 2022[36]).
Box 4.5. Oil and Gas Emissions Cap
Reducing oil and gas sector emissions is a priority for Canada’s federal government. Canada’s oil and gas sector accounted for 27% of the country’s emissions in 2020 (Norton Rose Fulbright, 2022[37]). In July 2022, as part of Canada’s climate plan, the government released a paper to initiate a formal discussion on two potential regulatory options to limit and reduce GHG emissions from the oil and gas sector, outlining two potential policy options.
The first option would be a cap-and-trade system under the Canadian Environmental Protection Act, which would set a regulated limit on emissions from the sector. The government would set an overall quota of GHG emissions for companies that fall under the cap. It would then issue emissions permits or allowances for each tonne emitted, requiring emitters to surrender one allowance for each tonne of GHG emissions. Emission allowances would apply only to the cap-and-trade system, meaning they could not be recognised, traded or exchanged by other regulatory instruments or carbon pricing systems. Also, to protect against excessive market power, limits on bidding and the number of allowances a facility can hold may be implemented. Environment and Climate Change Canada will determine the mechanisms for distributing allowances at a later date.
The second option would be to modify pollution pricing benchmark requirements to create price-driven limits on emissions from the oil and gas sector under the Greenhouse Gas Pollution Pricing Act. The government would set an “emissions cap trajectory” and then adjust the price of oil and gas as needed. This way, provincial carbon pricing systems would need to be adjusted accordingly to maintain parity. If changes are required, they would include an oil and gas-specific carbon price as well as other measures such as benchmark stringency. For provinces where oil and gas sector emissions make up less than 0.5% of total emissions from the sector, the jurisdiction will be exempted from the benchmark criteria (Government of Canada, 2022[38]; JD Supra, 2023[39]).
Regardless of the option chosen, the cap on oil and gas emissions would apply to direct emissions from upstream oil and gas production. The government is still considering whether the cap applies to petroleum refineries and natural gas transmission pipelines emissions. It will not apply to natural gas distribution and oil pipelines or end users. Overall, the cap would apply to all GHGs listed in Canada’s National Inventory Report (Government of Canada, 2023[40]). Significant criticism of the cap proposal comes from both Alberta and Saskatchewan, which declared it unachievable and favoured other methods of reducing emissions or less ambitious targets. The government of Alberta has also announced challenging the cap in court (von Schneel, 2022[41]).
Source: Norton Rose Fulbright (2022[37]), “Canada releases discussion paper on capping emissions from upstream oil and gas”, https://www.nortonrosefulbright.com/en-ca/knowledge/publications/d19bd616/canada-releases-discussion-paper-on-capping-emissions-from-upstream-oil-and-gas; JD Supra (2023[39]), “Canada’s oil and gas emissions cap: Options for the ECCC proposal”, https://www.jdsupra.com/legalnews/canada-s-oil-and-gas-emissions-cap-7590573/; Government of Canada (2022[38]), “Options to cap and cut oil and gas sector greenhouse gas emissions to achieve 2030 goals and net-zero by 2050 – Discussion document”, https://www.canada.ca/en/services/environment/weather/climatechange/climate-plan/oil-gas-emissions-cap/options-discussion-paper.html; Government of Canada (2023[40]), Canada’s Greenhouse Gas Inventory, https://www.canada.ca/en/environment-climate-change/services/climate-change/greenhouse-gas-emissions/inventory.html; von Schneel, E. (2022[41]), “Alberta wants to challenge federal emissions cap in court”, https://www.cbc.ca/news/canada/calgary/alberta-federal-government-oil-gas-emissions-constitution-1.6661484.
While carbon pricing is important, it is insufficient to incentivise green innovation. While it is important to drive down emissions by incentivising clean innovation development and deployment, and raising the cost for carbon-intensive production and consumption, it is also crucial to encourage greener choices. Recent research suggests that across different countries, the effects of carbon pricing on innovation and zero carbon investment are limited. Carbon pricing often primarily contributes to incremental innovation, which tends to increase efficiency but fails to reduce emissions in sectors that are hard to decarbonise. For example, carbon prices generally encourage the switch to a marginally cleaner version of conventional processes but will not lead to a breakthrough in climate-neutral technology (Lehne et al., 2021[42]; Lilliestam, Patt and Bersalli, 2020[43]). Consequently, additional policies will be needed to strengthen green innovation, including research, support for companies to change business models and innovation diffusion.
Additional government signals towards green innovation have come in the form of clean energy and carbon storage investment tax credit (ITC) announcements in the Canadian 2022 Budget and in the 2022 Fall Economic Statement. The 2023 Canadian Federal Budget, also called Budget 2023, released on 28 March 2023, provides further details on previously announced ITCs and details on further clean energy and technology ITCs.
The 2022 budget included a number of tax measures intended to support Canada’s climate objectives by incentivising investment in and development of clean technology while seeking to limit or remove certain tax incentives previously afforded to carbon-based industries. For instance, the 2022 Fall Economic Statement announced the details of the Clean Technology ITC, which will provide support to Canadian businesses in adopting clean technology at a 30% refundable rate (Government of Canada, 2022[44]). Budget 2023 further expanded the Clean Technology ITC to include geothermal energy systems, used primarily to generate electricity and/or heat solely from geothermal energy. This includes but is not limited to piping, pumps, heat exchangers, steam separators and electrical generating equipment (PwC, 2023[45]; Government of Canada, 2023[46]; Norton Rose Fulbright, 2023[47]). The total expected cost of the Clean Technology ITC is about CAD 6.9 billion over the period 2023-24 to 2027-28 (Government of Canada, 2023[46]). Furthermore, Budget 2023 introduced a 15% refundable tax credit for eligible investments in non‑emitting electricity generation systems (i.e. wind, solar, hydro, nuclear), in abated natural gas-fired electricity generation, electricity storage and equipment used for transmission of electricity between provinces and territories.
To also support Canadian companies that are manufacturing or processing clean technologies, the 2023 budget introduces a refundable Clean Technology Manufacturing ITC of up to 30% of the cost of investments in new machinery and equipment used to manufacture or process key clean technologies and extraction processes, or recycle key critical minerals (Government of Canada, 2023[46]; Norton Rose Fulbright, 2023[47]; PwC, 2023[45]). These tax credits will be an important incentive for Canada’s companies to realise more green innovation. The geographical implications and benefits to rural transitions and rural development will remain to be assessed in the implementation of the credits.
Investments in basic and long-term research – The state of green innovation in Canada
National-level performance to support green innovation
Public funding is the main source for environmentally related research in Canada and is an important factor in supporting green innovation and the growth of the sector. Unfortunately, subnational data on research and development spending, as well as patent registrations, are not available. This section provides a snapshot of the spending situation at the national level. Public research spending has increased significantly in the past five years. Between 2019 and 2020, the Canadian government exceeded its goal of doubling its clean energy spending over five years, reaching CAD 786.8 million (Government of Canada, 2022[48]). Furthermore, the 2023 Federal Budget earmarked funding for a number of clean economy initiatives, including CAD 18.5 billion over 5 years for targeted programming, financing and investment tax credits. In addition, the federal government projected a potential planned investment of CAD 20 billion from the Canada Infrastructure Bank (CAD 10 billion to clean power and CAD 10 billion to green infrastructure) for major clean electricity/infrastructure projects (e.g. Atlantic Loop) (Government of Canada, 2023[46]).
Overall, more than 80% of Canada’s energy research, development and demonstration budget is allocated to low-carbon technologies, including energy efficiency, carbon capture and storage, power and storage, renewables, hydrogen and fuel cells and nuclear, with the largest shares allocated to energy efficiency (37%) and nuclear power (22%) (OECD/IEA, 2022[49]). Renewable energy is less of a target than in most OECD countries. In fact, Canada spends more of its related energy-related R&D budget on fossil fuels (12.6%) than renewable energy (11.3%) (Figure 4.6 and Figure 4.7).
Figure 4.6. Renewable public research, development and demonstration (RD&D) budget, OECD countries, 2021
Percentage of total energy public RD&D
Note: Excluding carbon capture and storage. Data are provided for 2021, unless otherwise indicated in brackets.
Source: OECD (n.d.[50]), “Green growth indicators”, https://doi.org/10.1787/data-00665-en; based on IEA data.
Figure 4.7. Fossil fuel public RD&D budget, OECD countries, 2021
Percentage of total energy public RD&D
Note: Excluding carbon capture and storage. Data are provided for 2021, unless otherwise indicated in brackets.
Source: OECD (n.d.[50]), “Green growth indicators”, https://doi.org/10.1787/data-00665-en; based on IEA data.
The number of patent applications in environmentally related technologies originating from Canada increased since the turn of the century. The rate of increase, however, was not as fast as in the France, Germany, Japan, Korea, the United Kingdom and the United States. Canada files fewer environmental patents than other major economies (OECD, 2017[51]). At the national level, most high-level climate change mitigation technologies are developed in the production and processing of goods (Figure 4.8).
Figure 4.8. Innovation in selected climate change mitigation technologies per country
Note: Number of high-value inventions, last three-year average, by inventor country.
Source: OECD (n.d.[52]), “Patents in environment‑related technologies: Technology development by inventor country”, https://doi.org/10.1787/data-00760-en.
Patent data only captures a fraction of innovation likely to be happening in the area of climate mitigation at the local and firm levels. Many innovations SMEs use to improve energy efficiency, renewable energy generation or develop circular business models are likely not captured in the data. This is also because rural innovation is often not captured by patents, as these are costly and too expensive for small firms. A broader measuring approach that includes a subnational perspective is needed to capture green innovation outside these classical terms of science and technology.
The OECD Environmental Performance Review of Canada (2017[51]) made the following recommendations to improve green innovation in Canada. Most of these still hold to this day:
Provide stable and higher public investment in R&D; shift away from indirect tax credits towards competitive and transparent grants; ensure that energy-related R&D focuses on reducing and mitigating environmental impacts from fossil fuel activities rather than encouraging increased oil and gas production; ensure innovation programming extends to renewable energy and energy efficiency and the circular economy.
Foster domestic demand for clean technology and green innovations through public procurement, fiscal incentives and information sharing; improve federal-provincial-territorial collaboration to improve access to financing for Canadian clean technology firms; encourage a greater private sector role in research, development and technology adoption (OECD, 2017[51]).
Interdisciplinary research for green rural development
Adaptation and mitigation of climate change in rural places often impact multiple aspects of community and business life. To make rural innovation more successful, it is essential to provide funding to interdisciplinary research and projects to find solutions for complex problems and look at these from different perspectives.
Experimental tools, such as regulatory sandboxes and Living Labs, are one way this can be done; these are often placed within cluster structures. Rural places have an advantage in the use of these experimental tools or other experimentation processes that can provide new public services to a changing economy (see also Chapter 3). This is because, in comparison to more urban counterparts, they have the benefit of available space, function as a rather independent system and have lower living expenses. Consequently, by creating a regulatory environment that eases other pressures on firms, individuals in rural regions may experiment more easily than in high-income, high-turnover regions. Likewise, government public innovation service delivery can benefit through learning and the use of businesses that have found the practice useful for building consensus and ownership.
Canada’s Economic Strategy Table for Clean Technology is a collaboration between the government and cleantech industry leaders. In 2018, the table released an ambitious plan to transform clean technology into one of Canada’s top five exporting industries. The strategy also considers Canada’s regulatory system inconducive to green innovation because it is based on old standards and processes. As part of a set of recommendations, the table argues for increased utilisation of regulatory sandboxes and pilots. For instance, it suggests a regulatory sandbox for the adoption of clean technologies by utilities such as energy storage, energy and power substitution, methane reduction and carbon capture (Government of Canada, n.d.[53]).
To develop and foster a culture of experimentation, Living Labs have provided good results across the globe and allowed innovators to test solutions for the future at the local level, mimicking real-life situations. The Experimental Lakes Project in Kenora District, Ontario, is such a place. The internationally unique research station encompasses 58 formerly pristine freshwater lakes where innovations are tested, manipulating an entire lake ecosystem and collecting long-term records for climatology, hydrology and limnology that address key issues in water management. Important regional development implications for the project include researchers coming to work in the facility, procurement of local services as well as interactions with schools and other communities teaching students about scientific research, sustainability concepts and career options.
However, commercial implications, spin-offs or other commercialisation are still missing from the project. The project has few links to entrepreneurs or start-ups who might be interested in developing research further. To further facilitate connections and dialogue around innovation for climate change, better match‑making needs to happen for businesses and academics to work together. In Scotland, United Kingdom, the service platform Interface takes up that role. Launched in 2015, it connects organisations from a wide variety of industries to all of Scotland’s universities, research institutes and colleges. Brokering these collaborations contributes to creating jobs, delivering new products, processes and services, and increasing turnover, profits and productivity for organisations. The service is free and impartial, and is set up with business engagement teams throughout the country that help companies build links with relevant research institutions (for more information, see also Chapter 3) (Interface, n.d.[54]).
Clusters can be great platforms to encourage greater private sector collaboration with researchers and to develop knowledge sharing around green growth from an interdisciplinary perspective. One Canadian example is Canada’s Ocean Super Cluster, a pan-Canadian initiative fostering interdisciplinary ocean research and commercialisation, derisking private investment and contributing to regional development though the support of local innovation centres (Box 4.6). The advantage of clusters is also that they allow for building competitive industries across value chains.
Box 4.6. Setting up interdisciplinary research in rural places
Canada’s Ocean Supercluster is an industry-led cluster model that is driving cross-sectoral collaboration with the aim of accelerating innovation and growing Canada’s ocean economy. It combines sectors, such as fisheries, aquaculture, offshore resources, transportation, marine renewables, defence, bioresources and ocean technologies, and works across a wide range of stakeholders, including academia, Indigenous and non-Indigenous governments, to advance Canada’s position as a global leader in ocean economy. It seeks to establish sustainable ocean innovation by building robust ecosystems that are well-connected and well-equipped to rapidly innovate, commercialise solutions and deliver on the growing ocean opportunity. For instance, it reduces risk for companies and improves the work environment by:
Increasing data exchange across ocean stakeholders to maximise value and minimise duplication.
Strengthening connections to develop commercial, sustainable ocean solutions.
Building an inclusive and highly capable workforce.
Developing solutions that also address ocean health.
Up until 2022, Ocean Supercluster supported 490 projects worth over CAD 2.1 billion and involved over 2 100 partners. The federal government budget of 2022 further proposed an additional CAD 750 million investment over the next 6 years to further support the growth and development of the clusters in addition to private investments.
Part of the cluster is regional innovation hubs. One of them is located in Holyrood, Newfoundland and Labrador, which is part of the Fisheries and Marine Institute of Memorial University of Newfoundland. Aside from education and training, it also provides a reliable and near-Arctic environment to test, train and explore advancements in ocean research.
Source: Ocean Supercluster (n.d.[55]), About Canada’s Ocean Supercluster, https://oceansupercluster.ca/about/; The Launch (n.d.[56]), Meet - Tap into the Power of the Launch at the Marine Institute, https://www.thelaunch.mi.mun.ca/meet/.
Resource-abundant places and royalty systems
Well-being in resource-abundant rural places in Canada is often closely linked to commodity price fluctuations. This is because benefits like jobs, high wages and flow-on activities to firms that support extracting activities are only supported when prices are high. In addition, most resource extraction is time‑limited because sources are finite or phased out because of their negative environmental and climate impact. It is, hence, important to ensure that wealth from natural resources is managed appropriately to ensure future prosperity, especially in these regions. It can also mean that part of the wealth generated from fossil fuel extraction is used to diversify the economy and reinvest into more future-proof innovations, including the green economy. In 2019, Norway, for instance, adjusted its national oil fund, the largest sovereign wealth fund of USD 1.2 trillion, to invest in wind and solar power projects. The fund was created in the 1990s to invest the surplus revenues of Norway’s petroleum sector. In 2022, the fund also announced its net zero goals for 2050 (WEF, 2022[57]). Newfoundland and Labrador’s new CAD 100 million Green Transition Fund is currently being set up to support projects that help advance the province’s transition to a green economy. This was made possible by a restructuring agreement related to previous offshore oil development (Government of Newfoundland and Labrador, 2023[58]).
In the Canadian context, it is important that royalty regimes are set up the right way to ensure future prosperity for communities (including their alignment with green transition objectives), especially considering the large increase in resource revenues experienced in 2021 and 2022. Some reforms are already ongoing. In 2022, British Columbia began a two-year transition to a new royalty regime that includes a windfall mechanism. Once revenues from a production facility exceed its capital costs for development, a price-sensitive royalty rate between 5% and 40% depending on the commodity type will apply (Government of British Columbia, 2022[59]). Indigenous peoples have made calls for resource development decision-making processes and royalty regimes to be adjusted to reflect the principles of the UNDRIP and a more equitable distribution of benefits.
The use of stabilisation or wealth funds can also be useful to deal with revenue fluctuations and future‑proofing. Both Alberta and Saskatchewan have run stabilisation and wealth funds. Each heritage fund established in the 1970s was aimed to run like a wealth fund (which accumulates over the longer term, while stabilisation funds primarily aim to smooth out financing over boom-and-bust cycles). Saskatchewan’s fund was made too easy to access for current spending and was scrapped in the early 1990s. Alberta’s heritage fund is still in operation but has not been consistently inflation-proofed, such that withdrawals have eroded the real value of the fund. Both provinces have introduced (and subsequently scrapped) stabilisation-type mechanisms, such as the Alberta Stabilization Fund that operated from 2003 to 2013 (Fraser Institute, 2021[60]; 2021[61]).
Overcoming the dominance of existing technologies and business operating models
Policies to support green innovation in Canada
Canada has made firm commitments in its climate plans and legislation. In March 2022, the Government of Canada released it is 2030 Emission Reduction Plan. The plan fulfils the Canadian Net-Zero Emissions Accountability Act requirement that the federal government provide detailed plans in specific milestone years explaining how the outlined measures and strategies will contribute to Canada achieving net zero emissions by 2050. It is hence a planning tool for the federal government and provides a roadmap for how Canadian emissions can be cut 40-60% below 2005 levels by 2030. The plan not only provides emission modelling and analysis, it also functions as a roadmap and outlines sector-by-sector policy actions (buildings, electricity, heavy industry, transportation, nature-based-solutions, waste, oil/gas and agriculture) to be taken.
The plan describes clean technology and climate innovation as cross-cutting opportunities. Specifically, the plan identifies clean technology and climate innovation as crucial factors to drive down emissions and generate clean economic growth. Key targets with regard to innovation are advancing deployments until 2030 on heat pumps, zero-emission vehicles, renewable electricity, efficient buildings and methane reduction. Until 2050, the government wants to promote innovations in negative emissions technologies, clean hydrogen and carbon capture. Priority actions include clear regulatory signals, innovation support, deployment investments and tax incentives (Government of Canada, 2022[62]).
The plan also identifies Canada’s clean technology industry as one of the fastest-growing segments of the economy and forecasts an employment rise of roughly 50% over the next 8 years (Government of Canada, 2022[62]). It is also stated that the clean growth opportunity extends across every part of the country and all sectors of the economy. Yet, the plan itself does not include reflections on specific needs and challenges existing in different geographies and how opportunities can be realised across diverse Canadian places. There is a need for greater considerations to be taken with regard to incorporating regional and rural needs in federal programming and initiatives. This also holds for most of the programmes run under the federal government’s actions to foster green innovation. The most important programmes will briefly be discussed and analysed in the following sections according to their compatibility with rural needs and requirements.
The Canadian Regional Energy and Resource Tables, also called Regional Tables, are a step towards a more place-based approach and seek to co‑ordinate regional priorities, funding opportunities and policy and regulatory approaches to boost economic activity to achieve net zero. Recognising that each region has a unique mix of its own natural resources, energy systems and clean technology strengths, the Government of Canada is seeking to establish joint partnerships with each province and territory, as well as formal collaboration with Indigenous partners, to identify opportunities that will transform Canada’s traditional resource industries and advance emerging ones. The Regional Tables will empower provinces and territories to choose their own economic priorities and collaborate with the federal government to implement them. Individual action plans will be created to match resources, timetables and regulatory approaches. The tables will also inform Canada’s approach to supporting workers and communities and creating sustainable jobs. To ensure a collaborative effort, the government involves multiple stakeholders, including municipalities, industry and business leaders, workers and labour representatives, academics and sector-specific experts and Indigenous communities, groups and leaders (Government of Canada, 2022[63]; 2023[64]). At the federal level, the initiative is led by Natural Resources Canada and involves multiple federal institutions, including the RDAs and the Canada Infrastructure Bank. It will help inform project funding decisions within the current federal funding mechanisms, including the Clean Fuels Fund, the Low Carbon Economy Fund and the Smart Renewables and Electrification Pathways Program (Sussex Strategy, 2022[65]).
The initial phase of the Regional Tables was launched on 1 June 2022, involving British Columbia, Manitoba, and Newfoundland and Labrador. The second phase was announced on 13 October 2022, with New Brunswick, Nova Scotia, Prince Edward Island, the Northwest Territories and Yukon. Ontario announced its participation on 25 October 2022. It will focus on growing a clean and affordable electricity grid, developing critical mineral value chains, leadership in nuclear technology deployment, accelerating clean hydrogen opportunities and advancing a sustainable and innovative forestry sector (Sudds, 2022[66]; Sussex Strategy, 2022[67]). With a total of nine regions now participating in the Regional Tables, the goal is to establish Regional Tables in every province and territory in 2023. The Regional Tables are included in the federal funding of the CAD 8 billion Net Zero Accelerator, the CAD 35 billion Canada Infrastructure Bank and the CAD 3.8 billion Budget 2022 for the Critical Minerals Strategy (Government of Canada, 2023[64]).
Criticism of the tables describes them as not truly tripartite bodies, lacking mandate, resources and authority to balance competing interests. Furthermore, they might be inclined to privilege short-term political considerations over long-term strategy. Announcing them as mechanisms to attain a “low-carbon future” has also been evaluated as diverging from truly zero-carbon goals (Mertins-Kirkwood and Kathen, 2022[68]).
The Clean Growth Hub is an important advancement but could strengthen its co‑ordination with RDAs
In order to channel all relevant information and support on “clean growth”, the Canadian government created a Clean Growth Hub, which serves as a whole-of-government focal point for clean technology, helping innovators and adopters navigate the federal system and enhance co-ordination amongst programmes. To this end, the tool provides an online inventory of clean technology-focused funding programmes. The single-window platform also provides advice from experts on navigating federal offers and tools to help plan and access support. Currently, the platform lists 35 entries, featuring a broad range of different initiatives and funding schemes for companies as well as municipalities or regional governments. Key areas of support are listed in Table 4.2. Some of the listed support is targeted to geographic areas as well as SMEs, which make up a large share of the rural economy.
Table 4.2. Federal funding opportunities listed in the Clean Growth Hub
Source: Based on Government of Canada (2022[69]), Funding and Support Opportunities, https://ised-isde.canada.ca/site/clean-growth-hub/en/funding-opportunities.
The hub aims to bring together key federal departments and partners that support clean technology innovation to simplify client services, improve programme co-ordination and enable monitoring and reporting on results. Already in 2017, the OECD noted that the various federal, provincial and territorial organisations involved in supporting clean technology innovation are required to co‑ordinate their activities more effectively (OECD, 2017[51]). The government has taken steps in this direction as a working group with representation at the federal, provincial and territorial levels, which has been established to support the co-ordination and implementation of clean technology commitments across the country as part of the hub. The goal of this is to reduce overlap and identify gaps. Considering the large variety of stakeholders involved in innovation support, this is a step in the right direction, yet, to date, the impact of the hub in co‑ordination remains largely opaque.
A limitation of the hub is that it only lists federal support offers and does not provide links to or effectively integrates the work of RDAs as well as provinces/territories. As potential recipients may easily be lost in programme offerings, the tool could become more effective by further consolidating programmes in the hub to reflect at least RDAs programmes, if not also services provided by provinces and territories. Such an exercise might also be useful to identify important gaps or overlaps that easily emerge with multiple entities working towards similar goals.
Sustainable Development Technology Canada offers important support for SMEs wanting to bring innovations to the demonstration phase but lacks impact in rural regions
Another important support for green innovation at the firm level is Sustainable Development Technology Canada (SDTC), which works to accelerate technological shifts for high-potential companies and seeks to build an ecosystem for the commercialisation of sustainable technologies. The organisation acts as a not-for-profit and was created in 2001 by the Government of Canada and supports projects related to climate change, air quality, clean water and clean soil though technological innovation by:
Funding the development and demonstration of new environmental technologies.
Fostering and encouraging collaboration among organisations in the private sector, academia, the not-for-profit sector and others to develop and demonstrate new technologies.
Promoting the timely diffusion of new technologies across key economic sectors in Canada (SDTC, 2021[70]).
In its work, the fund addresses the existing pre-commercial funding gap and helps producers to further develop and demonstrate their technologies. They do this by providing three funding streams, including seed, start-up and scale-up, which include evaluations of environmental benefits as well as general business criteria such as technology readiness, management capacity, business plan and path to market. The largest share of funding goes to energy utilisation, energy exploration and production and power generation. The latest evaluation concedes that about one-third of Sustainable Development Technology Fund recipients subsequently were able to commercialise, while larger projects and those receiving other government support have a higher probability of success (ISED, 2018[71]). Yet, it seems like the ability to raise capital remains the main barrier to reaching the market. Building the right ecosystem to support follow-up through relationships with other partners might thus be helpful in supporting this process. This also includes connecting firms to international opportunities/supply chains, as mentioned in the 2018 evaluation.
The SDTC calculates its impact on jobs generated and reduced CO2 emissions. They estimate that 20 942 total jobs can be attributed to SDTC-funded projects and that 22.6 megatonnes of CO2 emission reduction were realised in their supported projects (SDTC, 2021[70]). Within the programme, important strides are being made to support more women-led firms (41%) being included in the programme. They also aim to increase gender parity and under-represented group representation in their companies. Evaluations on geographical levels have not been carried out so far.
OECD analysis of available data on funded projects shows that most funding has an urban bias and is concentrated in a select number of provinces. Almost 80% of money spent on completed projects between 2004 and 2020 benefitted only 3 provinces: Ontario (32.4%), British Columbia (25.1%) and Alberta (21%); 14% went to Quebec and less than 3% to the remaining provinces. Current spending is even more concentrated, with 65% going only to Ontario and Quebec. Companies that form more rural constituencies seem to not be benefitting from this support as much: 75% of all allocated funding goes to the cities in the highest population quartile or, in other words, to cities with more than 250 000 inhabitants (Figure 4.9). This allocation of funding suggests there is an asymmetry between the needs of regions in addressing climate challenges and the national support provided. This means that either rural places face specific barriers to accessing these funds or the funds do not support what rural innovators are looking for and what is relevant for them.
Figure 4.9. Share of total SDTC funding by population quartile, based on the number of residences
Note: Quartiles of completed SDTC funding as a share of total funding. Completed funding refers to all projects for which funding is completed allocated. Quartiles have been obtained from the distribution of inhabitants of each location to which funding has been allocated. Quartile thresholds are 231(1st), 19 658 (2nd), 89 490 (3rd) and 249 125 (4th) number of residents.
Source: SDTC (2022[72]), About - SDTC is Committed to Full Transparency, https://www.sdtc.ca/en/about/accountability/.
One concrete measure of activating more rural entrepreneurs could be to build on the existent SDTC Innovation Happens Here campaign. It could be used for targeted outreach to rural regions and feature stories from rural places to attract attention. Furthermore, ensuring that innovators are able to access services to the programmes adequately is key. The more general RDAs could provide support where the SDTC may come short, especially in innovation diffusion and adoption of new systems. Likewise, bridging the gap between this fund and the regional and provincial support may provide more opportunities for entrepreneurs from diverse places.
Other federal programmes include the Industrial Research Assistance Program (NRC IRAP) and the Strategic Innovation Fund. The NRC IRAP provides advice, connections and funding to help Canadian SMEs increase their innovation capacity and take ideas to the market. They run a network of 130 offices across Canada. Yet, they do not have a specific cleantech or green innovation support work stream and it remains unclear if staff is able to provide support and guidance regarding these issues. In the past, Strategic Innovation Fund money has gone toward a liquified natural gas plant and other fossil fuel projects (Mertins-Kirkwood and Kathen, 2022[68]). Their link to other regional agencies like RDAs is also unclear. Canada’s NRC IRAP will join the Canada Innovation Corporation, which is currently under creation. The corporation will help Canadian businesses innovate, commercialise, grow and create good jobs in a changing global economy. This operationally independent, outcome-driven organisation will work alongside the private sector to provide targeted support to new and established Canadian firms by delivering funding and advisory services.
As part of the Strategic Innovation Fund, Canada’s Net Zero Accelerator is providing CAD 8 billion in support of projects that enable the decarbonisation of large emitters, clean technology and industrial transformation, and the development of a Canadian batteries’ ecosystem through activities such as battery cell manufacturing and electric vehicles. For example, the fund has invested CAD 400 million to support ArcelorMittal Dofasco’s transition to low-carbon steel production and CAD 25 million in Svante Inc to advance carbon capture technology for cement and hydrogen production. This stream seems to be more focused on breakthrough technologies and large firms.
RDAs have started to shift focus but could do more to support green innovation diffusion by increasing spending and mainstreaming services
Canada’s seven RDAs contribute to building a net zero economy by supporting the development of clean technology and economic diversification of SMEs and communities across Canada. The Government of Canada has committed to doubling investment in clean energy research, development and demonstration by the end of 2020, compared with 2015 levels (CED, 2020[73]). As part of this goal, RDAs have introduced measures to double the total annual support for clean technologies, bringing it to CAD 100 million per year for all RDAs. Considering the total estimated budget of all RDAs for 2022-23 is CAD 2.6 billion, the annual support for clean technologies amounts to 4% of the budget. This 4% is dwarfed by expenditure on traditional support mechanisms.2 Considering the pressing need for enterprises to transition, more funding or more integration of green innovation support schemes is necessary. While it might be that some support is not captured in these numbers, there is room for RDAs to further increase budget goals for clean technologies and other innovations that contribute to climate mitigation and adaptation.
A review of the RDA programmes and budgets shows that all agencies mention clean technologies, sustainability or green growth as part of their departmental plans for 2022, as do agencies with departmental plans for 2023-24. Still, how this translates to support or inform the individual programming remains unclear. Also, the agencies do not have clearly defined and measurable targets to support green innovation support and no specific data are collected to tack its progress. So far, the only publicly available indicator across a range of RDAs providing information is the export value of clean technologies within the province. This, however, does not allow for any conclusion on the measures provided.
In terms of programming, there is also no specific climate-related programme/mechanism and most of the climate-related innovation support is streamlined through other programmes. Some of these feature requirements demonstrate aspects of sustainability of clean technology by the recipient, such as the Jobs and Growth Funds (see Annex 4.A). One of the most important programmes for rural firms and entrepreneurs is the Community Futures Program, as one of the first entry points for many businesses (see Chapter 3 for further information). However, questions of improving energy use, support of how to calculate environmental footprints or advice on climate-friendly investments are not systematically featured, despite the fact that initiatives, such as the Sociétés d’aide au développement des collectivités network, are involved in providing support for sustainability projects in SMEs (Réseau des SADC+CAE, 2021[74]), creating a gap in services for rural enterprises interested in improving their climate impact.
A positive development is that, under the Government Cleaning Initiative, under which the RDAs also fall, green procurement has become a priority. This includes incorporating environmental considerations into purchasing decisions. This can help motivate suppliers to green their goods, services and supply chains, also in more rural places where some RDA branches are located.
Provincial- and territorial-level green innovation support
At the provincial and territorial levels, ambitions are increasing to support cleantech, which is demonstrated in various strategic plans and as a comparative analysis of all online available provincial and territorial plans demonstrates (Annex Table 4.A.2). In total, 9 out of 13 provinces/territories have a strategy that supports cleantech innovation and 4 out of those 9 have a standalone guideline dedicated to cleantech, which is not part of a larger climate or innovation strategy. Most governments of large regions (TL2) use climate strategies and plans to elaborate their ambitions and focus on innovation and clean technologies to achieve sustainable growth.
The level of detail with regard to cleantech actions is uneven between provinces and territories. Provinces like British Columbia, Manitoba, Ontario and Quebec are a step ahead and present rigorous policy actions to accelerate the green innovation process. These provinces and territories mainly focus on leveraging existing infrastructure to foster innovation and accelerate the growth and impact of green innovation. British Columbia, for instance, has very elaborate actions and measures to achieve net zero emissions. Its CleanBC plan includes a Roadmap to 2030 and the Climate Preparedness and Adaption Strategy seeking to intensify partnerships between British Columbia’s cleantech sector and traditional industries. However, sometimes strategies do not seem to be well aligned: British Columbia’s Technology and Innovation Policy Framework, for instance, only makes a small reference to the CleanBC climate plan.
A range of regions, especially those with smaller populations, do not have overarching strategies but operate individual cleantech or green innovation programmes. For instance, Nunavut is powering and heating government-owned buildings with renewable energy.
With regard to considering rural specificities, 6 out of 13 strategies or plans mention rural places and seem sensitive to rural needs. Generally, the rural focus aims to support the transition to clean sources of energy by improving, for instance, connectivity in rural areas and clean transportation options. Just as many strategies or plans (6 out of 13) target SMEs, which are important for the rural economy (see also Chapter 3). The objective for SMEs across strategies is to help them scale up and support them in the development of innovative products and processes in the cleantech sector.
Overall, the start date of many of these strategies is no older than 2021, making it difficult to capture or measure the results of the programmes as of today. Moving ahead, it would be important for those provinces and territories that do not have strategies for green innovation or cleantech to further develop these and bundle already existing programmes while assessing potential gaps and them being fit for purpose. Furthermore, following these strategies, concrete actions need to be defined and evaluated at an ongoing basis. In those provinces that have high levels of rurality, it is especially important to add a rural lens to their green innovation planning, incorporating challenges such as remoteness, transportation cost and limited access to business support and research.
Overall, the analysis of the largest policy programmes existing in Canada to foster green innovation demonstrates that the Canadian government – at all levels – has significantly increased its support and ambitions with regard to climate action and green innovation. Examples of this are the plans and strategies devised, the increasing amount of funds given and the procurement undertaken.
Still, there seems to be a mismatch between the support given to rural areas and the pressures they are under to reduce emissions and adapt to climate change. Conventional green innovation support and strategies are largely space-blind and are likely to contribute to more urban economies, overlooking some of the important existing rural opportunities. As part of that, many do not fully grasp the specific needs, opportunities and challenges existing in different geographies. Those regionally specific programmes are underfunded or lack a green innovation focus. In addition to that, it seems like policy priorities on green innovation are fragmented across federal and provincial governments and their respective departments. This causes existing funds to come from a variety of different sources, often in the form of one-off grants to individual firms. This reduces efficiency and increases red tape for beneficiaries.
The following sections will elaborate on a range of policy actions that can be undertaken to strengthen existing efforts and build on successful programmes and services that are already in place but need to be adjusted to serve rural places as well as urban constituencies.
Policy action: Assure policy coherence across levels of government and allow for more federal-provincial/territorial and Indigenous collaboration
Overall, green funding and financing mechanisms for businesses are rather comprehensive and well‑established in Canada. Yet, having many, sometimes overlapping offers or support systems is a challenge. There is a need to further improve federal-provincial/territorial collaboration to support green innovation and green growth opportunities through collaborative funding. Currently, money given to green innovation projects often comes from a variety of sources, including numerous federal, provincial, territorial and private actors. This creates a situation in which companies either have to apply to many different schemes or programmes, which includes significant red tape and transactional costs as they are faced with different application and reporting procedures, or are limited to going with just one smaller source of funding.
To increase the impact of funding and reduce administrative barriers for firms, RDAs and provinces should increase ways of matching projects so that the money they give can have more impact. Furthermore, agencies in the public sector should create simpler application procedures so applicants are not required to fill in basic information repeatedly but can apply with a profile shared amongst agencies. This could also facilitate the application for follow-up support in a context where initial checks have already been completed so that processes can move quickly.
There is an opportunity to take advantage of the already existing Clean Growth Hub to further strategically connect green innovation initiatives from the NRC IRAP, the SDTC, RDAs, provinces and territories and other innovation support stakeholders. For instance, the hub could be used to collectively close data gaps, e.g. with regards to ensuring data consistency and collecting information related to key performance indicators, as well as environmental and economic benefits to be gained from green innovation. The hub could also feature not only federal but also provincial and territorial green innovation support programmes and funds. In this matter, it could be used to streamline options, including collaboration with other funding entities, to minimise duplication and reduce the administrative burden on companies.
Policy action: Evaluating potential regional opportunities and focusing strategic efforts in priority areas
Opportunities for transitioning to a net zero economy are not always clearly visible for governments, businesses and citizens alike. This can have several reasons, including inadequate information and data, misconception – for instance, that urban regions have an advantage because they rely less on carbon-based transportation, have a large share of the service industry and younger population –or simply other day-to-day priorities. Further, services that help firms transition, for instance, by reducing energy use or changing the materials, are more frequently inaccessible to rural firms that want to calculate their footprint or get advice. Consequently, promoting a rural opportunity lens, fostering awareness and providing adequate information are important to activate potential and offer the right services and incentives to unlock greater adoption across rural geographies.
To clearly communicate opportunities for rural places during the transition, the OECD has launched the Rural Agenda for Climate Action (OECD, 2021[75]). This agenda highlights the role of rural areas in the transition to a zero carbon economy and outlines areas of opportunities to achieve climate goals and support rural development. The most important areas of opportunities are:
A rural comparative advantage in producing renewable energy due to open spaces and low population density. Rural regions are already leading in renewable electricity production, generating 38% of their electricity using renewable sources in OECD countries. Further, remote OECD regions already produce more than half of their electricity from renewable sources, providing more than a third of all clean electricity in OECD countries (OECD, 2021[9]). Building on this, rural regions producing renewable energy and becoming energy independent can also establish local innovation ecosystems and link them to new initiatives such as green hydrogen production.
Ecosystem services are present in rural paces. Rural regions cover around 80% of the territory in OECD countries and contain the important associated natural resources and biodiversity needed to sustain our lives. They produce food and energy, clean water and air and sequester carbon. Promoting sustainable land management creates new opportunities for rural regions, especially when rural dwellers are compensated for their efforts in protecting the environment, for instance, through payments for ecosystem services, which often have no economic value. Indigenous peoples throughout Canada have a particular role to play as stewards of land. There is potential for partnerships with Indigenous communities and governments to advance nature-based solutions to climate change.
Less than 10% of the global economy is circular, with a tendency to decline (Circle Economy, 2022[76]). Developing the circular and bio-based economy – using renewable resources from rural regions and helping rural businesses more efficiently close, slow and narrow resource loops – is essential to minimise environmental pressures. It also promotes more sustainable local production and offers opportunities for new business models and new markets, for instance, by using the waste from one business as feedstock for another.
Contribute to decarbonising transport in rural regions by accelerating the transition to more sustainable and innovative mobility options whilst developing and smartly connecting the required physical and digital infrastructure (e.g. renewable energy generation, green hydrogen production and fast Internet connection).
Taking stock of the Rural Agenda for Climate Action, Table 4.3 provides a list of initial consideration strategies for rural opportunities emerging from the climate and environmental transition. Many rural development plans are only partially considering opportunities that can arise from the shift to an environmentally friendly net zero economy. While not all these opportunities are equally applicable to all rural places because rural places are socially, economically, geographically and culturally diverse, understanding this diversity helps to design climate-sensitive rural policy responses. Evaluating these areas of opportunity in the local context and incorporating them into the planning for economic development at the provincial/regional and municipal levels in relation to the local economic fabric can help to design opportunity-oriented strategies.
Table 4.3. Initial aspects to consider when evaluating rural development opportunities for sustainability transitions
Source: Based on OECD (2020[77]), The Circular Economy in Cities and Regions: Synthesis Report, https://doi.org/10.1787/10ac6ae4-en; OECD (2021[75]), OECD’s Rural Agenda for Climate Action, https://www.oecd.org/regional/rural-development/Rural-Agenda-for-Climate-Action.pdf (accessed on 15 March 2023); OECD (2021[9]), OECD Regional Outlook 2021: Addressing COVID-19 and Moving to Net Zero Greenhouse Gas Emissions, https://doi.org/10.1787/17017efe-en.
In addition, opportunity assessments should be matched with transition strategies in places that require more urgent transition because they are part of the group of high-emitting regions. To speed up CO2 reduction, the Canadian government needs to develop a considerate transition strategy for places with extremely high-emitting sectors. Figure 4.3 clearly identifies high-emitting places and the underlying industries. Based on these insights, the government should commit to developing specific transition plans for these places and industries and match them with local opportunities. Such a process will need to be developed in co-ordination with multiple government levels and their respective responsibilities. While the national government can play a role in setting the framework condition for such a place-based strategy, provincial/territorial and local levels will be needed to define concrete targets and measures supported by the RDAs. Furthermore, the links between the private sector and civil society are key to long-term success.
Tackling the challenges of rural areas while also ensuring sustainable development and economic growth will require an interface between a number of policy areas such as rural development, agricultural policy, bioeconomy strategies, energy and mobility policy and research and innovation. Regions will need to develop integrated rural strategies to empower businesses and citizens to use resources sustainably through new value chains, skills and collaborative models. Each rural area is unique and will need to reflect its different resources, ecosystems and businesses. Working with its specific stakeholders, actions need to be decided and tailored at the local level, bringing all relevant actors together and making use of available financial resources.
In the case of Canada, for instance, regions such as Alberta and Saskatchewan have the greatest potential for onshore wind and solar electricity (see also Figure 4.10), while they also have the highest share of coal electricity. Offshore potential is very strong, especially on the east coast, as shown in Figure 4.11. The need to reduce these potential barriers to renewable energy development in Canada is illustrated in Box 4.7. Nevertheless, some of these potentials could be translated into rural development opportunities, especially when linked to other innovations. In Quebec, for instance, a full innovation ecosystem has been structured around wind energy in Gaspésie. Starting with the construction of the wind turbine blade factory in the city of Gaspé in 2005, the previously largely natural resources-based economy has seen significant diversification. In June 2007, the Quebec government and regional stakeholders signed an implementation agreement for the development of a cluster initiative (Créneau d’excellence en énergie renouvelable, Nuvéo) and in 2022, the factory alone was the largest private sector employer with nearly 400 employees. Due to this project, this number increased to 800 in 2023. As part of the cluster, applied research on renewable energy is also conducted at the Nergica,3 a centre of applied research that stimulates innovation in the renewable energy industry, and other local SMEs are developing around energy production, wind farm installation, transport of turbine components and assembly as well as other industry related services (environmental impact assessments, wind measurement campaigns, operation and maintenance, etc.). Overall, the wind energy cluster comprises some 30 businesses that together represent roughly 1 000 direct jobs in the administrative region.
About 200 communities across Canada rely completely on diesel fuel for heat and power. The vast majority are Indigenous or have significant Indigenous populations. Remote communities consume more than 680 million litres of diesel per year; close to two-thirds of these are used for heat, as many remote communities are in harsh environments. The Government of Canada is investing in several clean energy projects in Indigenous communities that are seeking to transition from diesel to clean energy. For example, the Fort Chipewyan Solar Project has received CAD 4.5 million toward building a 2.2-megawatt solar energy and energy storage project in northern Alberta. Three neighbouring Indigenous groups in Fort Chipewyan own Canada’s largest off-grid solar project. It will produce 20% of the community’s electricity, displacing 650 000 litres of diesel fuel per year and reducing GHG emissions by 1 743 tonnes annually. Wah-ila-toos4 supports the shift to clean energy in Indigenous, rural and remote areas that use fossil fuels for heat or power, including Northern and Arctic regions and industrial sites. The programme prioritises Indigenous-owned or -led projects, or projects with community partnerships, providing support for all project stages and a variety of technology types.
Yet, there are many other opportunities in Canada linked to green innovation. The Pacific Institute for Climate Solutions has identified seven potential clusters that could provide a strong portfolio of opportunities for Canada’s green economy. They include low-risk and some high-risk high-reward. These are assessed on the basis of their “national advantage”, which considers whether Canada is likely to develop and maintain long-term cost advantage due to: i) the availability of relevant natural resources, upstream inputs or specialised labour skills; ii) the innovation capacity, which is defined as whether Canada has an advantage due to existing firms or research clusters; and iii) market potential. This involves looking at the export potential of a particular technology, either within the North American or global market. As a result, it identified the seven following clusters (Allan et al., 2022[78]):
Manufacturing of heavy-duty zero-emission vehicles.
Green chemistry for biofuels, plastics, net zero fertiliser.
Carbon capture, utilisation and storage and direct air capture.
Alternative proteins for the agricultural sector.
Green and blue hydrogen production.
Mass structural timber for buildings.
Net zero aluminium refining.
Figure 4.10. Photovoltaic power potential, Canada
Note: PVOUT represents the amount of power generated per unit of the installed photovoltaic capacity over the long term and it is measured in kilowatt-hours per installed kilowatt-peak of the system capacity (kWh/kWp).
Source: Global Solar Atlas (2022[79]), Welcome to the Global Solar Atlas, https://globalsolaratlas.info/map?c=11.609193,8.173828,3.
Figure 4.11. Wind power potential, Canada
Mean wind power density at 100 m
Note: Mean wind power density (W/m2).
Source: Global Wind Atlas (2022[80]), Welcome to the Global Wind Atlas, https://globalwindatlas.info/en.
Box 4.7. Overcoming hurdles for renewable energy generation in Canada
Despite the potential for green innovation within the generation of renewable energy for rural areas, some provinces’ restrictions on electricity markets still impede this progress. In Canada, each province and territory has a different power market and is in charge of the production, transmission, distribution and market organisation of electricity within its own boundaries. Limited electricity trade between proximate markets reduces access to clean electricity in provinces that are still reliant on fossil fuel energy and allows them to generate very low-cost energy in others. This requires additional government support, such as competitive tenders for renewable electricity generation, feed-in tariffs, tax breaks or subsidies to encourage investment in renewable energy. Grid investments and steps to pool power with competitive markets across regions together with provincial reforms to liberalise electricity markets, could enable clean power for export and reduce barriers to renewable energy generation. The Atlantic Loop system, originally aimed to connect Quebec with electricity markets in Atlantic Canada, was set up to capture these gains; however, the project was abandoned by New Brunswick and Nova Scotia due to cost concerns and a lack of guaranteed supply of power from Quebec (CBC, 2023[81]), highlighting cost and supply concerns of these projects. Other provinces and regions should continue to pursue bilateral efforts to pool production and invest in cross-border transmission links where feasible (OECD, 2023[14]).
In addition to market barriers, regulatory obstacles might lower the profitability of renewable energy investments. While consultations are important to ensure process buy-in, they must remain relatively simple and predictable. In Nova Scotia, for instance, project developers must meet specific notification and consultation requirements and, to go ahead, they sometimes need approvals from municipal, provincial and federal authorities (Government of Nova Scotia, 2007[82]). In addition, outcomes of review processes are subject to broad ministerial discretion and, thus, can be highly uncertain. This could affect the cost of finance for clean energy developments, which are large for projects requiring comprehensive impact assessments and could increase the returns needed to make projects viable.
As some provinces maintain effective bans on offshore wind projects, some governments have made progress in addressing lengthy approval procedures. In 2022, Newfoundland and Labrador ended its ban on offshore wind projects. In order to accelerate the permit process, Alberta, British Columbia and Ontario have co‑ordinated provincial approval procedures (see, for example, the Technical Guide to Renewable Energy Approvals (Government of Ontario, 2019[83]). Additionally, the Offshore Renewable Energy Regulations is an initiative being developed by the Canadian government that aims to ensure operational safety and environmental protection regulations are in place when developing offshore renewable projects while minimising the administrative burden for industries. The proposed regulations were published in Autumn 2023 (Government of Canada, 2023[84])
Source: OECD (2023[14]), OECD Economic Surveys: Canada 2023, https://doi.org/10.1787/7eb16f83-en; CBC (2023[81]), “N.S. abandons Atlantic Loop, will increase wind and solar energy projects for green electricity”, https://www.cbc.ca/news/canada/nova-scotia/clean-power-plan-abandons-atlantic-loop-1.6992765; Government of Nova Scotia (2007[82]), Guide to Preparing an EA Registration Document for Wind Power Projects in Nova Scotia, https://novascotia.ca/nse/ea/docs/EA.Guide-Proponents-WindPowerProjects.pdf; Government of Ontario (2019[83]), Technical Guide to Renewable Energy Approvals, https://www.ontario.ca/document/technical-guide-renewable-energy-approvals-0; Government of Canada (2023[84]), The Offshore Renewable Energy Regulations Initiative, https://natural-resources.canada.ca/public-consultations-and-engagements/the-offshore-renewable-energy-regulations-initiative/25006.
Box 4.8. Creating rural development from the net zero transition – Example from Quebec
Reducing the environmental impact of aluminium production
Quebec ranks first in North American aluminum production and fourth in global aluminum production. The sector represents 30 000 jobs in nearly 1 500 companies and CAD 7.4 billion in export value in 2020.5 Production is mainly carried out in the rural regions of Quebec, namely Saguenay-Lac-Saint-Jean and the North Shore. In 2014, the Quebec government launches its first Quebec aluminum strategy. The current operating cycle is 2021-24. One of the three axes of intervention focuses on innovation and green aluminium, notably with the aim of reducing CO2 emissions. In 2019, aluminum production generated 4.5 megatonnes (Mt) of CO2eq, mainly through the production process out of a total emission in Quebec of 84.3 Mt CO2eq.
The companies running Quebec plants are focusing on producing aluminum with fewer indirect carbon emissions, particularly through the use of hydroelectricity. Launched in 2018, the Elysis project is a joint venture receiving public and private funding. Elysis aims primarily to eliminate GHGs and produce oxygen by replacing the anodes in the traditional aluminum manufacturing process with carbon-free anodes, which have a 30 times longer life span. The new process will reduce costs and increase the production capacity of an aluminum smelter, while eliminating polluting emissions.
Further reducing the needs for new aluminium is equally important. As recycling requires 95% less energy than producing primary aluminum. The AluQuébec6 cluster launched the Valorisation et recyclage project in 2020, which offers innovation opportunities to SMEs. For example, the family business Lefebvre Industrie-Al7 has conducted research and development on a process for reclaiming residues from the Alcoa aluminum smelter in Baie-Comeau on the North Shore. The AluQuébec cluster aims to measure the environmental impact of different aluminum products in the construction sector in more detail.
Source: Information provided by Canada Economic Development for Quebec Regions (CED).
Policy action: Developing subnational data on green innovation to allow for targeted policy action and demonstration of impact
In order to best evaluate regional potentials and opportunities, access to climate-relevant data is fundamental. Data on green innovation in Canada have significantly improved in recent years, especially with the introduction of the Clean Growth Hub and the collection of data on environmental and clean technology employment, GDP generated by environmental and cleantech products, and revenues from goods and services exported as well as domestic sales.
Still, data relevant to green innovation, like employment, cleantech companies, R&D spending, other government grants and patent information, are only available at the national or TL2 level. Table 4.4, for instance, only shows a limited picture of the number of green jobs. According to the Canadian government’s definition, green jobs are rather balanced, varying only between 1-2% of total employment per province.8 Using the OECD definition, the shares of green jobs are higher. This is largely based on the definition used. However, it also shows a slight variation across provinces. As a proportion of all Canadian jobs, green jobs are highest in Ontario and Quebec, followed by British Columbia and Alberta at some distance. This is not surprising as these provinces probably have the most jobs in general. Data broken down into smaller regions would be essential to better understand green growth potential and the impact of green jobs. Likewise, a more granular understanding of where patents are located and where national RD&D spending goes can significantly increase regional policy makers’ decision making.
Table 4.4. Environmental and clean technology employment Canada, 2021
1. Refers to environmental goods and services that include clean electricity from renewable sources and nuclear power generation, biofuels and primary goods, and waste management and remediation services.
2. Refers to clean technology goods and services that include manufactured goods, scientific and R&D services, construction services and support services, such as the design and construction of energy-efficient buildings for instance.
Note: This table does not include self-employment and uses the industry classification of supply and use tables. Supply and use tables are built around three classification systems: the input-output industry classification (IOIC) for industries, the supply-use product classification for products (goods and services) and the input-output final demand classification for final demand categories. The IOIC is based on the North American Industry Classification System.
Source: Statistics Canada (n.d.[85]), Environmental and Clean Technology Products Economic Account, Employment, Table 36-10-0632-01, https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=3610063201.
Place-based development policy options are limited without good data that disaggregate metropolitan and non-metropolitan regions. For instance, policy actions to foster cleantech adoption, especially in high‑emitting regions, might be missing. Consequently, improving data for rural green innovation requires that data are collected below the provincial (TL2) level. This will also provide a better understanding of the benefits rural places are getting from the current support being provided and where there are gaps in support. For example, as well as providing more granular data, the Clean Growth Hub would benefit from including data on public sector funding for R&D, as well as on patents and support provided by different departments, broadening the analysis it can provide. To assist this, RDAs could include a marker on their spending on cleantech-related projects, which could then be added to the database and included in the reporting. An example of one such initiative exists already in ACOA, where “clean growth” expenditure is being tracked.
An important data source to better understand green innovation is business surveys. Quebec has a business survey investigating green business practices at the provincial level. Data from 2019 indicate that only around 8% of companies conduct actions to preserve biodiversity and natural resources, 9% adapt to climate change-induced changes and 13.7% try to reduce emissions associated with their activities. The highest numbers are recorded in the categories of management of residual materials, with 41% of companies acting. The survey also finds that the proportion of companies with eco-responsible business practices is generally lower in the sectors of agriculture, forestry, fishing and hunting, mining, quarrying, extraction oil and gas and construction than in other sectors. It is also lower for small companies, especially those with fewer than five employees (Brehain, 2019[86]). Analysis based on geography as per rural and urban delineation is not available. In order to see if there is a geographical difference between the adoption of green business practices across geographies, it would be interesting to include this in the analysis.
Similarly, the United States is integrating a sustainability management module into its 2023 Annual Business Survey. The module addresses how businesses try to meet environmental needs, as well as several key issues concerning carbon emissions, and tries to understand whether or not organisations have taken steps towards sustainability and to what extent. For instance, questions are asked about sustainability prioritisation, objectives and investments to understand the degree to which companies are investing in green innovation. Furthermore, by collecting information on direct and indirect carbon emissions tracking, the government tries to understand how firms are advancing in carbon emissions reduction and shaping future plans for decarbonisation. The survey also makes it possible to understand and measure the environmental benefits the business introduced via innovations and if they were obtained during the end user’s consumption or use of a good or service. Examples of the questions are provided in Box 4.9.
Box 4.9. Survey-based firm green innovation measurement in the United States
Below are two examples of questions included in the United States Annual Business Survey innovation module
Innovation and environmental benefits within this business”.
1. During the three years from 2020 to 2022, did this business introduce innovations with any of the following environmental benefits obtained within this business? If yes, was the extent of that contribution a great deal or not?
Innovation and environmental benefits during use of goods or services
2. During the three years from 2020 to 2022, did this business introduce innovations with any of the following environmental benefits obtained during the end user’s consumption or use of a good or service? If yes, was the extent of that contribution a great deal or not?
Source: U.S. Census Bureau (2022[87]), Information for Respondents, https://www.census.gov/programs-surveys/abs/information.html.
Policy action: Providing the right support in rural places and their businesses
SMEs have a critical role to play in the transition to carbon neutrality. Even though individual SMEs may have a small carbon footprint, their aggregate impact is likely significant. Information and research on the contribution of SMEs are still scarce but suggest that small firms worldwide make up 50% of GHG emissions (ITC, 2021[88]). United States- specific research indicates that small businesses contribute to USD 60 billion in annual energy costs and nearly half a billion tonnes of annual carbon emissions, equivalent to powering half of the homes in the United States every year (Hill, 2015[89]). Furthermore, SMEs and entrepreneurs are needed as a source of innovation, developing technologies, processes and services to address environmental challenges (OECD, 2021[90]). Focusing on SMEs is important in the rural context, as companies in rural places are often smaller than in urban areas.
Across the OECD, a range of factors push SMEs into reducing their environmental footprint. These include:
Pressure for cost reduction due to increased energy prices or carbon tax.
Changing consumer demands.
Larger firms looking to develop greener supply chains.
Within that process, SMEs continue to face different challenges, including a lack of knowledge on changing environmental requirements, limited access to skills, finance and technologies as well as red tape, which prevents SMEs from greening their operations or scaling up green products and services. The business case for SME greening is often complex and insights on how to best support this are not fully developed. In addition, the COVID-19 pandemic and the recent price spikes in energy have left some SMEs with limited resources and reduced consumer demand. This makes SMEs vulnerable and further reduces their capacity to engage in greening activities requiring investments (OECD, 2021[90]).
In the Canadian context, SMEs in the Quebec region have specifically identified a range of challenges in relation to the environmental shift (see Table 4.5). The challenges cover a broad spectrum, from accessing markets and commercialisation to funding, technical capabilities and access to business ecosystems. They also highlight the different communities – depending on the local climate and transition impacts. Similar research is also happening in other provinces/territories. For instance, in Atlantic Canada, the Atlantic Economic Council is trying to understand the impact of the shift to net zero emissions (Atlantic Economic Council, 2023[91]).
Table 4.5. Challenges of the environmental shift for SMEs in Quebec
Source: CED (n.d.[92]), Issues, Challenges and Business Needs, Canada Economic Development for Quebec Regions.
Although Canada has put in place an increasing number of policies to foster green growth, these are not always well adapted to SMEs and entrepreneurs located in rural places. As argued earlier, many policies have a bias towards urban areas, where larger businesses and research institutions are present, and ecosystems function based on agglomeration. These services offer important services, including information and advice on regulations, and offer grants and loans, but often do not consider aspects like technical capabilities present in rural places, the need for funding in the pre-commercialisation phase and lack of focus on specific industrial sectors and related environmental issues. Accelerating the uptake of greening by SMEs requires mainstreaming rural issues into broader SME and entrepreneurship policy frameworks and ensuring that climate and environmental policies take the perspective of SMEs better into account.
To boost green innovation support, federal and provincial governments should make an effort to improve access to resources, especially to provide financing where private investors shy away to allow for more risks to be taken, develop technical knowledge provision and allow the sharing of information for Canadian rural clean technology firms and other kinds of green innovations. A range of actions could include:
Streamlining green innovation across all programming areas of RDAs and aligning mechanisms related to innovation with net zero emissions targets and contributions to climate change mitigation. This could include introducing requirements for demonstrating the firm’s compatibility with net zero‑emission targets or positive environmental impact as a condition for funding.
Leveraging the existing Community Futures Programs to provide green services in rural places where no other measures can reach and thereby help fill some of the service gaps and bundling capacities. This could be done by featuring business support on innovation for climate change, including preparing businesses to assess possible climate risks (physical, price, product, regulation), improve energy and waste efficiency in their businesses and across value chains, helping them to source power from renewable resources or minimising waste, save and integrate Indigenous knowledge, support green innovation energy, water and materials, recycle and reuse materials or waste, while offering green products and services. An example of such a service on the island of Gotland in Sweden can be found in Box 4.10.
In remote areas where services are not available, increased (online) peer-to-peer learning could be used to substitute services like the Community Futures Program. RDAs could actively pair and match different businesses that are looking to learn from each other.
Sustainable Development Technology Canada (SDTC) should consider developing a rural SME programme that specifically targets rural entrepreneurs and tries to address specific rural needs through funding, giving them remote access to their networks and services. A dedicated communications campaign targeted at rural innovators might also increase participation from these constituencies.
Box 4.10. Energicentrum Gotland, Sweden: Enabling local transitions
Energicentrum Gotland was established in 2021 as part of the regional development strategy and the Energy Agency’s government mission, which aims for the region of Gotland to operate on a fully renewable energy system by 2040. Energicentrum Gotland is one of Sweden’s 16 regional energy offices. It is owned by Region Gotland.
The centre is set up as a knowledge and capacity-building hub that acts as an information centre and advisory service. It is channelled into the following four workstreams: i) mobility; ii) self-production and energy communities; iii) energy efficiency; and iv) storage and flexibility.
The goal is to enable people and businesses on Gotland to transition to an efficient and sustainable energy system. The centre advises companies, organisations and private individuals actively working with their own buildings and activities across a broad range of subjects:
Hydrogen installations for both storage- and fuel purposes.
Electro- and biofuel-protection.
Electrification systems for marine- and transport sectors.
Artificial intelligence technologies to support behavioural-based applications in the energy system.
Technology for inductive charging within the existing road network.
Energy infrastructure for electric aviation and energy communities.
Energicentrum Gotland’s centre of action is to facilitate active communication and participation with the island’s public and business community, as well as to provide individualised support. Its platform connects people to share best practices and organises events linked to energy transition. The service is free and impartial. The overall goal is to inspire and increase the level of knowledge, commitment and willingness to invest in and convert to a sustainable energy society.
Source: Energicentrum Gotland (2022[93]), Homepage, https://energicentrum.gotland.se/./ (accesed on 15 June 2023).
Policy action: Enabling Indigenous-led green innovation
Approximately 1.7 million people in Canada self-identify as Indigenous, which is 5% of the total population. In Canada today, the Constitution Act (1982) recognises three groups: Indians (now referred to as First Nations), Inuit and Métis. This recognition includes “existing aboriginal and treaty rights” (Section 35). Indigenous rights under Section 35 vary from group to group, creating constitutional and legal divisions (OECD, 2020[94]). In May 2016, Canada also announced its full support for the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP). The UNDRIP is an international human rights instrument that affirms the minimum standards for the survival, dignity and well-being of Indigenous peoples throughout the world. Among other standards, Article 3 of the UNDRIP recognises Indigenous peoples’ right to self-determination, including the right “to freely determine their political status and freely pursue their economic, social and cultural development” (UN, 2007[95]). Article 4 affirms Indigenous peoples’ right “to autonomy or self-government in matters relating to their internal and local affairs” and Article 26 states that “Indigenous peoples have the right to the lands, territories and resources which they have traditionally owned, occupied or otherwise used or acquired” (UN, 2007[95]).
On 21 June 2021, the UNDRIP act received royal assent and immediately came into force in Canada. The act requires the Government of Canada to work in consultation and co‑operation with Indigenous peoples to co-develop an action plan to achieve the objectives of the UN declaration, take measures to ensure that federal laws are consistent with the declaration and report annually on progress. The action plan must be completed by June 2023.
OECD research has shown that the Indigenous population is more likely to be located in predominantly rural regions. Approximately 60% of Canada’s Indigenous peoples live in rural regions, compared to 27% of the non-Indigenous population (OECD, 2020[94]). This makes Indigenous peoples particularly relevant for rural policy making, especially in those areas with otherwise minimal territorial occupancy. The support of Indigenous peoples is hence critical to the successful achievement of rural innovation in Canada and the potential innovation can play an important role in contributing to mitigation and adaptation objectives.
Indigenous peoples are particularly influential contributors in climate change debates because they are governors of significant parts of Canadian land. Since the announcement of the Government of Canada’s Comprehensive Land Claims Policy in 1973 and the establishment of the British Columbia Treaty Process in 1992, 29 comprehensive land claim and/or self-government agreements have been ratified and brought into effect. They cover over 40% of Canada’s land mass (Government of Canada, 2016[96]). Treaty settlement land granted through comprehensive land claim agreements with the Crown or reserve land under the First Nations Land Management Act ensures autonomy over the management of land and natural resources located within it. Furthermore, many Indigenous groups share the responsibility and the authority over land issues with Canadian government authorities in joint institutions for environmental governance, such as natural resource boards and land councils or for natural reserves.
A significant amount of work has been done between Canada and Indigenous partners to work jointly on climate change commitments. Since the launch of the Pan-Canadian Framework on Clean Growth and Climate Change, Canada, in collaboration with leaders of the Assembly of First Nations, the Inuit Tapiriit Kanatami and the Métis National Council, established three distinctions-based Senior Bilateral Tables on Clean Growth and Climate Change. Since then, First Nations, Inuit and Métis partners have been working in conjunction with the Canadian government at these tables to ensure that Indigenous peoples are full and effective partners in climate action and support collaborative planning and decision making, information sharing and engagement on federal climate measures. The First Nations-Canada Joint Committee on Climate Action has released three annual reports to the Prime Minister of Canada and the National Chief of the Assembly of First Nations. The latest publication sets out five areas of focus:
Advance First Nations’ full and effective participation in clean growth and climate change programmes.
Ensure Canada’s climate solutions build on First Nations climate leadership and promote its full inclusion in emerging climate actions.
Promote the meaningful participation of First Nations in the carbon pollution pricing system.
Monitor progress on First Nations climate leadership and the full and effective participation of First Nations in climate change programmes.
Foster intergenerational and intersectional dialogue on climate change (JCCA, 2021[97]).
Furthermore, more than 20 collaboration mechanisms have been established with Indigenous partners across departments involved in Canada’s strengthened climate plan “A healthy environment and a healthy economy” (2020), covering a diversity of objectives (from project selection to policy advice), scales (national, regional and local), responsibilities (from co-management to engagement) and areas of focus (adaptation, conservation, climate and infrastructure) (Environment and Climate Change Canada, 2020[98]). The Canadian Net-Zero Emissions Accountability Act formalised this trend by creating statutory requirements to engage and take into consideration Indigenous knowledge and the UNDRIP when setting GHG emissions reduction targets. In doing so, the act renewed the impetus for a renewed nation-to-nation, government-to-government relationship on climate with First Nations, Inuit and Métis.
Creating space for Indigenous-led processes, governance, decision making and knowledge systems is essential to the success of Canada’s response to climate change as well as economic reconciliation. This also means that working with First Nations, Inuit and Métis is essential to exploring how institutions, governance practices and jurisdictional arrangements can enable green innovation created by and for Indigenous peoples.
Making room for Indigenous voices helps bring forward aspects of policy that complement solutions that have traditionally been the focus of non-Indigenous governance structures, such as technological solutions, clean growth, economic incentives and cost-benefits analysis. Evidence demonstrates that mobilising Indigenous knowledge (see also Box 4.11) in research and decision-making reinforces Canada’s response to the various impacts of climate change, including on culture, food and water security, resource co-management, conservation of lands and waters, economic development, community infrastructure, and health and well-being (Environment and Climate Change Canada, 2020[99]). Studies have also shown that businesses utilising Indigenous knowledge in their processes are proven to be in line with government goals in sustainability and environmental protection (Kusumastuti et al., 2022[100]). The increasing number of Indigenous Protected and Conserved Areas (IPCAs) and Indigenous Guardians demonstrate clear conservation and biodiversity benefits (equal or higher than traditional protected areas), social and economic benefits, and positive returns on investments (i.e. estimated to vary between a minimum of two-to-one and a maximum of ten-to-one) (SVA Consulting, 2016[101]; EPI, 2016[102]). While initially focused on conservation objectives, IPCAs and Indigenous Guardians offer great potential to advance nature-based solutions, nature-based carbon sequestration, carbon offsets and climate monitoring objectives, all of which are currently being explored or implemented in partnership with Indigenous communities.
In addition, a growing number of successful initiatives have advanced approaches to weave Indigenous and non-Indigenous knowledge systems together. A few examples are portrayed below:
The Geographic Information System programmes by the Aurora Research Institute (ARI, 2022[103]). Adopting the “two eyes” approach of combining Indigenous and Western knowledge (Wright et al., 2019[104]), the programme researchers learn from community elders how to observe patterns in wildlife and the landscape to grasp changes in the ecosystem while also utilising scientific methodology for quantitative analysis. This integrative approach allows for a fuller understanding of the effects of climate-driven changes in local arctic conditions. Another facet of the co‑operation offered is employment opportunities for local workers to leverage their knowledge of the land to help collect permafrost data. In this way, local knowledge is incorporated into evidence-based policy making, which is crucial in mounting sufficient safeguards against events such as rising sea levels and permafrost thawing.
Another partnership between Indigenous communities and the Canadian Coast Guard relates to coast rescue and marine safety. The Indigenous Community Boat Volunteer Program provides funding to coastal Indigenous communities in ten provinces and territories to buy boats and marine safety equipment in view of strengthening marine search and rescue and promoting marine safety (Government of Canada, 2022[105]). As coastal Indigenous communities have expertise in navigating local waters, they can often act as first responders in emergency situations. With the birth of new Arctic Sea routes driven by climate change, local knowledge is more important than ever to respond to evolving waterways and conditions. This partnership reinforces the participation of Indigenous communities in water management and increasing traffic in the Arctic Sea.
The Aboriginal Aquatic Resource and Oceans Management (AAROM) programme assists Indigenous groups in acquiring the administrative capacity and scientific/technical expertise to facilitate their participation in aquatic resource and ocean management and encourages the establishment of collaborative management structures that contribute to integrated ecosystem/watershed management and planning processes. The programme includes 33 departments, including 15 in British Columbia, 12 in Atlantic Canada/Quebec, 3 in the Northwest Territories, 1 in the Yukon and 2 national organisations. AAROM is unique among federal Indigenous programmes in that it provides core and relatively secure funding for non-treaty-based science and technical activities.
Box 4.11. Indigenous knowledge
Indigenous knowledge is a term used to describe understanding, skills and philosophies developed by societies with long histories of interacting with their natural surroundings. It is cumulative and diverse, building on the experiences of previous generations and evolving in the context of contemporary society. It can be transmitted through storytelling, experience, intention and connectedness. Indigenous knowledge is integral to a cultural complex that also encompasses language, governance structures, resource use practices, social interactions, rituals and spirituality. In practice, the term can refer to a distinctive political and social perspective and set of interests rooted in shared history.
Indigenous knowledge originates from the intimate relationship that Indigenous peoples have with the natural environment, which serves as the foundation for their economic, cultural, social and subsistence practices. It synergistically complements science-based approaches by relying on long-term observations, incorporating larger sample sizes, involving harvesters as researchers and occasionally providing a valuable cross-reference for scientifically observed changes in resources and ecosystems. Indigenous peoples are able to conduct land use studies and reclaim the traditional stories, relationships and governance systems rooted in their deep connection with the land. Through this intergenerational experience and observation, Indigenous peoples were amongst the first to notice climate change and have critical knowledge to manage and adapt to it.
The significant contributions of Indigenous knowledge to environmental, regulatory and resource development decisions have been internationally recognised. When integrated into the decision-making process, the distinctive perspectives and inherent value of Indigenous knowledge enrich the outcomes of the discussions. Indigenous peoples’ observations and knowledge about the environment provide an important source of information on climate change. Indigenous knowledge systems can offer a more holistic approach to the environment that may complement the disciplinary nature of western science. It operates at a much finer spatial and temporal scale than science and includes understanding how to cope with and adapt to environmental variability and trends. Indigenous knowledge thus makes an important contribution to climate change policy and science by observing changing climates, adapting to impacts and contributing to global mitigation efforts.
Source: OECD (2020[94]), Linking Indigenous Communities with Regional Development in Canada, https://doi.org/10.1787/fa0f60c6-en; Indigenous Climate Hub (n.d.[106]), Traditional Knowledge (TK) and Climate Change, https://indigenousclimatehub.ca/traditional-knowledge-tk-and-climate-change/; NIEDB (2022[10]), National Indigenous Economic Strategy for Canada 2022, https://niestrategy.ca/wp-content/uploads/2022/12/NIES_English_FullStrategy_2.pdf.
Going forward, Canada should advance on championing Indigenous climate leadership in the spirit of implementing the UNDRIP, advancing reconciliation with Indigenous peoples and upholding Indigenous rights in economic reconciliation. This includes continuing to remove barriers to self-determined climate action and providing adequate funding to address capacity constraints in an effort to emerge as successful, large-scale project leaders on green innovation, by:
Strengthening the role of Indigenous peoples at the climate change and innovation policy nexus consistent with the UNDRIP. Rural green innovation endeavours need to seek stronger partnerships and collaboration with Indigenous communities and First Nations, Inuit and Métis governments. This includes supporting Indigenous-led solutions and meaningfully incorporating sources of local and traditional knowledge.
Promoting Indigenous clean energy strategies, support for Indigenous clean energy capacity building and providing long-term financial support for the implementation of Indigenous climate strategies and Indigenous participation in Canada’s carbon pricing regime.
Ensuring that Indigenous entrepreneurs have access to capital and enabling programmes to fully participate in the Canadian green economy.
Creating information and gateway platforms for Indigenous entrepreneurs to navigate the range of resources and services available in the field of green innovation.
Ensuring the potential of the IPCAs and Indigenous Guardians is used to advance green innovation around nature-based solutions.
Diffusion and take-up on green innovations
Policy action: Empowering local governments and local communities to take action and create local markets
Many rural and remote regions in Canada have an abundance of renewable resources. However, rural and remote areas in Canada are not yet advancing enough to develop a sustainable zero carbon economy. At the same time, strategies to mobilise these resources also need to tackle the distinct challenges of rural areas. As mentioned earlier, rural places have less access to essential infrastructure and services, including educational facilities, healthcare, public transport and job opportunities, than their urban counterparts. Rural places in Canada also see a shift in demographics as people move to where these opportunities are available. At the same time, rural populations tend to have high levels of voluntary and collaborative activities within the community. These strengths create significant opportunities for making use of collaborative models to unlock opportunities in industries such as the bioeconomy, renewables and decarbonised mobility.
Like all government levels, local governments also have a role in fostering local domestic demand for clean technology and green innovations through public procurement, fiscal incentives and information sharing. For instance, municipalities and other local government agencies can ascribe to sourcing certified sustainable resources to foster change in the local business community.
Currently, climate action at the local level varies greatly across Canada. Climate action and municipal activities often reflect provincial policy lines in the way climate considerations are featured in local development plans or how climate goals are featured in land use planning. In British Columbia, for instance, the province just launched a specific programme to support local government bodies in creating local climate projects in 2022. As part of the programme, they also provide information for different types of local governments, from small (below 50 000 inhabitants) to large (Box 4.12).
Box 4.12. British Columbia’s CleanBC Local Government Climate Action Program
British Columbia's Local Government Climate Action Program provides local governments and Modern Treaty Nations with predictable and stable funding to support and accelerate the implementation of local climate action. It was designed considering input from local governments, the Union of British Columbia Municipalities (UBCM), Modern Treaty Nations and the independent Climate Solutions Council.
From 2022 onwards, British Columbia’s funding for the programme amounts to CAD 76 million over 3 years. The distribution of funds to eligible governments will be determined by the population of each town and a base amount. Governments that take part have to provide evidence that money was used for initiatives that further the goals of the CleanBC Roadmap to 2030 or of the Climate Preparedness and Adaptation Strategy. To be eligible, participating governments are required to complete a number of reporting requirements and demonstrate matching funding or in-kind contributions for local climate initiatives equal to 20% of their provincial allocation.
To meet unique community needs, there are three different webinars designed for small local governments, large local governments and Modern Treaty Nations. Overall, the programme enables community-specific action to reduce emissions and increase climate resilience and knowledge sharing among local governments and Modern Treaty Nations.
Source: Government of British Columbia (2022[107]), Local Government Climate Action Program, http://www.gov.bc.ca/local-government-climate-action-program.
The Federation of Canadian Municipalities plays an important role in setting climate goals at the local level across the country, enabling local governments to access resources, share experiences and learn from best practices to achieve those goals. Their Green Municipal Fund (GMF) is a crucial element, offering funding, transferring knowledge and developing skills to help municipalities switch to sustainable practices faster. One promising example is the Regional Energy Coach pilot that encourages affordable housing providers to think big about innovative sustainability solutions. Coaches offer comprehensive project management and technical support and provide walk-through energy assessments and one-on-one coaching to help municipalities deliver transformative projects. The current urban-rural balance analysis of the GMF shows an approximate match between the percentage of funding received and the percentage of the population.9 The GMF works to support rural communities’ participation in their capacity and knowledge-sharing initiatives and to mitigate particular hurdles for them to overcome, like long travel times or limited digital infrastructure. It should also be acknowledged that funding reflecting per capita data does not account for geographical challenges such as limited available skills or increased costs for retrofitting buildings in remote communities.
As local governments are at different stages in their zero carbon transition, it might also be useful to create communities of practice based on different levels of transition. Since 2021, the Tamarack Institute is hosting Community Climate Transitions, a collective impact movement aimed at supporting a just and equitable climate transition. This is done by hosting a community of practices, webinars and events, producing publications that share our learnings and supporting our members with specialised coaching. The Climate Transitions Cohort is a unique opportunity for communities across Canada to learn from some of the most promising emerging solutions and collaborative governance innovations to build and/or advance a climate action plan that is unique to their local needs (Tamarack Institute, n.d.[108]).
Figure 4.12 provides a suggestion on different stages for villages or towns to move towards a zero carbon future, starting with low-hanging fruit and then moving to more advanced systems. Guiding communities based on their level of experience can be useful to improve the effectiveness of proposed measures within communities and provide a pathway of development beyond individual measures that are developed in a fragmented or piecemeal fashion. As part of a net zero pathway, municipalities can also be incentivised to innovate further and move up the ladder faster.
Existing federal government training initiatives help close gaps in capacity in smaller municipalities, including through Natural Resources Canada’s Building Regional Adaptation Capacity and Expertise (BRACE) programme. Funding is available for local adaptation efforts, including through Infrastructure Canada’s Disaster Mitigation and Adaptation Fund, which the federal government has committed to top up. Calls on the fund are expected to increase as communities move from assessing risks to implementing adaptation plans (Canadian Climate Institute, 2022[109]). Technical support can also help local authorities assess the costs and benefits of alternative adaptation investments.
Figure 4.12. Towards a net zero carbon village system
Source: Rural England (2021[110]), Opportunities and Challenges for Rural Communities from Net Zero Carbon Legislation.
Policy action: Creating role models and information sharing on leading practices
In addition to hard data and clear economic incentives, for instance through cost savings or carbon pricing, “softer” instruments also need to be given close attention, including client education and information. These can include:
Communication campaigns to show the impacts of green innovation on regional and national economies, how citizens and different actors can contribute to it and share success stories.
A dedicated website to share knowledge and good practices concerning green innovation as part of the Clean Growth Hub.
Events for knowledge sharing, networking and the promotion of green innovation at the local level, as well as conferences and seminars in schools and universities.
Use of social media to provide quick updates and information on the topic and related events.
Storytelling and the creation of role models are powerful tools to inspire opportunity-oriented thinking from green innovation. Methods to foster this kind of outreach are currently present in the SDTC Innovation Happens Here campaign and through RDA websites. The SDTC campaign portrays how regular people engage in cutting-edge clean technology research. The short film portrays entrepreneurs who are supported by the programme and how they strive to innovate while also following environmental values. Similarly, the CED provides a success story page that allows for filtering for “green economy” and covers company portrayals such as from Kuma Brakes located in the Gaspé Peninsula (see also section above). While these examples are a good step in the right direction, more could be done to advocate for rural climate innovation.
With the support of the RDAs, the federal government could develop a dedicated rural climate innovation campaign, showcasing leading practice examples from different parts of the country that demonstrate how innovation for climate change can have a positive impact on regional development. It could also help explain various concepts like net zero, ecosystem services or circular and bioeconomy that might be unfamiliar or loaded with misconceptions. For instance, the concept of circular economy is often misconceived as just a synonym for recycling. While displaying the relevant actors, it should also explain and link to funding opportunities and advisory support accessible to businesses that would like to contribute.
Locally, events and awards are also good opportunities to build awareness as well as provide information and deal with potential misconceptions. Examples from Germany and Scotland can be found in Box 4.13. Furthermore, certificates and labels can enhance trust and lead to more sustainable consumption choices, which will again stimulate green growth. Canada could consider introducing a label for cleantech or green innovations.
Box 4.13. Building capacity and enthusiasm for the bioeconomy and circular economy
The circular economy in Glasgow, Scotland
Since 2015, the Glasgow Chamber of Commerce hosts Circular Glasgow and is responsible for delivering this initiative alongside Zero Waste Scotland, Glasgow City Council and key stakeholders. Circular Glasgow aims to build best practices and capacity on the circular economy across Glasgow businesses, helping them identify opportunities to support and implement circular ideas. This is done through: workshops and a series of knowledge-sharing business-to-business networking events; Circle Assessment, a tool which helps businesses understand opportunities to become more circular; and the Circle Lab, an online hackathon event to find a circular solution to local challenges. The Circle Lab sought solutions to make Glasgow’s event industry more circular. From over 200 contributions, the 3 winning ideas include a deposit-based reuse system for food and drink containers, circular designs for event marketing and branding, and a scheme that will repurpose organic waste into energy and fertilisers. Ways to turn these ideas into pilot projects are now being explored. The city is currently developing a circular economy roadmap.
BioDENKER bioeconomy innovation prize, Germany
The phase-out of lignite coal marks a turning point for the regional coalfield in the state of North-Rhine-Westphalia, Germany, away from the fossil-based linear economy and towards a circular bioeconomy. With good conditions for a high-yield agricultural and food industry, strong regional industries, proximity to cities and an extraordinarily dense research landscape, the Rhinish mining area is very well positioned to work towards a sustainable bioeconomy.
With the aim of promoting a sustainable bioeconomy in young companies, the BioDENKER start-up award is looking for courageous people and innovative, bio-based business models. At the premiere in 2021, a total of 23 start-ups applied for this award. The winner, EEDEN GerMan from Mönchengladbach, uses a green, chemical upcycling process to recycle used cotton-based textiles again and again, without any loss of quality. Textiles that largely end up in landfills or are incinerated thus find their way back into the (circular) economy.
Source: OECD (2020[31]), The Circular Economy in Cities and Regions: Synthesis Report, https://doi.org/10.1787/10ac6ae4-en; Biooekonomierevier (2021[111]), Bioökonomie im Business? Zeigt uns Eure innovative Geschäftsidee!, https://www.biooekonomierevier.de/BioDENKER_Startups.
Policy action: Providing the right skills for clean innovation
Adaptation and mitigation pressures and opportunities are different across geographies. Depending on the respective geographical area, there will be both employment gains and losses due to the transition to net zero GHG emissions. Employment in sectors that may be subject to job loss by 2040 as a result of policies to reduce emissions in line with the climate objectives in the Paris Agreement are located all over Canada. While oil and gas extraction activities may not be at risk of employment loss across all OECD countries by 2040, they are more likely to be at risk in Canada. Oil is extracted at higher costs in Canadian regions than in other oil-supplying regions. Policies to drive GHG emissions to net zero will first drive the highest-cost producers out of the market. Therefore, investment in oil extraction risks becoming stranded, resulting in substantial economic loss. Employment in the sector is particularly strong in Alberta and Saskatchewan. Canadian regions with the largest shares of employment in the oil and gas extraction sector have higher GDP per capita and lower long-term unemployment; however, relative poverty is high in Alberta (Figure 4.13)
Figure 4.13. Regions with employment in the extraction of crude petroleum, natural gas and manufacture of coke and refined petroleum products, and regional socio-economic indicators
Large regions (TL2) with employment in selected sector, 2017
Note: In this figure, poverty risk is assessed from individual survey responses indicating there have been times in the past 12 months when they did not have enough money to buy food that they or their family needed. Long-term unemployment is defined as having been unemployed for 12 months or more.
Source: OECD (2021[9]), OECD Regional Outlook 2021: Addressing COVID-19 and Moving to Net Zero Greenhouse Gas Emissions, https://doi.org/10.1787/17017efe-en.
The transition to net zero GHG emissions needs to be just and avoid social hardship (see also Box 4.14). This also means creating new green jobs, ideally where workers are being laid off, and equipping the latter with the right skills to work in and around jobs developing and working with green innovations. The prospect of green jobs in Canada is good but differences between regions are difficult to grasp.
To be able to serve future green skills needs, workers need to have the right skills and knowledge. Research indicates that the cleantech sector is already facing workforce shortages. This makes competition even harder. The most difficult occupations to hire were identified as engineers, designers (in special technology fields), technicians, drivers, equipment operators, managers, maintenance staff and craftsmen (ECO Canada, 2020[112]). While employers are trying to address these shortages individually, it is important for Canada to work on more comprehensive solutions to bring together industry, government and academia to ensure that the needed skills are available to the whole sector. Employers surveyed by Eco Canada (2020[112]) also expressed the need for additional training and certifications in the areas of environment, waste management and recycling, energy efficiency, alternative energy, sustainability and health and safety to fill skills needs.
Launched in 2017, Canada’s Innovation and Skills Plan aims to strengthen innovation and improve Canada’s position in the global race for competitiveness by making sure its talented people have the right tools to succeed in a new economy (Government of Canada, 2017[113]). It covers a range of measures, including investments in childcare and early learning, more flexible work arrangements and an increase in the affordability of post-secondary education, including for adult learners to learn new skills. It also focusses on advancing digital skills, coding and promoting science, technology, engineering and mathematics (STEM) among young Canadians. Part of the strategy is also support for the cleantech sector, including access to finance for investments and research for clean energy and transportation (Government of Canada, 2017[114]). Despite its focus on innovation and cleantech, the plan does not specify any measures to advance the development of green skills in the Canadian workforce and does not mention an assessment of future skills needs for the industry it is seeking to build.
In 2023, the Government of Canada released the interim Sustainable Jobs Plan that lays out the federal government plan to help train workers for sustainable jobs. Sustainable jobs are those of a net zero emissions economy but they also refer to a just transition for workers and fair income, job security, social protection and social dialogue. The interim plan for 2023-25 seeks to lead workers away from the fossil fuel industry and towards clean energy and sets an initial frame for the Sustainable Jobs Action Plan that will be released every five years starting from 2025. The first Sustainable Jobs Action Plan was released in June 2023.
Ten key priority areas define the interim plan:
The first two key priorities set out the governance of the plan. First, a Sustainable Jobs Secretariat will co‑ordinate government policies across the government and be in charge of developing future sustainable job plans. The exact composition and mandate of the secretariat are still to be defined.
Second, the Sustainable Jobs Partnership Council will act as an advisory body for the ministers overseeing sustainable jobs policy. The council will formalise and facilitate a social dialogue between the public sector, the private sector and the labour movement across all regions of Canada, including rural and remote communities.
As a third key priority, the interim plan seeks to develop economic strategies through the Regional Energy and Resources Tables (hereafter the Regional Tables) to identify, prioritise and pursue opportunities for sustainable job creation and economic growth. The Regional Tables will inform Canada’s approach to supporting workers and creating sustainable jobs.
Fourth, the interim plan will introduce a sustainable jobs stream under the Union Training and Innovation Program as well as a Sustainable Jobs Training Centre. The centre will bring together workers, unions, employers and training institutions across the country to examine the skills of the labour force today and forecast future skill requirements to help 15 000 workers upgrade and gain green skills. An additional 20 000 apprenticeships are expected to be created in the labour market.
As a fifth point, the interim plan intends to advance funding for skills development towards sustainable jobs with an investment of CAD 802.1 million over 3 years.
Moreover, the Sustainable Jobs Plan will improve labour market data collection, tracking and analysis, as well as facilitate the creation of indicators that can help to track the creation of sustainable jobs. This initiative will be run in partnership with Statistics Canada.
The plan commits to the principle of free, prior and informed consent for establishing a National Benefits-Sharing Framework, ensuring that Indigenous communities directly benefit from major resource projects. The plan will also directly promote Indigenous-led solutions in the clean energy space projects across Canada.
The interim plan will increase investor motivation and draw in industry leadership to support workers. It will require substantial investment beyond the public sector and involve private sector capital and expertise.
International co‑operation also plays a crucial role in the creation of sustainable jobs. Through the interim plan, Canada will be involved in the exchange of best practices and valuable insights through bilateral and multilateral channels, specifically pertaining to the development of green jobs (Government of Canada, 2023[115]; 2023[116]).
The final key priority includes introducing legislation on sustainable jobs. In June 2023, the Minister of Energy and Natural Resources advanced this key action area by introducing the Canadian Sustainable Jobs Act, which includes a framework for accountability, engagement and transparency. Specifically, the legislation includes guiding principles, governance structures and reporting requirements (Government of Canada, 2023[117]).
Overall, the Sustainable Jobs Plan sets out a comprehensive agenda to support workers in the transition to a clean economy. It addresses the need for green workforce development initiatives in all regions and recognises the imperative of integrating Indigenous communities into the clean economy. This approach is critical to accessing a larger talent pool to meet future workforce needs. Overall, the Sustainable Jobs Plan combines many of the existing programmes and budgetary elements into a comprehensive strategy. The Secretariat and council governance elements and the link to the Regional Tables give it an important whole-of-government perspective reflecting upon Canada’s geographical variety. The establishment of the Sustainable Jobs Partnership Council builds upon the social dialogue process that started with the Task Force on Just Transition, marking a positive step forward. The plan also importantly addresses the necessity for green workforce development initiatives across all regions and recognises the imperative of integrating the Indigenous peoples into the clean economy. Regional table consultations should focus on addressing stakeholders’ real problems and engage in meaningful dialogue. While acknowledging RDAs and their role in creating green jobs, co‑ordination between the plan and RDA programmes is not specified. As the plan rolls out in more detail, its real impact on rural green innovation will need to be evaluated in the future.
Box 4.14. The just transition concept
The policy objective of a “just transition” refers to actions that are intended to reduce the negative effects of industrial and economic transitions on individuals and society as a whole. Just transition was first promoted by the North American labour movements in the 1970s to refer to a variety of measures to protect workers’ rights in the wake of government-led environmental legislation and regulations impacting the labour market. In the context of international climate discussions and through the advocacy of global union organisations, just transition rose to prominence on a worldwide scale.
In 2015, the International Labour Organization (ILO) adopted a set of guidelines based on inputs from governments, businesses and trade unions to ensure a just transition. These guidelines highlight the need for policy coherence between actions taken on climate change and economic development as well as industrial, labour market and enterprise policies. They emphasise the need to pay special attention to regions and workers that could be negatively affected. The guidelines recommend action to anticipate the adverse effects of the transition, implement international labour standards and actively promote social dialogue (ILO, 2015[118]). Regional just transition initiatives are policies and interventions directed to manage industrial transitions at the subnational level in line with just transition goals. Just transitions are inherently place-based and, as such, regional policies are important instruments for managing these transitions.
Research by Krawchenko (2021[119]) has identified that, globally, there are nine thematic policy areas of intervention for just transition initiatives across selected OECD countries:
Macroeconomic and growth policies.
Industrial and sectoral policies.
Enterprise policies.
Skills development.
Occupational safety and health.
Social protection.
Active labour market policies.
Rights.
Social dialogue and tripartism.
Source: ILO (2015[118]), Guidelines for a Just Transition towards Environmentally Sustainable Economies and Societies for All, https://sustainabledevelopment.un.org/content/documents/22092wcms_432859.pdf; Krawchenko, T. (2021[119]), “How do we manage a just transition? A comparative review of national and regional just transition initiatives”, Sustainability, p. 13.
This study has already highlighted the importance of ensuring that all people in different regions have an opportunity-oriented mindset towards the transition to a green economy. A broad understanding of environmental and sustainability principles should be present in all workers, influencing their expertise, attitudes and skills. Early education on sustainable development could play an important role in raising awareness and shaping attitudes. While different approaches are present in Canada, interviewees shared their impression that education for sustainability was taking place on an ad-hoc basis rather than systematically. To foster the development of clean skills at an early age, it would be important to mainstream environmental and sustainability principles in all education curricula from school to university level. In the Netherlands, for instance, the European Centre of Excellence for Sustainable Water Technology (Wetsus) has developed activities for primary and secondary schools in the city of Leeuwarden in addition to research activities and collaboration with universities (Box 4.15). Mainstreaming green skills into broader curricula can also contribute to increased environmental awareness and enables actors to both drive and adapt to changes associated with the transition to a green economy.
Future activities should build on existing projects where possible but expand assisting colleges and universities in the adaptation of curricula, especially for business and finance courses. Furthermore, academic and training institutions should be encouraged to better prepare their students to tackle challenges faced in the Canadian cleantech industry through enhanced partnerships to provide work-based learning opportunities to students.
Box 4.15. The European Centre of Excellence for Sustainable Water Technology, Leeuwarden
Wetsus in Leeuwarden has developed a wide range of educational activities to build a talent pipeline for water management technologies.
The centre collaborates with primary and secondary schools, working with a team of six teachers on various projects. At primary level, activities revolve around the discovery of water. In secondary school, activities include cluster excursions, design assignments, guest lectures, competitions and the development of teaching materials in collaboration with education.
The centre has also developed a Master’s degree in Water Technology, a two-year programme offered jointly by Wageningen University, the University Twente and the University of Groningen. It also welcomes PhD students and post-doctoral researchers and collaborates with a large network of universities.
Source: Wetsus (n.d.[120]), Homepage, www.wetsus.nl/.
At the firm level, engaging them in training and education can help boost productivity and ultimately enhance the contribution of local firms to the green transition. Common mechanisms to support workforce development in existing firms include financial incentives such as training subsidies, training vouchers and tax incentives to encourage employees to take training or for employers to provide training for new skills. Training measures include support to handle digital technologies or helping firm managers better identify their company’s training needs.
In a situation of industrial transition, the goal is to help workers affected by lay-offs to find new positions. Doing this without forcing them to relocate is often a challenge but an important element of successfully managing the industrial transition because it buffers social hardship. Policies aimed at increasing the likelihood of finding a job through improving skillsets and facilitating the match between the newly skilled and job vacancies can help regions transition. In general, policy responses to the increase in temporary unemployment due to transition include the redesign and strengthening of local public employment services and providing workforce and management training. In this context, special attention needs to be paid to the integration of under-represented and disadvantaged groups, such as women, older people and Indigenous peoples (OECD, 2019[121]).
Skills anticipation and assessment exercises (e.g. skill needs assessments, forecast and foresight exercises) can provide information to tailor the offer of education and training programmes more effectively to local needs. For Canada’s rural places, there seems to be a limited assessment and vision of what future skills will be needed and where and how to support the development of these skills. As previously mentioned, there is a significant lack of comparable data at the local level for understanding the cleantech industry and local labour market needs. Local governments need to be assisted in monitoring the transition to a green economy. An interesting example is France, where a national observatory for employment and jobs in the green economy has been created (Box 4.16). One of its observatory’s pillars of work is to assist with local indicators in French regional and local areas. It also supports economic sectors in assessing the impact of the transition to the green economy. Furthermore, the Scottish Government has developed a powerful strategy for green skills in its Climate Emergency Skills Action Plan (CESAP). The plan sets out a clear direction for the changes needed in the skills system and signals the role that industry, communities and individuals across Scotland will play in achieving this, as described in Box 4.17.
Box 4.16. National observatory on green skills and jobs in France
The Observatory for Green Skills and Jobs is a structure for dialogue and work among various stakeholders, which the French General Commission co‑ordinates for sustainable development. It aims to build a methodological framework to conduct studies, collect data and ensure a shared diagnosis on green growth jobs, professions and training. It produces an annual review of its activity, including a synthesis of observation results.
In particular, it:
Identifies and analyses economic activities, trades and professions related to the green economy and lists associated jobs.
Carries out statistical monitoring of jobs and trades related to the green economy in connection with equivalent work carried out at the international level.
Examines the socio-demographic trends of employed persons concerned by the above-mentioned activities.
Analyses the types of recruitment.
Identifies the skills required and training needed to meet the needs of employers and support those affected by these changes.
Identifies the possibilities of territorial application of conducted analysis.
One particular work theme of the overarching project is to develop regional observatories for training and employment and help local stakeholders develop methods and tools for collecting comparable regional data.
Source: Ministère de la Transition écologique et de la Cohésion des territoires (n.d.[122]), L’observatoire national des emplois et métiers de l’économie verte, https://www.ecologie.gouv.fr/lobservatoire-national-des-emplois-et-metiers-leconomie-verte.
Box 4.17. Green skills in Scotland
The Climate Emergency Skills Action Plan (CESAP) sets out a clear direction for the changes needed in the skills system and signals the role that industry, communities and individuals across Scotland will play in achieving this. The CESAP was published in December 2020 and focuses on the key actions needed over the next five years to 2025, with an update of the plan by the end of 2023.
The CESAP provides new evidence based on the skills needs of a net zero economy considering demographics, population and the availability of people, specific skillsets and geographies. It identifies potential opportunities for job growth across five broad areas of economic activity and notes priority areas for activity to drive economic change. The CESAP has been developed through engagement with industry leadership groups and an expert group comprising Skills Development Scotland, the Scottish Funding Council, Zero Waste Scotland, the Scottish Cities Alliance, NatureScot, the Scottish Government’s Domestic Climate Change and Skills Divisions, Highlands and Islands Enterprise, Scottish Enterprise, South of Scotland Enterprise, the Universities of Edinburgh and Strathclyde.
Three categories of green jobs have been identified, providing a framework against which to gauge likely skills demand and develop and focus interventions when the CESAP moves to its implementation phase.
These are:
New and emerging jobs that relate directly to the transition to a net zero economy, e.g. hydrogen cell technicians, carbon monitoring technicians and urban miners.
Jobs affected by the transition to a net zero economy that will need enhanced skills or competencies, e.g. architects and environmental consultants.
Existing jobs that will be needed in greater numbers as the result of the transition to a net zero economy, e.g. insulation installers, energy assessors and designers and multiskilled onsite operatives.
Two important measures defined in the plan are the establishment of a Green Jobs Skills Hub that will cascade intelligence into the skills system on the numbers and types of green jobs that will be needed over the next 25 years and a Green Jobs Workforce Academy. The academy will support existing employees and those who are facing redundancy to assess their existing skills and undertake the necessary upskilling and reskilling they need to secure green job opportunities as they emerge. Various other activities and in-depth descriptions can be found in the Climate Emergency Skills Action Plan 2020-2025.
Source: Scottish Government (2020[123]), Climate Emergency Skills Action Plan 2020-2025, https://www.skillsdevelopmentscotland.co.uk/media/47336/climate-emergency-skills-action-plan-2020-2025.pdf.
Annex 4.A. Additional tables and figures
Annex Table 4.A.1. Green innovation support through RDAs
Note: Other federal programmes include the Regional Economic Growth through Innovation (REGI) and Community Futures Program. Support the development and adoption of clean technology. Help communities and businesses plan and drive clean, sustainable economic growth. Partner with organisations to catalyse the development of green regional clusters. Work with organisations supporting businesses to transition to a green economy. Support businesses that develop or market new clean technologies; support the adoption of clean technologies that help improve environmental performance while boosting productivity, growth and competitiveness; support organisation that foster the development or transfer of clean technologies.
Source: Based on PacifiCan (2021[124]), 2022-2023 Departmental Plan, https://www.canada.ca/en/pacific-economic-development/corporate/transparency/departmental-plans/2022-2023-departmental-plan.html; CED (2020[73]), Departmental Sustainable Development Strategy 2020-2023, https://www.canada.ca/en/employment-social-development/corporate/reports/sustainable-development/2020-2023.html; Government of Canada (n.d.[125]), 2022-23 Departmental Plan, https://www.canada.ca/en/atlantic-canada-opportunities/corporate/transparency/2022-23-departmental-plan.html#s6; CanNor (2019[126]), Pan-Territorial Growth Strategy, https://www.cannor.gc.ca/DAM/DAM-CANNOR-CANNOR/STAGING/texte-text/pan-terr-growth-strategy2018-19_1564507799759_eng.pdf; Government of Canada (2022[127]), The Government Expenditure Plan and Main Estimates - 2022-23 Estimates, https://www.canada.ca/en/treasury-board-secretariat/services/planned-government-spending/government-expenditure-plan-main-estimates/2022-23-estimates.html.
Annex Table 4.A.2. Examples of key provincial and territorial level strategies for clean tech and green innovation
Note: In addition, the 2030 Plan for a Green Economy (Government of Quebec, 2023[128]) is the first electrification and climate change policy framework in Quebec. It defines the climate actions that various partner ministries and public agencies will carry out. Other initiatives in Quebec include: Programmes d’aide pour un Québec vert et prospère, which has no rural focus but one on SMEs via the Programme PME en action (Government of Quebec, 2022[129]); Bioénergies, with an SME focus and a partial rural focus through maple product producers (Government of Quebec, 2023[130]); Écoperformance, which has no rural focus but is available for all types of businesses (Government of Quebec, 2023[131]); Programme de valorisation des rejets thermiques with no SME or rural focus, but available to farm industry (Government of Quebec, 2023[132]); and Défi GES -Industrie with no rural or SME focus (Government of Quebec, 2023[133]).
Source: Based on Government of Alberta (2022[134]), Alberta Technology and Innovation Strategy (ATIS), Government of Alberta; Government of British Columbia (2022[59]), CleanBC, https://cleanbc.gov.bc.ca/; Government of Manitoba (2022[135]), “Manitoba government provides more than $900,000 to businesses through innovation growth program”, https://news.gov.mb.ca/news/index.html?item=56857; Province of New Brunswick (2022[136]), Our Pathway Towards Decarbonization and Climate Resilience, https://www2.gnb.ca/content/dam/gnb/Departments/env/pdf/Climate-Climatiques/climate-change-action-plan-progress-report-2022-2023.pdf; Province of Newfoundland Labrador (2022[137]), Maximizing Our Renewable Future - A Plan for Development of the Renewable Energy Industry in Newfoundland and Labrador, https://www.gov.nl.ca/iet/files/Renewable-Energy-Plan-Final.pdf; Province of Nova Scotia (2022[138]), Our Climate, Our Future - Nova Scotia’s Climate Change Plan for Clean Growth, https://climatechange.novascotia.ca/sites/default/files/uploads/ns-climate-change-plan.pdf; Government of Northwest Territories (2019[139]), 2030 NWT Climate Change Strategic Framework - 2019-2030 Action Plan, Government of Northwest Territories; Government of Canada (2020[140]), “Government of Canada partners with Nunavut for renewable and energy-efficiency projects”, https://www.canada.ca/en/environment-climate-change/news/2020/08/government-of-canada-partners-with-nunavut-for-renewable-and-energy-efficiency-projects.html; Government of Ontario (n.d.[141]), A Made-in-Ontario Environment Plan, https://www.ontario.ca/page/made-in-ontario-environment-plan; Prince Edward Island (n.d.[142]), Cleantech on Prince Edward Island, https://www.princeedwardisland.ca/en/information/environment-energy-and-climate-action/clean-tech-on-prince-edward-island; Government of Quebec (2022[143]), The 2022-2027 Québec Research and Innovation Investment Strategy, https://cdn-contenu.quebec.ca/cdn-contenu/adm/min/economie/publications-adm/politique/PO_SQRI2_2022-2027_MEI_EN.pdf; Government of Saskatchewan (2021[144]), “Province announces launch of Cleantech Accelerator Program”, https://www.saskatchewan.ca/government/news-and-media/2021/january/06/province-announces-launch-of-cleantech-accelerator-program#:~:text=The%20program%2C%20which%20will%20be,month%20to%20access%20the%20program; Government of Yukon (n.d.[145]), The Yukon Green Infrastructure Program, https://yukon.ca/en/blogs/yukon-green-infrastructure-program; Government of Quebec (2023[128]), 2030 Plan for a Green Economy, https://www.quebec.ca/en/government/policies-orientations/plan-green-economy (accessed on 10 November 2023).
Annex Table 4.A.3. Taxonomy of products considered clean technologies by industry and sector/technology area
Source: Government of Canada (2022[27]), Clean Technology Data Strategy, https://ised-isde.canada.ca/site/clean-growth-hub/en/clean-technology-data-strategy.
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Notes
← 1. The Environmental and Clean Technology Products Economic Account measures the production of goods and services that reduce the environmental impacts of the Canadian economy. Two broad categories of goods and services are recognised: environmental goods and services (including clean electricity from renewable sources and nuclear power generation, biofuels and primary goods and waste management and remediation services) as well as clean technology goods and services (including manufactured goods, scientific and R&D services, construction services and support services). Examples of clean technology goods and services include solar panels and the design and construction of energy-efficient buildings.
← 2. Some RDAs may have more than this percentage of funding. For example, the proportion of CED-Q expenditure devoted to clean technologies is 11.8% of total programme funding on clean technologies projects, and encourage some networks of more general business support such as those administered by the Community Futures programme, have been helping businesses integrate sustainable development practices.
← 3. For more information, see https://nergica.com/about-us/.
← 4. For more information, see https://www.canada.ca/en/services/environment/weather/climatechange/climate-plan/reduce-emissions/reducing-reliance-diesel.html.
← 5. For more information, see https://cdn-contenu.quebec.ca/cdn-contenu/adm/min/economie/publications-adm/politique/PO_strategie_aluminium_2021-2024_MEI.pdf?1637077590.
← 6. For more information, see https://aluquebec.com/.
← 7. For more information, see https://www.lefebvre-al.com/.
← 8. The OECD applies a bottom-up and task-based approach for measuring and quantifying green jobs. Bottom-up approaches define green jobs based on the skills or tasks different occupation require and the extent to which those tasks or skills are green. Each occupational task is classified as a binary measure as green or non-green. Using that information, the green intensity of an occupation is computed, which can be broadly defined as the proportion of tasks within an occupation that are green. An occupation is considered green if its green intensity is larger than 10%. This means that at least 10% of the tasks it entails are green.
Canada measures green jobs as the employment from the provision of environmental and clean technology goods and services based on the Environmental and Clean Technology Products Economic Account. It measures the production of goods and services that reduce environmental impacts’ contribution to the Canadian economy. Two broad categories of goods and services are recognised. The first refers to environmental goods and services that include clean electricity from renewable sources and nuclear power generation, biofuels and primary goods and waste management and remediation services. The second refers to clean technology goods and services that include manufactured foods, scientific and R&D services, construction services and support services, such as the design and construction of energy-efficient buildings for instance.
Estimating the share of green jobs depends on detailed employment data at the regional level. Canada’s statistical office is estimating employee jobs based on the National Occupation Classification. The OECD estimates the percentage of employment based on the International Standard Classification of Occupations (ISCO).
← 9. Municipalities with populations under 10 000 inhabitants are classified as rural. In the case of regional municipal governments, to be considered rural, each member municipality must have a population of fewer than 10 000. Urban regional municipalities are those where at least 1 member municipality has a population of 10 000 or more.