4.4 Trade and Market Access
Framing the Future: Embracing the Low-Carbon Economy
As a small, open economy, Canada relies on trade for economic growth and prosperity.62 Although Canada’s dependence on trade may be less than it once was,63 trade remains a significant contributor to national GDP, and Canada’s further integration into global value chains is critical to its future prosperity.
In a global economy, success in low-carbon competitiveness includes the efficient flow of low-carbon goods and services across geopolitical boundaries. As nations take action to reduce their GHG emissions and markets for low-carbon goods and services expand, the carbon intensity of imports and carbon risk of business ventures are gaining profile. Canada’s trade is heavily weighted toward emissions-intensive industries and products. Emissions-intensive sectors — that is, sectors exceeding 0.5 kt CO2e / $GDP — accounted for 44% of Canada’s exports in 2010. With steady growth in oil and gas extraction, mining, and primary metals manufacturing,c the emissions intensity of Canada’s exports is on an increasing trajectory.d
Currently low-carbon goods represent less than 1% of Canadian merchandise exports and approximately 1.6% of merchandise imports.e Canada is failing to capitalize fully on the opportunity to sell its low-carbon services in global markets.64 Analysis of 45 climate-friendly commodity groups shows an overall negative trade balance of $3 billion for Canada.65 Adjusting for inflation, Canada’s exports of low-carbon technologies declined on average by 2% annually between 2002 and 2008.66 Over the same period, the global low-carbon market experienced 10% annual compound growth.67
Looking to the future, Canada is well positioned to benefit from the relative size and growth trajectories of its trading partners’ LCGS markets. While by far, the United States is Canada’s main import and export market, a trend in diversification is apparent, with growing trade flows with China and the U.K.68 Six of Canada’s top ten export markets are also countries with the largest LCGS markets, and these countries represent 49% of the global low-carbon market.f Furthermore, analysis of Canada’s likely trading partners in 2040 undertaken by DFAITg projects growth in trade with nations that represent a larger portion of the world low-carbon market than today, and for which low-carbon market growth rates are high. Ensuring open access to these expanding global low-carbon markets is key to the success of Canada’s LCGS sectors.
4.5 Labour Market and Skills
Canada continues to struggle with higher levels of unemployment due to the recent recession, with a national unemployment rate of 7.4%, as of February 2012, up from the pre-recession low of 5.9% two years ago.69 The situation is highly variable across regions and industries, with the lowest unemployment rates in Alberta and the highest rates in Newfoundland and Labrador, and service-based industries and resource industries experiencing employment growth while employment is falling particularly in the manufacturing and utilities sectors.70
The global low-carbon transition will, in the long term, influence the structure of the Canadian economy, irrespective of domestic policy. Industries will evolve — some will shrink, some may disappear, others will grow, and new and innovative industries will emerge. Such shifts will undoubtedly alter Canadian livelihoods. The extent to which and pace at which the economy and its component industries reduce their carbon intensity, and Canada’s capacity to reap the economic rewards of aiding global low-carbon efforts, influence and are influenced by the country’s collective human capital.
Canada would benefit from better labour market data and information related to the low-carbon economy to understand its current footing and future trends. Analysis commissioned by the NRT to estimate the present and potential future size of Canada’s low-carbon economy estimates that Canada’s LCGS sectors directly employed in the range of 42,000 people in 2010. The years 2008 to 2010 saw exceptional annual employment growth rates in cleantech at 11%.71 As Canada’s economy reduces its carbon intensity, the electricity sector will see substantial employment growth. NRT’s own analysis suggests that even in the absence of additional policy, direct employment in LCGS sectors will grow to 91,000 by 2050.
A low-carbon economy will require talents and skills to match. Current general unemployment rates and labour shortages in particular sectors hint at a potential mismatch in Canada’s labour market and are a reminder of the importance of preventing such structural imbalance. Labour shortages are especially prevalent in resource sectors, and while much of the attention has been focused on the acute labour shortages in the oil sands industry, labour shortage concerns exist broadly across the energy and resource sectors. LCGS industries, a large proportion of which involve energy production, transfer, and end-use, are also exposed to this risk, and representatives of many LCGS industries have either experienced or anticipate a lack of skilled labour to meet their needs.72
[c] Energy-intensive resource-sector exports figure prominently in Canada’s trade profile. The last decade saw a steady and strong resurgence of resource-based exports including energy, metal ores, and processed metals.c Analysis of trade data indicates that together, these high-growth sectors accounted for approximately 39% of total exports in 2011, doubling their 2002 share (Industry Canada 2012).
[d] NRT analysis of DFAIT trade data (Industry Canada 2012).
[e] Internal report prepared by the Conference Board of Canada for the NRT (Conference Board of Canada 2011b). Because the provision of low-carbon goods and services tends to be highly integrated, we can draw conclusions on low-carbon services based on data on exports in low-carbon goods.
[f] Based on export market ranking in Canada’s State of Trade and analysis of these nations’ low-carbon market value based on the report Low Carbon and Environmental Goods and Services: An Industry Analysis — Update for 2008/09 (Innovas Solutions Ltd. 2010).
[g] For their publication Canada’s State of Trade — Trade and Investment Update 2011, the Department of Foreign Affairs and International Trade undertook to project Canada’s top merchandise export markets in 2040. They employed an in-house gravity model along with a GDP forecast provided by IHS Global Insight.
[62] Hart 2002
[63] Armstrong 2011
[64] Goldfarb 2010
[65] Conference Board of Canada 2011b
[66] Goldfarb 2010
[67] Goldfarb 2010
[68] Foreign Affairs and International Trade Canada 2011a
[69] Statistics Canada 2012c
[70] CBC News 2012
[71] Analytica Advisors 2010
[72] ECO Canada 2010b
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