November 3, 2020

By Colleen Kaiser & Martin Olszynski

While the global pandemic caused by the COVID-19 virus has been detrimental to the Canadian and global economies[i] it also provides an opportunity to kick-start the transition to a cleaner economy. It provides an opportunity to do things differently as our economy re-opens and our country rebuilds. The "build back better" agenda strongly emphasizes accelerating clean growth in Canada to align a post-COVID-19 recovery with the ongoing transition to a low-carbon economy.

Even before the COVID-19 pandemic, shifting to a more "agile" regulatory system – one that is stringent but also flexible and predictable – was increasingly understood as necessary for accelerating the transition to a low-carbon economy (Government of Canada 2019; ISED 2018). More broadly, regulators must adjust to operating in an increasingly challenging environment, characterized by high risk and high opportunity, driven largely by rapid technological change.

In a COVID-19 world, such a shift takes on additional urgency to ensure that ongoing recovery measures and any further public investments achieve the combined objective of maximizing economic recovery while also transiting to cleaner growth economy, which represents a US$26 trillion opportunity over the next 12 years.[ii]

Regulatory barriers to clean innovation come in many forms. Regulations may be duplicative, arbitrary or unnecessarily rigid. They may conflict with regulatory regimes at other government levels or be missing altogether, resulting in a regulatory vacuum. However, past regulatory reforms have faltered because efforts were directed almost entirely towards improving competitiveness without sufficient regard for other public benefits related to health, safety, and the environment. Such a one-sided approach can actually lead to poorer regulatory performance, as became clear in the aftermath of the Mount Polley mine spill in British Columbia.[iii] To avoid this trap, regulatory reform must be redefined as a win-win opportunity, to advance both clean and growth objectives.

And there is ample room to improve both the economic and environmental outcomes of our regulatory system; improved competitiveness need not come at the expense of environmental performance. In fact, evidence from the WEF’s Global Competitiveness Index suggests that countries that have the highest level of environmental performance tend to be among the most competitive.[iv] There is also a tendency to overestimate the costs and underestimate the benefits of environmental regulation.[v]

Shifting towards a more agile regulatory system requires considering both policy instruments and the institutions that implement them. Agile regulations are stringent, flexible, and predictable. Operationalizing such regulations requires regulators that are well-informed, anticipatory, collaborative, and have both the ability and capacity to experiment, approaching policy-making and implementation as an iterative rather than static process. This combination of regulatory agility in both instrument and institutional design can drive innovation that fosters improved performance towards Canada’s economic and environmental goals.

This is, of course, easier said than done.

In order to understand this challenge, it is critical to unpack what exactly it means to shift towards a more agile regulatory system.

In the coming weeks, Smart Prosperity’s new blog series on agile regulation will do just that. Key characteristics of both agile regulations and regulators will be broken down and discussed, alongside new research lines of inquiry that tackle how these reforms might be achieved in practice in the Canadian context, which presents its own unique challenges.

Alongside this new blog series, Smart Prosperity will be working to improve our understanding of agile regulation in the Canadian context through a new research study funded by the Social Sciences and Humanities Research Council (SSHRC), working in partnership with Innovation, Science and Economic Development Canada. The goals of this research are to identify, examine, assess, and learn from recent Canadian experience with agile regulation. In doing so, the project will inform regulatory approaches that will foster clean innovation and economic growth in the aftermath of the COVID-19 pandemic, while maintaining stringency of the regulatory process.

Smart Prosperity Institute’s Colleen Kaiser and Geoff McCarney and uCalgary’s Martin Olszynski were recently awarded a SSHRC 2020-21 Partnership Engage COVID-19 Special Initiative Grant for their proposal on “Agile Regulation for Post-COVID-19 Clean Innovation, Recovery and Growth in Canada.” SPI extends its congratulations and encourages readers to stay tuned for more exciting work in this area!