April 8, 2021

Guest post by David A. Wolfe - Smart Prosperity Research Network member

This piece originally appeared in the Financial Post under the title The Innovation Imperative: Digitization and decarbonization are picking up speed and policymakers need to be ready.

Two major trends are rapidly altering the context and challenges for Canadian science, technology and innovation policies — and they are being amplified by pandemic-related social and economic disruption. The pandemic has accelerated the adoption of digital technologies to support retail and commerce, remote working, distance learning and to facilitate contact tracing and other public health efforts. At the same time, we are witnessing a rapid shift away from carbon-based forms of energy to renewable forms, including wind, solar, battery electric, fuel cells and hydro power. What do these trends mean for innovation policy in Canada?

These trends will persist and gather speed as we move to reopen the economy after COVID. The first trend involves the growing digitization of all aspects of the economy, placing greater reliance on cloud computing, mobile telephony, data analytics and artificial intelligence. For the past two decades, the quickening pace innovation has dramatically compressed the time it takes to disrupt established industries and bring new products and processes to market. The impact of exponential growth has been accentuated by the shift to virtual work and learning during the pandemic. The pandemic has prompted a new wave of digitization across virtually every aspect of our lives.

The second trend is the accelerating shift away from carbon-based forms of energy to renewable forms, including wind, solar, battery electric, fuel cells and hydro power. Over the past decade the cost of renewable energy and energy storage have fallen steadily and are rapidly approaching the cross-over point with natural gas. The trend away from carbon-based energy sources is reinforced by the steady stream of announcements from leading investment firms and sovereign wealth funds of their divestment from conventional fossil energy producers. Recent reports, including the Expert Panel on Sustainable Finance, underline the vulnerability of existing oil and gas reserves, much of which may end up as stranded assets. This trend will have profoundly unsettling effects across the Canadian federation as some provincial economies are more closely tied to the carbon energy paradigm, while others are based on renewable energy sources.

Innovation policy must be aligned across all sectors of the economy to stimulate the further diffusion and adoption of digital technologies, as well as their application in support of public health measures to mitigate the spread of this or future pandemics, and to promote the transition of all economic sectors and our energy systems to sustainable sources of energy. It no longer suffices to focus innovation policies on breakthroughs in ICT, pharmaceuticals or clean technologies that drove past waves of innovation. In effect, climate change, environmental sustainability and public health concerns are now the critical lenses through which all potential innovations must be filtered. We need to think about how new forms of technology and innovation interact with nature and the environment and the extent to which they can improve or harm our prospects for sustainability and survival.

This creates the imperative to fundamentally reorient our innovation policies to pursue these objectives more effectively. Shifting our reliance from carbon-based to alternative forms of energy, such as wind, solar and hydrogen, necessitates the development and application of new technologies to provide alternative energy sources, as well as the creation of the energy infrastructure needed to integrate alternative sources into the grid. Digital technology can play a central role in optimizing the efficiency with which the alternative forms of energy are moved across the grid, as well as the efficiency with which they are deployed in different sectors of the economy.

In addition to growing the clean energy sectors of the economy and extending the digital revolution underway for the past two decades, we need enhanced policies to support: the growth of domestic firms in new sectors of the economy linked to the transformation of existing industrial processes (cleantech); greater provision of renewable sources of energy, including, wind, solar and hydrogen; the rethinking and redesign of digitally integrated and enabled urban mobility systems, including public transit; more attention focused on public health systems, through the effective use of digital technologies to track diseases, the application of new computing techniques to accelerate the discovery and development of new vaccines and antiviral drugs and the use of these technologies to support and protect front line workers in the health sector and other parts of the service economy.

The challenge is substantial but many of the solutions are readily available in the form of existing technologies and the firms to develop them. What is missing is a national innovation strategy to accelerate their deployment throughout the economy.