Canada makes multi-million dollar bets on green tech, quantum and AI in annual budget

Justin Trudeau’s government has laid out plans for multi-million dollar investments in research in Canada’s first federal budget since 2019.

Vowing to “punch our way out of the COVID recession”, Canadian finance minister Chrystia Freeland pledged C$100 billion in stimulus projects over three years, including in green technology, artificial intelligence development and to boost vaccines manufacturing.

Canada’s financial roadmap for the future includes C$360 million over seven years for the country’s first National Quantum Strategy, and C$400 million over six years for a genomics strategy.

A centrepiece of the budget is a plan for green investment, with big spending pledges and tax breaks for clean technology. 

After a year of heavy spending to tackle the pandemic, “This budget is about finishing the fight against COVID. It’s about healing the economic wounds left by the COVID recession,” said Freeland.

But because the governing Liberals do not have a parliamentary majority, they will require another party to support the budget, in a vote expected in the coming days. In the absence of a willing partner, the government will likely fall and Canadians will go to the polls for a spring election.

AI, photonics, space

The budget sees the government “renew” its commitment to artificial intelligence development, with C$443.8 million promised over 10 years.

The country is in the midst of an AI boom, with the likes of Google, Microsoft, Facebook, Huawei and other global heavyweights spending hundreds of millions of dollars on research hubs in Quebec, Ontario and Alberta.

From the government’s 2021 budget, C$185 million will support the commercialisation of AI research; C$162.2 million will go towards recruiting top academic talent across the country; C$48 million will be for the Canadian Institute for Advanced Research; C$40 million over five years will aim to bolster computing capacity for researchers at national AI institutes in Edmonton, Toronto, and Montréal; and C$8.6 million over five years will help advance the development and adoption of standards related to AI.

The budget will put C$7.2 billion into the government’s strategic innovation fund over seven years, with the money to be distributed among aerospace, life sciences and bio-manufacturing, and decarbonisation projects.

There will also be C$90 million over five years given to the National Research Council to retool and modernise the Canadian Photonics Fabrication Centre, and a further C$60 million over two years for the so-called Innovation Superclusters.

The five government-designated superclusters are designed to encourage companies of all sizes to work together to boost high growth sectors, ranging from advanced manufacturing to digital and ocean technologies. These hubs are partly inspired by Germany’s Fraunhofer Institutes and the UK’s Catapult centres, which help small science and technology firms that might otherwise have struggled due to a lack of funding, expertise or facilities.

For quantum research, the government says it will expand on its national strategy plans “in the coming months”. The money on offer – C$360 million over seven years – is smaller than quantum research sums provided by the governments of France, the UK and Germany, but would see Canada building on a recent C$120 million quantum commitment.

In other spending, the government pledged C$90 million, over two years, to create ElevateIP, a programme to help accelerators and incubators provide start-ups with access to expert intellectual property services. The budget also grants C$10 million over five years to encourage research partnerships between Canadian and Israeli SMEs.

There’s C$80.2 million over 11 years to replace ageing ground-based space infrastructure, along with an envelope of C$9.9 million for the Canadian Space Agency to plan for the next generation of Earth observation satellites.

And to avoid vaccine shortages in the future, Freeland also announced C$2.2 billion over the next seven years to increase Canada’s vaccine manufacturing capacity.

Green push

The budget includes measures aimed at fulfilling the Trudeau government’s longstanding pledge to tackle climate change, such as directing spending to battery production, and introducing tax breaks for clean energy equipment.

“This is a plan that embraces this moment of global transformation to a green, clean economy,” said Freeland. “In 2021, job growth means green growth.”

There’s C$35 million to establish the Centre for Innovation and Clean Energy, to advance the scale-up and commercialisation of clean technologies in British Columbia.

The government also pledges C$319 million over seven years to support research, development, and demonstrations that would improve the commercial viability of carbon capture, utilisation, and storage technologies.

Canada is an early adopter of carbon capture, with projects that have already captured and stored millions of tonnes of CO2. “But we have the technical and geological capacity to capture and store much more,” the budget says.

The government presented a large envelope for securing the supply of raw materials, with C$9.6 million over three years to create a so-called Critical Battery Minerals Centre of Excellence, which would coordinate policy and programmes on critical minerals. One major challenge for countries as they develop their electric car markets is that indispensable battery metals such as lithium, cobalt, and nickel are extracted in a handful of locations, such as the Democratic Republic of Congo and Chile.

Other environmental budget proposals include C$36.8 million over three years for research and development to advance critical battery mineral processing and refining expertise.

Canada will also begin to issue so-called “green bonds” to finance infrastructure projects and other sustainability measures.

Green tax breaks

As part of the budget, the government pledges a new tax credit for money invested in carbon capture projects, with the goal of reducing emissions by at least 15 megatonnes of CO2 annually.

To support clean tech jobs, the government also proposes to expand its list of tax deductible spending to include equipment used in pumped hydroelectric energy storage, renewable fuel production, hydrogen production by electrolysis of water, and hydrogen re-fueling.

Certain existing restrictions related to investments in water current, wave and tidal energy, active solar heating, and geothermal energy technologies would also be removed, the government pledges.

The budget also proposes to reduce, by 50 per cent until 2032, the general corporate and small business income tax rates for businesses that manufacture zero-emission technologies.