Trends and Outlook

Remarkable advances in information, communication, and other technologies and innovations took place over the past 2 decades. The application of these technologies has brought considerable change to nearly every sector of the economy, including transportation. New technologies are being applied to transportation infrastructure, equipment, and supply chain management in an effort to make them smarter and more efficient. For example, technological changes, such as ride sharing and “last-mile” delivery services have altered both how and where transportation occurs and will continue to disrupt transportation in the future.

This trend shows no sign of slowing down, and in fact, is likely to accelerate as the public and private sector adjust to new operational environments. Technological changes and innovation will continue to impact both demand for and supply of transportation equipment and services. Major disruptions are expected from technologies in 3 categories of operational readiness, from those past the operational tipping point (cloud logistics, internet of things, etc.); to technologies on the cusp of widespread operationalization (AI, advanced analytics, blockchain, etc.); and finally with advanced technologies (electric vehicles, automation and robotics, etc.), which are at varying levels of operational readiness across jurisdictions, industries and modes.

Such innovations in the transportation sector have the potential to optimize corridor flows, reduce costs, improve safety and reduce environmental impacts, and alter the origins and destinations of shipments and the nature of transportation services. In the freight sector, technologies can enable supply chain stakeholders to optimize their existing infrastructure and work technology-driven efficiencies into new infrastructure as it is built. Supply chain visibility and transparency also promises to be further enhanced by new technology, fostering greater cooperation across fragmented supply chains. Writ large, technologies carry the potential to drive better decisions, increase productivity, streamline freight and intermodal processes, develop new data-driven business models, and harness economic and trade benefits.

Innovation is often mentioned as a key contributor to productivity gains and therefore to economic growth. According to Statistics Canada’s Survey of Innovation and Business Strategy data, the percentage of innovative businesses in the transportation and warehousing industry increased from 62.5% for the 2007-2009 period to 70.2% for the 2015-2017 period. However, despite the fact that the transportation industry introduced more innovative practices, it still lagged behind the national average of 79.3% in 2015-2017.

As the pace of transportation innovation accelerates, it is critical that the Canadian transportation sector readies itself for the continual arrival of emerging and disruptive transportation technologies, including connected and automated vehicles (CAVs). If integrated properly into existing transportation system, CAVs have the potential to help address many urban transportation challenges in Canada’s largest cities, including congestion, urban movement of freight, affordability, and accessibility. However, the potential risks associated with mass CAV deployment will need to be mitigated through sound planning processes and effective policy tools to prevent unintended consequences such as increased congestion, a modal shift away from mass transit, and increased socio-economic inequity.

To further examine the potential risks and benefits associated with mass connected and automated vehicle use in Canada, Transport Canada and Innovation, Science and Economic Development Canada created the Advisory Group on the Vehicle of the Future (connected, automated, clean, shared) in 2018. The group included representation from senior members of government, industry, academia and non-government organizations. The findings of the group are included in a comprehensive report currently under review by Transport Canada and senior officials from Innovation, Science and Economic Development Canada.

Transport Canada was also a member of the Task Force on Urban Mobility, which was created in 2019 by the Council of Ministers Responsible for Transportation and Highway Safety. The task force provided a regular forum to engage with provincial counterparts on the mobility issues affecting passenger and freight transportation in Canadian cities. The task force’s final report considers a number of policy areas of relevance to urban mobility, for example, complete communities and congestion management, and provides jurisdictional examples of mobility policy implementation. The report also considers how COVID-19 has impacted urban mobility in Canada. The final report was approved by the Council of Ministers Responsible for Transportation and Highway Safety at their February 2021 meeting.

With funding under the Trade and Transportation Corridor Initiative, Transport Canada launched the Program to Advance Connectivity and Automation in the Transportation System in 2017. This program is helping Canadian jurisdictions prepare for the array of technical, regulatory and policy issues emerging as a result of connected and automated vehicles. The Program undertakes and supports research, and technical studies in areas such as the security, integrity, and privacy of connected and automated vehicle communications – security credential management systems, road infrastructure cybersecurity, and talent development for road authorities.

The program is also providing $2.9 million in grant and contribution funding over 4 years, to support 15 projects that assist Canadian jurisdictions prepare for these new technologies. Funded projects include:

• testing vehicle-to-infrastructure communication technologies and applications to reduce fuel consumption at the City of Ottawa, and for emergency vehicle signal pre-emption at the City of Calgary
• updating the Intelligent Transportation System Architecture, which is a common framework for planning, defining, and integrating intelligent transportation systems
• studying the impacts of automated and connected vehicles for pedestrians with sight loss
• supporting testing of connected and automated vehicle technologies, such as low-speed automated shuttle trials in Calgary and Toronto, establishing a connected vehicle test bed in Calgary, and exploring the fuel reduction potential of providing fleet vehicles with traffic signal timing information in Ottawa
• helping Canada take part in developing standards for connected and automated vehicles, and
• supporting capacity-building activities with road authorities

Recognizing the need for early leadership and guidance on connected and automated vehicles in Canada, Transport Canada published Testing Highly Automated Vehicles in Canada: Guidelines for Trial Organizations. This guidance was developed in collaboration with the provinces and territories. It offers practical, Canada-wide guidelines for the safe testing of connected and automated vehicles. Its flexible and responsive policy approach will make connected and automated vehicle testing consistent across jurisdictions, which in turn will support safety, competitiveness and economic growth.

In 2019, Transport Canada launched the Enhanced Road Safety Transfer Payment Program, which funds projects to help create nationally consistent tools that address road safety challenges, and new opportunities to invest in Canadian projects to promote the innovative design, testing, and integration of connected and automated vehicles and other safety enhancing technologies. The results of these projects will support the development of national and global safety standards, regulations, and requirements.

Transport Canada is also working to enable bold and innovative transportation solutions through research and evaluation including the ecoTECHNOLOGY for Vehicles (eTV) Program which tests and evaluates the safety and environmental performance of innovative vehicle technologies to advance key Government of Canada priorities. Results from RD&D projects support the development of codes and standards, which ultimately lead to the safe and timely introduction of these technologies, for example, cooperative truck platooning system for heavy-duty vehicles, electric and alternative fuel vehicles and connected and automated vehicle.

Notably, as part of the Transportation Sector Regulatory Roadmap, Transport Canada launched a pilot project to test fuel saving truck platooning technology beginning in 2019-2020, including trials on Canadian public highways. Through this initiative, Transport Canada is working with industry, academia, and provincial, territorial and municipal governments to gather evidence informing the potential development of regulations, policies, and programs that provide a modernized approach for safe and effective deployment on Canadian roads and in Canadian climate conditions. Ascoping paper on considerations for safely deploying platooning in Canadawas published in fall 2020, and a pilot deployment is planned on public road, beginning in summer 2021.

Additionally, Transport Canada’s Rail RD&D program supports the development of technologies that have the potential to increase safety, optimize efficiency and reduce emissions associated with transporting people and freight by rail. It emphasizes technologies that are on the pathway to commercialization and for which key barriers are inhibiting their uptake. These barriers include uncertainty relating to technological readiness, lack of understanding about the capability of technologies, concern over the impact of new technologies on existing equipment and gaps in codes and standards. As such, industry collaboration plays a key role in guiding the research agenda.

Projects of note in 2019 include:

• advancing the technology readiness levels (TRL) of automated and semi-automated inspection systems
• assessment of opportunities, challenges and technological options for hydrogen locomotives (like hydrail)
• development of advanced emission control technologies and lignin derived drop-in fuel blends for locomotives
• feasibility assessment of hyperloop technologies and automated intercity rail technologies;
• research relating to the impacts of climate change on railways built on permafrost
• viability study of wearable technology to increase rail worker safety, and
• use of satellites and drones to monitor landslides and water levels

As aging, deterioration, and climate change threaten the integrity and longevity of transportation infrastructure, Transport Canada is exploring new technologies that can identify and monitor performance issues at early stages. One such technology includes Canada’s Radarsat Constellation Mission Synthetic Aperture Radar satellites that can detect bridge movements developing over time which may be due to excessive loads, soil settlement, truck or ship impacts, and extreme climatic events. This is made possible due to today’s advanced computing algorithms and the frequent availability of high-resolution satellite images.

Currently, data is being gathered for a few pilot bridges in Canada and development is underway to advance and implement a data-driven decision-support tool that can provide bridge authorities with performance indicators on bridge condition and assist them in the challenging decision making process of bridge maintenance and rehabilitation. Most recently due to the innovative nature of this research, our National Research Council of Canada partners have initiated collaborative work with the UK’s Satellite Applications Catapult Program to co-develop a decision-support tool for asset maintenance decision makers. The pilot study tool, named BRIGITAL, visualizes data on key bridges in Canada (and eventually the UK) to deliver indicators on their overall condition.

Furthermore, Transport Canada continues to help Canadian small and medium size businesses develop and commercialize innovations. In 2018, Transport Canada launched 2 challenges through Innovation, Science and Economic Development Canada’s Innovative Solutions Canada Program with the intention to find solutions for specific challenges in the transportation industry where solutions do not exist.

As a result of those challenges, 5 recipients were awarded funding to develop proof of concepts for economically viable and environmentally sustainable methods for recycling glass fiber-reinforced plastic used in vessel hulls to avert disposing vessels in landfills and for affordable after-market technology solutions for commercial vehicles to aid in the detection of vulnerable road users (like cyclists, pedestrians) and alert the driver of potential collisions.

In 2020, Transport Canada launched a new round of challenges, including an innovative solution to reduce underwater-radiated noise from marine tugs that escort large commercial vessels through the critical habitat of the Southern Resident killer whale in the Salish Sea.

Context

The COVID-19 pandemic has shocked global economies and greatly changed transportation flows, completely altering pre-pandemic forecasts and placing the world in uncharted territory. It has become critical to analyze current economic and trade drivers, project possible futures, and become proactive in planning. Transportation demand forecasts can be used to better inform short-term shipment (2-3 year) management and long-term (10 year) investment decisions. More detailed information on the forecast presented here can be found on the Transportation Data and Information Hub. The detailed version includes highlights such as a range of forecast scenarios, outlook risks, and implications for the transportation network.

Economic outlook

Canada’s economic activity is expected to recover to pre-COVID levels in 2022, lagging behind the global recovery projection of 2021. This is partially explained by the hard-hit passenger transportation sector and the economy’s interdependence with the energy sector which was also hard hit in the pandemic. Despite this, the short-term outlook could swing more positively through effective vaccination and national immunity, particularly if it is achieved before global lockdown and border restrictions are lifted (in other words, an immediate return to travel).

Globally, political shifts and COVID-control measures have stifled economies, although China is emerging strong from the pandemic and Emerging Economies have also rebounded quickly. Europe and the US, traditional international powerhouses, continue to experience high COVID case counts and uncertainty.

Permanent global economic scarring from COVID is expected to be present but modest, resulting in a slight reduction in gross domestic product levels in the long term. Structural changes resulting from COVID are assumed to be minimal. Consequential, post-COVID global growth rates are anticipated to follow a similar trajectory as pre-COVID expectations. Similarly, most major commodity markets relevant to Canadian transportation are not expected to see significant structural change resulting from COVID.

Despite minimal COVID implications, over the long term, national economic growth is expected to slow. Growth will be weighted towards that west, while eastern provinces will realize limited gains. Growth in trade will outpace gross domestic product growth. Gains in trade will be driven in part by growth in developing and emerging economies. Emerging markets will be the engine of global growth. While growth in China decelerates. Nonetheless, the US will remain Canada’s largest trade partner.

Freight outlook for Western Canada

The relatively limited adverse, and some cases beneficial, impact of COVID on key western commodity markets (grain, containers, potash, and wood products) will result in the west recovering before other regions. Rail and port traffic on the Vancouver and Prince Rupert corridors is expected to recover to pre-COVID levels by 2022, with for hire trucking recovering by 2021 (Alberta remains an outlier due to its dependence on the oil and gas industry). For hire trucking commodities will largely recover in 2021, excepting energy products. Due to the devastation of their energy sector industry, Alberta’s for hire trucking will lag, recovering in 2022.

Cross-border rail traffic is expected to realize solid gains, with particular strength in grain and potash. Container growth will retain current levels until 2021, with moderate gain thereafter. The cancellation of the Keystone XL pipeline is not expected to significantly impact border traffic. However, the lack of short term pipeline capacity is expected to result in a significant temporary increase in traffic. Increase in home repair activities during the pandemic are expected to boost wood product movements over the border.

Over the next 10 years, the region will emerge as the fastest growing region in Canada, reflecting optimistic population and income prospects, with broad-based growth across most commodities. Solid population and income growth will translate into solid growth in for-hire tucking activity. Both the Vancouver and Prince Rupert rail and marine corridors will benefit from particularly stronger growth in Asia driving both demand (grain, potash, energy) and production (containers) of key commodities. Western rail border crossings will realize moderate growth owing to strong gains in potash and grains at BC crossings to US ports and minimal gains in potash, forest products and crude oil at other crossings.

Freight outlook for Central Canada

In the short term, central networks are expected to return to pre-pandemic levels by 2022. Transportation of consumer goods, particularly food, will remain stable; as a key commodity in the region, this has bolstered the network throughout the pandemic. The Thunder Bay corridor is expected to continue growing into 2023, but the market share of grain at the port is expected to shift as normalization occurs; this is an expected outcome of a strong harvest year.

Recovery of container traffic at the Port of Montreal is expected in the short term, emphasizing goods consumption and reflecting anticipated economic growth (in other words, increasing disposable income correlates with increased demand for goods), with recovery in 2021. For hire trucking is expected to remain constant for most commodities, achieving stability in 2021, with an exception for manufacturing and wood products, which will realize a slower recovery. Overall, pre-pandemic levels are expected to be achieved by 2022.

Long-term, the region will realize moderate growth. Manufacturing and consumer good will lead demand for transportation. However, automotive sector will experience significant declines. Consequently, rail and truck movements originating from the region are expected to also realize moderate growth. Shipment through Thunder Bay will be particularly weak owing to declining energy shipments related to switch to cleaner energy and limited population growth driving grain demand in Europe.

Freight outlook for Eastern Canada

The eastern transportation networks are expected to recover in full by 2022. Trends in home repair are expected to continue driving demand for movement of construction material, further spurred by economic recovery and increased disposable income. Container movements through the Port of Halifax are anticipated to improve, due to general recovery. Mining is projected to be particularly strong as COVID health restrictions ease at larger operations, and new mines ramp up production for iron ore along the Labrador Quebec rail corridor; volumes are expected to increase in the short term in all scenarios. For hire trucking will remain consistent with most of the country, with manufacturing and wood products hardest hit, slow recovery in energy, and stable consumer goods.

The long-term growth in for hire truck growth is expected to be tepid. The region will experience more pronounce aging, which will weigh on demand for transportation. Shipments moving across the region from the Port of Halifax will realize moderate growth owing in part to growing container markets outside of China. Labrador Quebec rail corridor will see minimal growth as shipments of iron ore are constrained by lack of mine capacity.

Air passenger outlook

Over the last decade, total air passenger traffic in Canada rose 3.5% annually driven largely by travel to and from outside Canada. Over the same period, flights between Canada and the US rose 4.0% annually and flights to and from outside North America were up 6.6%. Prior to the COVID-19 pandemic, an increase of about 4.0% per year was forecasted for other international travel over the following 10 years, while trans-border flights with the US was expected to slow moderately to 3.6% per year. Domestically, moderate expansions of 2.4% per year was anticipated as population and economic expectations for Canada were slowing down.

Historically air transportation has been highly resilient to negative external shocks; however, the COVID-19 pandemic has been unprecedented in its scope, with the air sector impacted disproportionately compared to the other sectors. Air passenger annual traffic in 2020 was around 28% of 2019 and ten months into the crisis, weekly air passenger volumes remain about 9% of 2019 levels with little signs of recovery.

The air passenger traffic recovery path remains uncertain and will be shaped by 3 major drivers: the recovery of the overall economy, vaccine distribution and effectiveness, and travel behaviour such as different responses of passenger demand for domestic versus international travel, and leisure versus business travel. Canada’s air transport recovery lags behind other countries in part due to rigid travel restrictions, strict quarantines, and the uncertainty evoked by constant changes in travel requirements. International air passenger markets are only recovering where quarantine rules have been relaxed, with domestic markets in China and Russia leading the way. Volatility in air sector recovery is expected over the coming years and traffic is anticipated to eventually return to the forecasted long-term growth rate.