Trends and Outlook

Technological advances are significantly changing nearly every sector of the economy, including transportation. Canada is improving the efficiency and safety of its transportation network with emerging technologies to make sure it stays world-class.

The transportation sector is transforming from the rise of electrification, autonomous vehicles, connected infrastructure, and sustainable aviation. Increasing electric vehicle adoption is central to Canada's strategy to reduce greenhouse gas emissions, supported by governmental incentives and investments.

Autonomous vehicle technologies are currently in the testing phase. They’re positioned to make travel safer and traffic management more efficient. Connected infrastructure is improving the way vehicles, traffic management systems, and other infrastructure components communicate. This is leading to smarter and data-driven traffic solutions.

Initiatives exploring hydrogen fuel and expanding drone use are part of Canada's commitment to safer, more efficient, and eco-friendly transportation. This shift is complemented by both emerging and established technologies such as advanced driver-assistance systems and expanding electric vehicle infrastructure. These are changing consumer behaviors towards sustainable transportation options.

Digitalization and automation are also key drivers of change. They are rapidly advancing innovation and changing employment and supply chain management. The integration of artificial intelligence and the Internet of Things is improving the intelligence and resilience of infrastructure and logistics. This shift is crucial for adapting to fast-paced technological developments, optimizing systems, increasing productivity, and reducing operational costs.

These advancements provide greater throughput and improved visibility across transportation and trade flows. Artificial intelligence and the Internet of Things are increasingly used in systems management, cargo inspection, and real-time tracking of shipping containers to boost efficiency and transparency. The Government of Canada is playing a vital role by creating an environment for extensive information sharing and collaboration across sectors.

Emerging innovation trends in canada’s transportation sector

• Electrification of Transport: Faster electric vehicle adoption is supported by government incentives and an expanding charging infrastructure. This includes integrating renewable energy sources such as solar and wind power to further reduce the carbon footprint
• Autonomous, Connected, and Automated Systems: This trend includes trials of autonomous buses and taxis which make urban mobility safer and more efficient. It also includes automating traffic management and logistics operations. This improves precision and reduces errors. Ongoing policy and regulatory updates ensure safety, efficiency, and equitable access to these technologies
• Smart Transportation Systems and Internet of Things Integration: Adopting data-driven and Internet of Things-enabled systems improves traffic management and reduces congestion. These systems improve safety, equity, and accessibility, providing more personalized services. However, there are still challenges related to privacy, data security, and the need for effective public-private partnerships to manage and safeguard data
• Sustainable and Multimodal Transportation Networks: Developing networks that allow smooth transitions between different modes of transport. This reduces reliance on personal vehicles and supports environmental sustainability
• Digitalization of Operations: This trend includes using advanced artificial intelligence for logistics software optimization, Internet of Things devices for predictive maintenance, and blockchain for secure processing. These technologies improve operational efficiency and security across the transportation sector
• Enhanced Accessibility through Innovation: Artificial intelligence and other emerging technologies are being used to create more accessible and smoother journeys, particularly for people with disabilities, seniors and other citizens with unique needs
• Advanced Air Mobility: Explorations into drone deliveries and passenger drones are preparing to introduce air mobility solutions into urban transportation networks. This could potentially reduce ground traffic congestion

The way Canada is using technological innovations to improve transportation aligns with other nations, like the United States, United Kingdom, the European Union and Japan. Collaborating with these nations is essential for innovation and addressing modern transportation challenges.

Implications for Canada's transportation sector

Canada is embracing technological advancements. Both established and emerging technologies have crucial roles. Advanced driver-assistance systems and real-time data applications are now widely accepted. Expanding electric vehicle infrastructure is promoting more sustainable consumer behaviors.

New digital tools increase supply chain efficiency. They optimize service delivery and logistics management by helping to find problems and improve performance across different modes of transportation, including international dimensions. These innovations improve corridor flows and reduce costs. They also help collaboration and reduce safety and environmental risks, changing the entire transportation experience.

Canada's proactive approach to digitalization, automation, electrification, and sustainable aviation needs strong regulatory frameworks and large investments in infrastructure. It also needs more vigilance and stronger security measures to address evolving risks such as cyber-attacks and private and commercial data ownership issues. These technological advancements are also creating new job opportunities in technology. This shows the urgent need for retraining and upskilling programs to prepare the workforce for the future.

With strategic management, this transition can make Canada a global leader in transportation technology. Advancements in operational efficiency and sustainability from transportation innovations can match public policy outcomes to benefit all stakeholders.

Changing Demographics

In 2022, Canada witnessed record population growth, reaching an estimated 39.6 million by end of year, fueled largely by international migration. Looking ahead, the population is expected to increase by more than 2.5 million by 2036. Canada is by far leading the G7 countries for population growth, as has been the case for many years. As major urban centres absorb the bulk of that growth, the United Nations, through its World Urbanization Prospect, projects that urbanization in Canada will reach 88% in 2050, up from 83% today, increasing demand for urban travel and the risks of congestion. Higher urban congestion could also raise demand for public transit. According to the TomTom 2021 Traffic Index, which ranks urban congestion worldwide across 404 cities worldwide, Vancouver ranks as the most congested city in Canada, followed by Montreal and Toronto with extra overall travel time between 24% and 33%.

The growing population of Canadian seniors will also affect the nature of passenger transportation in the future by increasing the need for more flexible and accessible transportation. In 2036, Statistics Canada expects the population aged 65 and over to reach 24% of the population, up from 18.5% in 2022.

The demographic outlook highlighted above will also impact the human resource availability of transportation activities and operations. As the population ages and an increased portion of today's workers retire, there will be a smaller supply of skilled professionals to take their place.

Green Transportation

In 2022, the Government of Canada continued to take action to advance zero-emission vehicle (ZEV) adoption across the country and committed to implementing ZEV regulations in both the light-duty vehicle sector and the medium- and heavy-duty vehicle sector. These regulations will set annually increasing requirements towards achieving 100% light-duty vehicle ZEV sales by 2035 and medium- and heavy-duty ZEV sales by 2040 where feasible. The light-duty regulations include interim targets of at least 20% by 2026 and at least 60% by 2030, while interim targets for the medium- and heavy-duty regulations will be explored for different vehicle segments based on feasibility.

Technological Advance

Canada needs to position itself for a future characterized by emerging and disruptive technologies and new approaches. Connectivity and automation will have far-reaching impacts on the transportation sector, and the economy. Adapting to the exponential growth in the rate of change of technological advancement and applying the benefits of these advancements to improve the efficiency and safety of the transportation sector is key in maintaining a world class transportation network.

Significant advances in information, communication, and other technologies have taken place over the past two decades. These technologies have brought major change to nearly every sector of the economy, including transportation.

New technologies are being used for transportation infrastructure, equipment, and supply chain management to make them smarter and more efficient. Changes like ride sharing and “last-mile” delivery services have changed both how and where transportation occurs and will continue to disrupt transportation.

This trend shows no sign of slowing down, and in fact, is likely to speed up as the public and private sector adjust to new ways of working. Changes in technology and innovation will impact both demand and supply of transportation. Major upcoming disruptions include:

• recent technology (cloud logistics, internet of things),
• emerging technology (artificial intelligence, advanced analytics, blockchain), and
• advanced technology (automated vehicles, robotics).

These innovations could improve corridor flows, reduce costs, help with collaboration, reduce safety and environmental impacts, change the origin and destination of shipments, and the nature of transportation services.

Additionally, digitalization is playing a key role in Transport Canada’s technological advance, highlighted in the Government of Canada’s announcement to launch a new digital infrastructure initiative to strengthen Canada’s Supply Chains. This initiative, which would form a key part of Canada’s National Supply Chain Strategy, would improve the efficiency and resiliency of Canada’s supply chain by:

• Making it easier to plan and coordinate transportation activities to alleviate bottlenecks, reduce congestion and be more resilient to disruptions by collecting and sharing data and analytics in real time;
• Supporting industry-driven approaches to digital solutions, especially in the areas of data collection, coordination, and improving the visibility of the transportation network for carriers, shippers and governments;
• Supporting evidence-based decision-making to further optimize existing networks and better plan infrastructure investments.

Air passenger recovery

Demand almost recovered from pre-Covid levels in 2023. In July, major Canadian airlines carried over 7 million passengers for the first time since the start of the COVID-19 pandemic (up 13% year over year). Departures by air in the last 3 months of 2023 were stable and approached 2019 levels (98.6%).

Domestic recovery was uneven, affecting remote and rural communities. Every province and territory has lost regional connectivity since the pandemic. This has been made worse by a global pilot shortage.

The Airport Recovery Operations Committee was established in May 2022 to identify and reduce slowdowns in the air transportation system. It continues to meet regularly to advance air sector recovery efforts. In 2023, the Committee worked to support better security screening wait times, ontime performance for flight cancellations and delays, communications with passengers, and stakeholder coordination during extreme weather and peak travel periods

Air passenger traffic shows resiliency

In 2023, the number of passengers travelling by air was up 27% from 2022. This is about 6% below prepandemic levels. The number of passengers travelling internationally was above 2019 levels, followed by those travelling within Canada, and finally to or from United States. Global air travel demand has continued to grow during economic slowdown and geopolitical tensions.

Air passenger volumes are expected to recover to 2019 levels later in 2024. This is supported by strength in the international sector. Downside risks remain from higher costs of living in the short term, higher borrowing costs, changes in travel behavior, and industry supply-side concerns. Supported by the remnants of pent-up demand, the resilience of leisure travel continues to be an upside risk.

Over the next 20 years, air travel is likely to go back to its long-term relation to economic activity. However, there are still uncertainties. Borrowing costs could slow down fleet renewal, combined with the effects of environmental protection goals, other regulatory environment, and technological innovation.

Freight recovery

The freight sector in 2023 faced different challenges and opportunities affected recovery. Postpandemic consumer spending and a large surge in demand for goods changed to a more stable environment influenced by global macroeconomic factors. While certain sectors such as the automotive industry have maintained their post-pandemic demand, the freight sector continues to face global supply chain issues and economic uncertainty.

High inflation rates and tightened spending affected consumer consumption patterns, reducing demand for imports and overall demand for freight transportation. Geopolitical conflicts also affect the demand for specific industries – particularly energy products, as the Ukraine-Russia conflict continues.

The long-term outlook for freight transportation is good. Growth is expected to return as global economic conditions evolve. Advancements in digitalization, data analytics, and smart infrastructure reduce costs through increased fright efficiency, oversight, and management. Factors like climate change and sustainability are also changing freight transportation and suggest broader long-term transformation in the years to come.

The outlook for freight transportation services is a direct result of the outlook of supply and use of goods in Canada. We need to know the outlook for key sectors of the economy to understand the outlook for demand of transportation services.

Population growth and rising incomes in emerging markets will cause increasing demand for Canada’s agricultural products abroad. Moderate domestic population growth will drive continued household demand for domestic shipments and imports of construction materials and consumer goods. Direct impacts of climate change and climate change policies will cause limited growth in exports and domestic use of forestry and fossil fuel products. However, climate change action and new technologies are significant opportunities for Canada’s critical minerals and alternative fuels exports.

As the fastest growing commodities are mostly for overseas trade, transportation demand growth will focus on rail and road corridors connecting to major ports. Sustained increase in domestic commodities will still cause modest growth of inter-regional highways.

Figure 9. Transportation demand growth 2024-2034