Operating context and key risks

Operating context

Canada has vast resources in energy, minerals and forests, which are central to our economic prosperity. This resource wealth directly and indirectly contributes 16% of the country’s nominal Gross Domestic Product and 1.74 million jobs. Several trends influence Natural Resources Canada’s (NRCan’s) work to support the continued prosperity of Canada's natural resource sectors. Notable trends include: rising global demand for natural resources, increasing competition in global markets, the growing imperative for sustainability and environmental responsibility, and increasing threats to our forests from wildfire and pests.

Firstly, the emergence of large and growing export markets for natural resources, such as China and India, is increasing the overall demand for natural resources and putting positive pressure on commodity prices. Together with demand from the United States, which continues to be generally strong despite the current uncertain trade environment and specific measures on our softwood lumber exports, this upward trend in demand gives Canada opportunities for increasing our exports and driving further economic growth and job creation.

This is particularly true for the energy sector, where Canada has become a global energy superpower, and where global demand for energy resources is poised to grow even further: for example, the International Energy Agency (IEA) projects that by 2040, the world will need 31% more energy than is being produced today.

Secondly, as Canada's natural resource industries work to gain their share of the growing global market, they face an evolving competitive landscape marked by cyclical downturns in pricing, changing supply and demand patterns in the United States and beyond, and regulatory changes and new policy approaches to climate change and carbon pricing. In response, NRCan is working with international partners to promote investment in Canada’s natural resource sectors and collaborating with Canadian industry to research, develop and test innovative approaches, diversify products and services, and to leverage expertise and clean technologies to ensure we stay competitive. In addition, the department is working to ensure that the right structures are in place – including resource management systems, environmental and regulatory regimes, and accessible public geoscience – to support Canada’s competitive advantage in the natural resource sectors.

Thirdly, increasing competition in natural resource markets worldwide is accompanied by a greater emphasis on sustainability and environmental stewardship among international governments. With its eyes on the low carbon future, NRCan is taking steps today to ensure Canada has sustainable, cleaner, and competitive natural resource sectors tomorrow. Through its scientific research and partnerships, the department is supporting innovation in the development of clean technologies.  Budget 2017 provided over $2.2B to support the development and use of clean technology. Additionally, the department has recently implemented a number of new initiatives that support clean technology development and improve environmental performance of our natural resource sectors. For example, through the Green Mining Initiative, NRCan is working with a diverse group of stakeholders to look at the entire mining life cycle to create green technologies and to improve the environmental performance of the mining sector.

Also in support of the transition to a low carbon economy, NRCan is working to minimize the carbon footprint of conventional energy sources by increasing the supply of clean energy and by promoting energy efficiency. The department has engaged Canadians in a national dialogue called Generation Energy and created the Generation Energy Council to accelerate Canada’s transition to a reliable, affordable, low-carbon economy in the future. The department, in close collaboration with the Department of Environment and Climate Change Canada, is also actively engaged in advancing the Pan-Canadian Framework on Clean Growth and Climate Change.

Lastly, climate change is affecting the sustainability and competitiveness of our natural resource sectors. For instance, climate change is contributing to the increased threat of wildfires and destructive pests that can have devastating effects on Canada’s forest sectors. Through its risk management programs, NRCan is helping to manage climate-related and other threats and emergencies, for example by taking action to prevent, monitor and respond to wildfires and forest pest outbreaks.

Key risks

Natural resources are a key economic driver for Canada and play a fundamental role in Canada’s economic prosperity. Managing risks and seizing opportunities facing the natural resources sector are therefore at the forefront of the Government’s agenda.

For the 2018-19 fiscal year, three key risk areas have been identified based on NRCan’s mandate and priorities: (1) clean technology and innovation, (2) climate change mitigation and adaptation, and (3) public confidence.

The following table provides an overview of the context and rationale for the risk areas; it outlines NRCan’s key risks, the associated response strategies and the links to the Departmental Results Framework, government-wide priorities and the Minister’s mandate letter.

1. Clean technology and innovation

The global economy is moving towards a greener future. Innovation enables natural resource firms to accelerate the development of new technologies and products that will contribute to clean economic growth and jobs. NRCan is committed to increase the creation and adoption of clean technology in key natural resource sectors of the Canadian economy: energy, mining and forestry. Measures and actions are required from NRCan to provide more support for Canadian companies to remain competitive and to take advantage of global opportunities in key natural resources market.

Risk	Risk response strategy	Link to the department’s Core Responsibilities	Link to mandate letter commitments and any government-wide or department’s priorities
If Canada fails to apply innovative approaches to energy, mining and forestry sector challenges, it may impact the competitiveness, growth and environmental performance of Canada’s natural resources and clean technology sectors	In 2018-19, NRCan’s risk response will include: As part of the Government of Canada’s commitment to invest over $2 billion in clean technologies, continuing to fund programs to improve energy efficiency and to reduce the environmental impacts of energy production and use, while increasing productivity and competitiveness. Leading Canada’s participation in global initiatives such as Mission Innovation that aim to accelerate global clean energy innovation at a global scale Developing strategic partnerships to support innovation in natural resource sectors through programs such as the Clean Growth Program, the Forest Innovation Program, Investments in Forest Industry Transformation and the Green Mining initiative, assisted by the Clean Growth Hub Supporting additional energy RD&DFootnote 1 through  initiatives such as the Energy Innovation program   Leading the Impact Canada Initiative Clean Technology Stream to explore new programming approaches to advance transformative and breakthrough clean technologies Supporting the United Nations Climate Technology Centre and Network that will provide Canadian producers specializing in clean technology with business opportunities and partnerships in developing countries	Innovative and Sustainable Natural Resources Development Globally Competitive Natural Resource Sectors	Link to Minister’s mandate letter: Make strategic investments in our clean technology sector Link to Government priorities: Jobs and Innovation Environment and Climate Change

2. Climate change mitigation and adaptation

As per the Paris Agreement ratified in 2016, Canada is committed to a 30% reduction in its GHG emissions by 2030, relative to 2005 emission levels. Canada is also engaging in adaptation planning and implementation. NRCan has a broad mandate with respect to climate change mitigation and adaptation, and works collaboratively with other federal departments and organizations to address climate change. As Canadian industries and communities become more aware of the need to adapt to climate change, NRCan’s leadership in climate change mitigation and adaptation will have a direct impact on the country’s ability to develop and export its resources in a responsible manner. Measures to mitigate and adapt to climate change are required to facilitate the transition to a low-carbon economy, to protect or increase market access for our natural resources and to respond to the impacts of climate change for Canadians.

Risk	Risk response strategy	Link to the department’s Core Responsibilities	Link to mandate letter commitments and any government-wide or department’s priorities
If natural resource sectors and communities do not develop in a way that supports Canada’s transition to a low carbon economy and if the adoption of adequate adaptation and mitigation measures does not take place, Canada’s climate change commitment to reduce GHG emissions by 30 percent may not be met, the competiveness of our natural resource sectors may be undermined and communities may become more vulnerable to the impacts of climate change	In 2018-19, NRCan’s risk response will include: Climate Change Mitigation Pursuing domestic collaboration with provincial and territorial counterparts on specific actions through the Canadian Energy Strategy and the Energy and Mines Ministers’ Conference to advance work in support of the Pan-Canadian Framework on Clean Growth and Climate Change Working collaboratively with other government departments and federal organizations to inform and influence Canada’s policy, research, and regulatory response to clean growth and climate change Through Mission Innovation and Clean Energy Ministerial initiatives, pursuing international collaboration with key partners to accelerate the transition to clean energy Under the Energy Innovation Program and Green Infrastructure demonstration programs, funding projects for clean energy technologies that, if proven, will reduce GHG emissions across key sectors (electricity, built environment, transportation and industry) Climate Change Adaptation Supporting projects and activities to improve adaptation knowledge and practice in coastal management, energy, mining, and forestry in order to enable action to adapt to a changing climate Delivering a 10-year research Agenda for Canada’s forests to increase awareness of climate change risks and align efforts to conduct and implement research in mitigation and adaptation activities Providing new geoscience knowledge in Northern and coastal areas to inform climate change risk reduction strategies so that transportation and community infrastructure will be more resilient to climate change Developing new methods to evaluate the impact of climate change on mine waste management	Natural Resource Science and Risk Mitigation Innovative and Sustainable Natural Resources Development	Link to Minister’s mandate letter: Develop a Canadian energy strategy with provinces and territories   Link to Government priorities: Environment and Climate Change Safety and Security

3. Public confidence

NRCan aims to foster a competitive natural resource sector and ensure the sustainable development and use of Canada's natural resources through intergovernmental collaboration. However, Canadians want more opportunities to provide views and influence decision-making processes affecting natural resources development. As well, Indigenous Peoples want assurance that their rights are recognized and their traditional territories protected. Measures are thus required to improve public confidence and to address concerns about potential impacts of natural resources development projects on the environment, Indigenous peoples, and the health and safety of Canadians.

Risk	Risk response strategy	Link to the department’s Core Responsibilities	Link to mandate letter commitments and any government-wide or department’s priorities
If the public does not have confidence that local and Indigenous People’s concerns will be addressed,  decision-making in the natural resource sectors to achieve Canada’s economic and environmental goals could be impeded	In 2018-19, NRCan’s risk response will include: Continuing to lead the modernization of the National Energy BoardFootnote 2 to ensure that its composition reflects regional views and has sufficient expertise in fields such as environmental science, community development, and Indigenous traditional knowledge Continuing work to restore public trust in our regulatory processes and environmental assessments, recognizing that this confidence is key to ensuring that the most appropriate projects get built in Canada Under Generation Energy Strategy, continuing to engage Canadians and other stakeholders to shape Canada’s energy future Continuing engagement with Indigenous communities on West Coast energy infrastructure development Advancing the work of the Indigenous Advisory and Monitoring Committees for Line 3 and Trans Mountain Expansion pipeline projects Advancing the Economic Pathways Partnership to better support Indigenous access to federal programs and services that support participation in economic opportunities Strengthening engagement with Indigenous communities on energy infrastructure development Continuing to promote energy literacy by publishing the Energy Fact Book, infographics, and other information products	Innovative and Sustainable Natural Resources Development Globally Competitive Natural Resource Sectors .	Link to Minister’s mandate letter: Develop a Canadian energy strategy with provinces and territories Modernize the National Energy Board Review Canada's environmental assessment processes Link to Government priorities Exports and Investment Indigenous Peoples Safety and Security