Executive Summary

Canada's transportation system overcomes the limits of the country's topography and geography—linking communities, reducing the impact of distance, and moving people and goods across the country and around the world.

Introduction

The 2007 Canada Transportation Act requires the Minister of Transport to table in Parliament this comprehensive report on the state of the transportation sector every five years.

The bulk of this report focuses on 2011 while offering historical retrospective. It also examines transportation from various perspectives: its impact on the economy; key factors affecting the four modes of transportation (air, marine, rail and road); the movement of dangerous goods; Canada's gateways and trade corridors; and trends and future issues.

Transportation and the economy

Demand for freight and passenger transport is driven by overall economic conditions. Canada's economic growth slowed in the second half of 2011, due to lower domestic demand resulting from decelerated consumer spending. Nevertheless, Canada's economic performance was a success compared to that of other industrialized economies; Canada's GDP growth in 2011 ranked third amongst G-8 countries, after Russia and Germany. Gross domestic product rose by 2.5% in 2011, down from 3.2% in 2010. This compares favourably to the 2.8% decline reported in 2009, at the height of the economic downturn.

Canada's economic performance was buoyed in part by higher commodity prices—a double-edged sword for the transportation sector, as higher prices stimulate demand but also drive up costs. The sector's profitability is largely dependent on affordable fossil fuels, since energy is often the largest or second largest expense—after labour—for a transportation company, regardless of mode. Fluctuations in energy prices were noted over the 2006–2011 period, with significant increases in 2011, including a 23.5% increase in the Canadian average retail price of diesel, a 28.2% rise in price of rail diesel, a 32.1% jump in price for jet fuel, and a 32.6% climb in price for marine bunker fuel.

In addition to grappling with higher fuel costs, Canada's transportation industry must also adapt to changing demographics caused by Canada's ageing population. This key structural issue cuts across all regions and sectors of the economy, and the transportation sector is not immune. Changing demographics will force transportation patterns to shift, and will include heightened demand for accessible transportation.

Government expenditures and revenues from transportation

All three levels of government provide funds and collect revenues from the transportation sector.

Government funding for transportation takes on a number of different forms (see Addendum Tables G1 to G3). At the federal level, it includes funding for VIA Rail Canada, Marine Atlantic and Infrastructure Canada programs. At the provincial and municipal levels, transportation funding covers the cost of building and maintaining roads, ferries and public transit to name but a few areas. Governments also collect revenues from transportation. At the federal level, revenue sources include fuel excise and sales taxes, airport ground leases and the Air Traveller Security Charge. At the provincial level, revenues from transportation come mainly from fuel taxation and licensing. Table G4 provides more details on public revenues from transportation.

Air transportation

Canada's air transport system encompasses 1,889 aerodromes; 2,220 air carriers; a private not-for-profit corporation owning and operating Canada's civil air navigation system (NAV CANADA); and the Canadian Air Transport Security Authority (CATSA), a Canadian Crown corporation responsible for security screening at designated Canadian airports. Some of the 26 largest airports in the country form the National Airport System (NAS). These airports handle approximately 90% of all passenger traffic in Canada and have experienced a period of acute expansion and construction aimed at increasing capacity.

In 2011, air transportation carried 78.4 million passengers (up 2.5% from 2010), and 739,000 tonnes of freight (down 9.1% from 2010) (see Addendum Tables A18 to A19C). Air cargo tends to be higher-valued or perishable goods. The air industry transported $110 billion of Canada's international trade, up nearly 10% from 2010.

Canada's aviation industry's fuel efficiency has improved by 1.9% annually since 1990, surpassing the agreed-upon goal in the voluntary agreement between carriers and the government.

Canada has one of the safest air transportation systems in the world. During the last decade, the rate of air transportation accidents has continuously declined, from nearly eight accidents per 100,000 hours flown in 2000 to fewer than six in 2011. The implementation of Safety Management Systems (SMS) is well underway within the air transportation industry, with SMS policies, processes, procedures and systems covering more than 90% of revenue passenger-kilometres in 2011. Improvements to systems for screening passengers and their belongings have been introduced, including new equipment and lane configurations that improve the flow of passengers and bags through security screening checkpoints at major Canadian airports.

Marine transportation

In 2011, marine transportation handled more than $205 billion of Canada's international trade. It is by far the most important mode, both in terms of value and volume, for serving overseas markets. In 2010, marine freight traffic totalled 392 million tonnes—269 of which were handled at the 17 Canada Port Authorities (CPAs). Bulk commodities were the main products transported by ship.

CPAs, which administer federally owned ports at arm's-length and on a commercial basis, are financially self-sufficient. In 2010, they reported combined revenues of $456.5 million, 18% more than in 2009, with total net income of $101.7 million (see Tables M8 and M9).

Pilotage services, which provide vessels with local navigational expertise, are grouped around four federal Crown corporations. In 2011, they handled a combined 50,743 assignments, generating $180 million of revenue for an overall net income of $10.8 million.

Alleviating water pollution remains an important focus of government and the marine industry. In 2011, Canada signed the Hazardous and Noxious Substances (HNS) Protocol adopted in 2010 by a Diplomatic Conference convened by the International Maritime Organization (IMO). The Protocol covers approximately 6,500 substances and will bring into force an international regime of liability and compensation for HNS. Transport Canada continued to develop regulations and measures to prevent pollution from vessels operating in Canadian waters and the introduction of invasive species into Canada's waterways, and to enable the implementation of a North American Emission Control Area.

On the security front, the Perimeter Security Action Plan announced in December 2011 proposed several measures aimed at improving, better aligning and coordinating maritime security regulatory measures between Canada and the U.S. while enhancing marine security and fostering economic opportunities.

Rail transportation

During 2011, the rail transport industry moved 313.5 million tonnes of freight (see Tables RA7 and RA10). In 2010, the latest year for which data is available, the rail industry carried 4.2 million passengers on VIA Rail, 146,500 passengers on other intercity railways and 64.3 million on commuter railways in the Montreal, Toronto and Vancouver metropolitan areas (see Tables RA30 and RA31). The recent economic crisis coupled with cyclical fluctuations in the Canadian economy impacted volumes of rail freight as well as passenger activities, with the railway industry employing 32,006 people in 2010, up 1% from the previous year, and employee average annual compensation at $76,564, up 2.8% in a year (see Table RA5).

Between 2006 and 2011, the federal government amended the Canada Transportation Act to strengthen shipper protection provisions, and the Railways Safety Act (RSA) to enhance rail safety oversight and enforcement, and to increase the focus on safety management systems and environmental protection. The government also followed up with a Rail Freight Service Review, releasing the final report in December 2010 and government responses on March 18, 2011.

Canadian National (CN) and Canadian Pacific Railway (CPR) have pursued billion-dollar capital investment programs aimed at improving overall efficiency, reliability and fluidity of the rail network through targeted investment in track and roadway, buildings, rolling stock and information systems. Locomotive fleet improvement also took priority, as both companies aimed to improve fuel efficiency. Both Class I railways have focused investment in fleet renewal programs, technology and the adoption of best practices to achieve economic and environmental sustainability of their operations. In passenger rail, VIA Rail completed infrastructure upgrades of $300 million in its Montreal-Ottawa-Toronto corridor, and opened a new $750,000 station in Smiths Falls, Ontario.

2011 saw significant progress in efforts to reduce air emissions from rail transportation. Both CN and CPR announced plans to improve their locomotive fleet fuel efficiencies and lower emissions by purchasing new locomotives and rebuilding some of their existing fleet, while Transport Canada completed six preliminary consultation sessions on the development of locomotive air pollutant emission regulations.

In keeping with the Rail Safety Strategic Plan 2010–2015, Transport Canada launched the first phase of its national data collection system in 2011 and made significant progress on its implementation of risk-based planning and quality management procedures.

Road transportation

With more than one billion (two-lane equivalent) kilometres of roads (see Table RO2), road transportation is Canada's most important mode for passenger and freight transportation. The National Highway System's (NHS) 38,000 kilometres of roads are critical to domestic and North American trade and tourism activities. While the road network falls under the responsibility of provinces, territories and municipalities, the federal government contributed financially to a number of major road-related projects through several programs—such as the Building Canada Fund. The federal government continues to contribute to a significant number of projects, including the construction of a new bridge to replace the existing Champlain Bridge in Montreal, the construction of a new bridge over the St. Lawrence Seaway to connect both ends of Highway 30, and work on the Detroit River International Crossing between Windsor and Detroit, which began in 2011.

In terms of freight on Canada's roads, in 2010, Canadian for-hire trucking carriers moved 225 billion tonne-kilometres of freight (see Table RO17), 139 billion in domestic freight and 87 billion in international freight traffic (see Tables RO13 to RO15). On the passenger side, bus industry revenues in 2010 were $14.3 billion. Meanwhile, public transit continued to gain popularity across the country, as did active transportation and shared transportation systems. Major new mass-transit infrastructure projects are being planned in Montreal, Ottawa, Toronto, Edmonton and Vancouver.

Of all transportation modes, the road mode is by far the largest producer of greenhouse gases (GHG), accounting for 82.5% of domestic GHG emissions from transportation, and 19% of total Canadian emissions in 2009. However, more stringent regulations introduced in 2011 for vehicle model years 2012 to 2016, as well as technological advances and alternative fuel and energy types, will help contain the road mode's carbon footprint. As well, the Government of Canada has introduced a number of initiatives in recent years to develop lower carbon-intensive alternative and renewable fuels.

The most recent road casualty data shows a decrease in road casualty collisions from 148,154 in 2005 to 123,524 in 2009 (see Table S6), a decrease in the number of fatalities from 2,898 in 2005 to 2,207 in 2009, and a decrease in the number of injuries from 204,768 to 170,415 (for 2005 and 2009, respectively). Numerous outreach and public initiatives have targeted impaired driving—which may be a factor in up to 37.6% of fatal accidents—winter driving and driver distraction. Canada also supported the United Nations in declaring 2011 to 2020 the Decade of Road Safety.

Transportation of dangerous goods

The safety record for the transportation of dangerous goods has improved over the past five years: some 358 transportation accidents involving dangerous goods were reported in 2011, 4.4% below the average for the 2006–2010 period; 70% of them occurred during handling at transportation facilities, and 30% took place while the goods were in transit. The 96 road-related dangerous goods accidents accounted for more than 92% of in-transit dangerous goods accidents (see Tables S22 to S24). Fatalities resulting from the transportation of dangerous goods has remained at zero for the fifth consecutive year.

Gateways and trade corridors

Canada is working to ensure ongoing trade competitiveness through the implementation of strategic planning and focused investments in the country's transportation system through three initiatives: the Asia-Pacific Gateway and Corridor Initiative (APGCI), the Ontario-Quebec Continental Gateway, and the Atlantic Gateway and Trade Corridor. To support these initiatives, the federal government created the $2.1-billion Gateways and Border Crossings Fund and the $1.0-billion Asia-Pacific Gateway and Corridor Fund within Building Canada, the federal government's overall plan for infrastructure that commits almost $6 billion to Canada's gateways and trade corridors to support key projects.

Gateway development reaches beyond infrastructure. A broad analytical framework, including a fluidity indicator, has also been developed to evaluate how gateways and strategic trade corridors interact operationally, to examine end-to-end supply chain performance by focusing on the time component, and to identify capacity and demand of the multimodal system by determining issues and bottlenecks that affect the efficient flow of international freight as well as the competitiveness of the system.

Trends and future issues

Looking forward, an efficient, clean, safe and secure transportation system accessible and integrated across all modes will continue to be vital to Canada's competitiveness. This integrated system will facilitate the movement of people around the world and enable Canadian goods to access new markets, stimulating wider economic activities, direct investments and prosperity in Canada.

While the United States will remain a crucial trading partner for Canada, increased diversification can be expected in the future, with impacts on both freight and passenger transportation. This will present an opportunity to review policies, legislation and regulations under new circumstances.

Canada's transportation system must remain aligned with the country's opportunities in the global marketplace. Pressure from emerging economies on the world's renewable and non-renewable resources represent opportunities for Canada, particularly for its northern regions where transportation challenges require a tailored approach. However, this will present significant challenges in building a sustainable transportation network that can resupply the North and export its resources while taking into account the needs of the local population and adaptation to climate change.

Canada's transportation sector faces a pending two-pronged infrastructure challenge: first, how to optimize use of current infrastructure to alleviate congestion and adapt to ever-growing traffic volumes; and second, how to address the issue of ageing infrastructure within the current fiscal framework. An additional consideration will be how to address evolving supply chains caused by shifting trade patterns. This may force a rethinking of current service delivery models as well as specific metrics used to measure transportation system performance, and will place a greater emphasis on the transportation system's fluidity, reliability and resiliency.

While high fossil fuel prices provide development and exporting opportunities, they also present a significant challenge to the transportation industry—the challenge of containing costs. All transportation modes are dependent on fossil fuels, and high energy prices have forced industry to explore alternative sources of energy and areas for improved fuel efficiency. This challenge also presents an opportunity for the transportation industry to become more environmentally sustainable and to approach the issue of high fuel prices from a network-wide perspective.

Technology, meanwhile, can play an important role in improving current infrastructure use and capacity, and will remain at the forefront of the transportation system's efficiency, environmental, safety and security improvements.

 

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