With firms warning about economic challenges, the debate over AI safety hitting a fever pitch and the U.S. election set to take place, 2024 may be a year where many sectors brace for a reset.

 Here are the stories to watch in the months ahead, as chosen by The Logic’s reporting team. 

Turmoil in higher education

How it started: The intellectual engines of innovation in Canada are in tough spots. Inflation has eaten into budgets (especially for young researchers), new restrictions on partnerships keep appearing, the Quebec government has it in for English universities McGill and Concordia, and the foreign students whose fees they’ve relied on financially are a factor in the housing crisis that’s animating all levels of politics (which is discouraging some from studying here). Now the feds want to stop universities from declaring bankruptcy if all else fails. 

How it could go in 2024: Quebec might ease up a bit on tuition hikes at its primarily Anglo universities, but not enough to make them happy. The feds are swinging a fiscal hammer to get municipalities to approve more housing construction, but rezonings and development approvals typically precede move-ins by years. Canada’s universities were furious about what they called a “bupkis budget” from the federal government in 2023; inflation rates might be down but that means most prices are rising somewhat more slowly. With graduate awards largely unchanged in 20 years, schools are staring daggers at the government in the leadup to the next budget. How they all muddle through 2024 will have a big impact on cutting-edge tech and the larger economy for years to come. – David R.

Retailers adjust to weakening demand

How it started: Higher interest rates and soaring inflation have led both consumers and retailers to rein in their spending. Households have shifted their budgets toward essential products and discount chains, while many retailers laid off staff and reduced earnings expectations.

How it could go in 2024: While it’s likely rates have peaked and inflation is slowing, a recession is still very much on the table and 2024 may be the year that Canadians tap out on spending. Consumers are now more strapped than ever, taking on higher amounts of non-mortgage debt and increasingly missing payments. Even the record-breaking holiday season so far has come with a grimmer outlook as consumers relied heavily on buy-now, pay-later services. They also spent less on electronics and luxuries, and more on necessities. Hopeful Canadian retailers may have to temper their expectations for 2024 as disposable income is projected to drop and consumers are unlikely to dip into savings cushion to fund unnecessary purchases. – Aleksandra

Hiccups in Hydro-Québec’s green transition

How it started: Economy Minister Pierre Fitzgibbon has expanded the scope of Quebec’s hydroelectric utility, dramatically upping exports and leveraging its massive energy-generating capacity to spur the creation of a battery production hub in Bécancour, about 150 kilometres northeast of Montreal. Enticing big business to Quebec via cheap power is nothing new—it’s no coincidence that nine of 10 Canadian aluminum smelters are within its borders—the scale of Fitzgibbon’s strategy has gobbled up Hydro-Québec’s power surpluses. At current consumption rates, the utility expects to run a 6.9-terawatt-hour deficit by 2029.

How it could go in 2024: Meeting demand growth will cost up to $110 billion by 2035, according to Hydro-Québec. Churning this lucre into electricity will be a politically fraught affair. Apart from new wind and solar energy projects, Fitzgibbon has floated the idea of going nuclear—in a province that has long frowned at nuclear power. Premier François Legault has said the construction of new hydroelectric dams is critical, but Indigenous opposition to such landscape-altering megaprojects is vociferous. It will be up to Hydro-Québec president Michael Sabia, who is open to nuclear and an advocate of landscape-altering megaprojects, to sell Quebecers on the necessity of one or both. – Martin

Macklem nails a soft landing

How it started: When central banks started chasing runaway inflation with aggressive interest rate increases, it seemed an economic crash was unavoidable. Maybe not, Bank of Canada governor Tiff Macklem and some of his counterparts argued. Unusually large numbers of job vacancies might act as a cushion, allowing policymakers to stifle excess demand without triggering a surge in joblessness. 

How it could go in 2024: The “soft landing” scenario is looking plausible. Canada’s unemployment rate was 5.8 per cent in November, roughly the same as at the end of 2019, while vacancies dropped to about 632,000 in September from a peak of more than one million in May 2022. Of course, a soft landing is still a landing: growth stalled over the second and third quarters. But Canada should push through the headwinds. Households still have relatively high savings rates; the AI boom and energy transition should provide incentive for businesses to invest; surging productivity in the U.S. suggests opportunity for Canadian exporters; interest rates likely have peaked and might start to fall by the middle of 2024; inflation appears to be on a downward trajectory, while wages are on an upward one. It might feel like a recession for a while, but it could be a lot worse. – Kevin 

Crypto platforms brace for impact of Canada’s stablecoin regulations

How it started: The country’s securities regulators dropped a bombshell on the crypto industry in February 2023, saying they are of the view that the crypto assets with a value typically pegged to the U.S. dollar “generally meet the definition of ‘security.’” In October, they followed up with detailed rules and deadlines they expect stablecoin issuers and platforms offering them to follow, including providing annual financial statements. Companies are running out of time—stablecoin issuers had to submit documents to regulators by Dec. 1, while crypto-trading platforms must either comply with regulators’ requirements or stop offering stablecoins by Dec. 29.

How it could go in 2024: Canadian crypto-trading platforms kicked up a fuss about the rules, but most told The Logic they got their documents in by the deadline. If major stablecoin issuers like USDC’s Circle and Tether’s iFinex don’t play ball as well, however, the platforms will have to delist the crypto assets by April 30. “Unfortunately, many stablecoin issuers don’t want to be transparent about their financial condition,” Ontario Securities Commission CEO Grant Vingoe said at a Coinbase event in November. – Claire

Open banking becomes a reality

How it started: In September, as Canada’s open-banking lead Abraham Tachjian was expected to wrap up his term, fintechs became increasingly frustrated that the government still hadn’t provided a timeline for open banking—a long-awaited system that would let consumers share financial data with third-party providers, like financial technology startups or other banks. Lobby groups Fintechs Canada and the Council of Canadian Innovators, with the support of firms like Wealthsimple, Borrowell and Neo Financial, launched public campaigns to put pressure on the government to share a clear delivery plan. Meanwhile, the Conservatives tabled a private member’s open-banking bill to push for an implementation plan. 

How it could go in 2024: In her fiscal update, Finance Minister Chrystia Freeland promised to introduce open banking, rebranded as “consumer-driven banking,” via legislation in the 2024 budget and establish rules for the system by the end of next year. Ottawa also announced plans to put a government unit, either a new agency or existing regulator, in charge of the new system. Canadian fintechs were overwhelmingly supportive of the update. Fintechs Canada executive director Alex Vronces told The Logic, “I am more confident than I’ve ever been that these things are going to happen.” – Leah

AI governance gets real—or not

How it started: Policymakers reacted to the popularity of ChatGPT and its ilk as well as the dire warnings of prominent researchers in the field by hustling to impose some rules on AI—or at least to be seen to. At home, the Liberal government launched a voluntary code of conduct for generative systems and sought to bring such tools under its proposed AI law. Elsewhere, the U.S. demanded safety-testing results. The U.K. put on an AI Safety Summit that produced multi-country pledges of greater international cooperation. And Europe finally reached a deal on its AI Act.

How it could go in 2024: Governments are trying to perform three, occasionally clashing balancing acts on AI. The first is between the economic rewards the technology promises and the negative consequences it could have for populations, particularly vulnerable ones. The second is between immediate harms like bias and perhaps-possible risks like extinction events. And the third is between the demand for action at home and the need for international coordination to ensure interoperability. Industry and rights advocates will react to every move. Expect more summits, codes and initiatives—and maybe some binding laws and regulations too. – Murad

Ottawa catches up on green investment rules

How it started: It’s been nearly five years since the federal government said it would develop a rulebook for how to define and classify green assets. The guidelines are meant to stem greenwashing and help close Canada’s $115-billion-a-year investment gap for transitioning to a net-zero economy. But the process has been fraught with disagreement and delays. 

After a failed attempt by the Canadian Standards Association to develop what’s known as a green transition taxonomy, the Sustainable Finance Action Council, a group of finance executives, took over. The group delivered its recommendations to the government in September 2022. Those guidelines sat for over a year without Ottawa acting on them, spurring frustration among sustainable finance experts desperate for clarity on how to allocate green funds. 

How it could go in 2024: In November, the government finally indicated it’s serious about implementing a green taxonomy, allocating $1.5 million for the effort in the fall economic statement. The announcement came as a relief to the investment community. But Canada is now playing catch up, as markets like the EU, U.K., China and Australia either have green taxonomies in place or are moving fast to implement them. Further delaying sustainable finance rules could deter investors from Canada, making 2024 a crucial year in establishing credibility in its green investments and ensuring money is flowing to projects that genuinely help curb climate change. – Catherine

AI misinformation floods democratic elections 

How it started: World Press Freedom indexes have worsened dramatically. According to Reporters without Borders, In 2023, more than two-thirds of the world’s countries reported that political actors were often or systematically involved in massive disinformation or propaganda campaigns. Artificial intelligence is wreaking further havoc, with an increasing level of disinformation and propaganda costing less to produce, and achieving new scale. 

How it could go in 2024: According to The Economist, over four billion people will be heading to the ballot box this year. Eight of the 10 most populous countries in the world—Bangladesh, Brazil, India, Indonesia, Mexico, Pakistan, Russia and the United States—will hold elections, along with democracies like Britain, Taiwan and the EU. These elections are taking place at a time when tech platforms have scaled back or removed many of the safeguards that were installed after the 2016 U.S. election in which Donald Trump won. With AI now in the mix, flooding the zone with junk to distort factual messaging, misinformation could jeopardize the world order and destabilize democracy itself.  – David S.

The next U.S. president determines the IRA’s future

How it started: Once U.S. Democrats had adopted the US$369-billion Inflation Reduction Act spending plan along party lines in August 2022—with major incentives for cleantech manufacturing—it triggered a global subsidy war with countries like Canada jockeying to secure  their own green projects. Canadian EV suppliers have reported that even small wording changes in the IRA made big differences in their businesses. Other companies, from dairy distilleries to carbon-capture projects, invested in the U.S. as a result of the policy.

How it could go in 2024: The IRA is already a talking point for Republicans who want to unwind it if they win on Nov. 5, 2024. Though voters in swing states have benefited from EV-manufacturing incentives, major Republican candidates oppose the IRA. Congressional Democrats say Republicans would have to fight to undo the IRA, but experts contend that a future administration could slow rollouts and tighten criteria for IRA programs. Volkswagen and LG’s massive subsidies to build Canadian electric-vehicle gigafactories are contingent on the IRA being alive and well. Its possible downfall could have consequences for Canadian businesses that are planning their cleantech investments around potential future funding. – Anita

The carbon market gets real 

How it started: Carbon-trading markets certainly aren’t new. The EU Emissions Trading System, the world’s largest in terms of volume, launched in 2005. Today there are numerous platforms where heavy polluters or clean energy companies can effectively swap carbon emissions, either by buying someone else’s reductions to lower their own carbon footprints or selling those reductions for a profit. 

How it could go in 2024: In Canada, carbon contracts for difference (CCFDs)—a policy wherein the government uses public funds to guarantee the price companies receive for their carbon reductions on the market—might serve as the anchor for the broader carbon market. In its latest fall economic statement, Ottawa allocated $7 billion to CCFDs, nearly half of its $15-billion Canada Growth Fund, which is currently negotiating contracts with the private sector. Separately, e-commerce giant Shopify has spent $54 million of its own capital verifying and retiring carbon credits last year, and said in its 2024 outlook that “carbon removal technology is taking off.” Morgan Stanley estimates the carbon market could grow to US$250 billion by 2050, up from a modest $2 billion today. – Jesse