The file you're trying to download is in UTF-16 format, and the CSV module is not designed for that. You need to decode it from UTF-16 into some other format. For example:
import csv
import codecs
import urllib2
url = 'http://wildfire.alberta.ca/reports/activedd.csv'
response = urllib2.urlopen(url)
cr = csv.reader([x.strip() for x in codecs.iterdecode(response, 'UTF-16')])
data = [x for x in cr]
# Manipulate the data here
# Now to save the CSV:
with open('outputfile.csv', 'wb') as output:
writer = csv.writer(output)
writer.writerows(data)
If you just need to download the file, and not manipulate it, there are better ways (see minitoto's answer).
This is an example, and the newlines have to be stripped manually for this to work properly, so I'm sure there's probably a better way, but that's the main issue