Canada Excels at Climate Technology Innovation, but Struggles to Adopt It

Canada has done a tremendous job over the past two decades funding research and development that has led to world-class climate technologies. But as entrepreneurs know all too well, innovation without market adoption typically leads to a dead end.

If public investment is to translate into commercial success and all the economic benefits that come with it, we need to adjust our course to seize what’s expected to become a multi-trillion-dollar global opportunity.

To be clear, the world is very interested in what we have. For the past decade, Canada has consistently ranked second only to the United States for the number of companies appearing on the prestigious Global Cleantech 100 list of the world’s most promising climate technology or “cleantech” startups, averaging 10 per year. Michael Gryseels, co-founder of Singapore-based Antares Ventures, is among many international investors who see this potential. “Canada has been our go-to place to look,” he says. “The founders and cohesive ecosystem are so strong.”

The Adoption Gap at Home

This strength, however, is severely tested when it comes to convincing larger Canadian organizations to acquire and deploy our homegrown climate solutions, or invest the capital required to scale manufacturing and build first-of-a-kind demonstration projects in our own backyard.

The dozens of early-stage cleantech companies my team works with across the country routinely describe how frustratingly difficult it is for them to get customer traction and investor attention in Canada. They describe being bounced between pilot projects—stuck in what we call pilot purgatory—but rarely getting the follow-on business they need to build revenue that can sustain growth. They talk of the troubling lack of venture capital and project funding needed to grow, and investors with little appetite for risk compared to global counterparts.

The Role of Government in Driving Market Adoption

This is where government can be essential. Policy can provide a consistent signal to the market, creating the certainty required for decision-making. Programs can bring support and incentives to both providers and buyers of new innovations by de-risking projects and crowding in new sources of capital. Government departments—federal, provincial, and municipal—can also play a hugely catalytic role by being the first to procure and showcase newly commercialized Canadian cleantech innovations to achieve their own emission-reduction goals.

Over the years, our federal government and many of our provinces deserve kudos for acknowledging the existence of these challenges and coming forward with policy and program interventions. Unfortunately, these efforts far too often lack the urgency required to achieve the desired impact.

It’s a familiar pattern: a government policy direction is announced, followed by several months of consultation to inform program design, which itself can take up to a year. Once a program is formally launched, a call for proposals leads to many more months of application intake and review. If that process is disrupted by an election cycle, more months of pause result along with the added risk a program can be discontinued if political leadership changes.

Canada’s response to the Inflation Reduction Act passed in the United States in August 2022 is a case in point. That legislation, meant to stimulate investment and deployment of clean technologies, sent a clear signal to the market and almost immediately resulted in billions of dollars of capital flowing to U.S. clean energy projects. 

Roughly a year later, Canadian Manufacturers & Exporters issued a statement citing “Canada’s slowness” to respond. It urged the federal government to “step up its game” or risk falling behind with each day that passes. To this day, many of the investment tax credits underpinning Canada’s response to the IRA are still held back by needless complexity and “bureaucratic sluggishness.”

Procurement and the Missed Opportunity

Similarly, public officials across Canada have acknowledged for many years the importance of leveraging the purchasing power of government—amounting to $200 billion annually—to catalyze the adoption of homegrown climate tech solutions. It would help different levels of government achieve their own climate goals and provide initial customer traction for the country’s small cleantech providers looking to showcase their products and services to private-sector buyers and other governments around the world.

Yet the current model still favours large multinational incumbents that sell well-established solutions and which have the resources required to navigate what is a complex, fragmented procurement system. Public tenders typically prescribe the product or service being sought—that is, safe bets—rather than seek newer, innovative solutions that achieve the outcomes desired. There is little evidence of a willingness to take on more risk to achieve the goal of boosting Canada’s clean economy competitiveness.

Signs of Progress, but Uncertain Impact

The federal budget released this fall commits $186 million over five years to support the implementation of a Buy Canadian Policy, including support for a new small business procurement program that would be enhanced by AI tools. It’s encouraging news to see the size of this commitment, but whether it will benefit Canadian cleantech businesses or the urgency with which the policy and program are implemented remains to be seen.

As recent history has shown, good intentions are not enough when efforts get bogged down by risk-aversion, complexity and bureaucracy in the search for perfection. Good intentions won’t help emerging and scaling climate innovators who run out of runway before getting the lift they need. While a slow and cautious approach designed to avoid failure may work in some areas of policy, when it comes to innovation, it will only hinder our global competitiveness in the long run.

Rather than fail fast, we’ll just fail slow.

A Call for Urgency and Risk-Taking

As we look forward to 2026 and the policies and programs designed to help Canada’s cleantech industry navigate turbulent economic times, let’s inject some urgency into the mission. Let’s chart a quicker path to clear rules and stronger market signals. Let’s move funding out the door more quickly so it can get projects built, help scale our most promising innovators, and move them out of pilot purgatory. 

Let’s build the industry coalitions we need, and enable the innovation support organizations that convene them, to solve common challenges to innovation adoption so we can share learning, including those that come from our fast failures.

Finally, let’s recognize that all innovation inherently requires a degree of risk. Like our cousins to the south, let’s embrace it.