Mapping the Route to a Clean Future: An Open Letter to Canada’s Policymakers

Canada has the opportunity to become a country where economic growth and environmental stewardship are not at odds but, rather, are mutually reinforcing. Our air and water could be cleaner, renewable energy could power our homes, and traditional industries could be greener and more efficient, all while increasing GDP, exports, and high-paying jobs for Canadians. 

We have made significant progress in the last decade. We’re developing clean, renewable energy systems, electrifying our transportation sector, and developing incredible technology to reduce emissions, even in our hardest-to-abate industries. In the last ten years, our GDP has increased by more than half a trillion dollars, while our GHG emissions have fallen by nearly 50 Mt in the same period of time. It’s movement in the right direction, but it’s not enough. 

Canadians are already on the cutting edge of cleantech innovation, and our innovation hubs are full of investment opportunities. We should already be outpacing other G7 countries in the race to net zero. Yet cleantech innovators are facing an uphill battle—a frustratingly avoidable one at that—that’s paralyzing an economically viable green transition. 

Our market has painfully low domestic adoption rates and much smaller private capital investments compared to the United States or Europe. And yet, if policymakers urgently deploy the right incentives to industry adopters that de-risk cleantech investment and adoption, Canada could usher in a net zero future this decade. 

Enact Environmental and Economic Policies to Drive the Adoption of Cleantech Solutions 

According to the UNEP, among its G20 peer countries, Canada has the widest gap between our international climate commitments and the implementation of our actual climate policies. 

With the impacts of climate change now apparent in our daily lives, deploying emissions-reducing solutions should be proceeding with the utmost urgency.

Instead, Canadian innovators struggle to find customers within our borders and are forced to look internationally for viable markets. Navigating the international marketplace comes with its own set of challenges: different regulations, logistics and supply chain management, and varying political landscapes. For cleantech ventures—the majority of which are small and medium-sized enterprises—their already-limited resources can be strained by this process, leaving their climate solutions on the shelf. 

Canada’s biggest industries are risk-averse, and cleantech adoption is not without risk. Many technologies show promising results in lab settings. Without early industry adoption, their benefits can’t be proven in the field. 

To be clear, Canadian cleantech ventures are creating game-changing cleantech solutions. We have the technology to meet our 2050 targets, but Canadian industries are not investing at the scale of G7 comparison countries. 

With the lack of paying customers, funding from organizations like Sustainable Development Technology Canada (SDTC) has become crucial for our early-stage startups. Although back in operation now, SDTC’s recent funding freeze highlighted the problem. Without that crucial early-stage funding, the future of hundreds of startups was put in jeopardy. This is not a problem we see in international markets. 

Consistent, nonpartisan policies like Germany’s renewable energy mandates, China’s Emissions Trading Scheme, and the EU’s Carbon Border Adjustment Mechanisms have been proven to benefit both cleantech innovators and keystone industries, both environmentally and economically. 

Canada’s largest driver of emissions reductions is our Industrial Carbon Pricing system. What we need now is a cleantech adoption policy to accelerate the integration of cleantech into Canadian industries. If we are going to keep up economically with the rest of the G7, policymakers need to incentivize Canadian industries to adopt Canadian cleantech. 

Immediate policy solutions should be focused on driving down the risk. Incentives for first-of-a-kind technology adoption can incentivize and ensure that Canada’s biggest industries are investing in sustainability and are rewarded for it. Likewise, financial incentives can also be deployed to offset initial investments so cleantech’s cost-benefit can be demonstrated without a big upfront investment.

As it stands, many cleantech solutions are more expensive than incumbent technologies, and to be competitive without government incentives, cleantech must achieve cost parity with traditional operations. Costs will come down as the technology becomes more integrated, but we need to support these climate solutions in the meantime. 

De-risk and Incentivize Cleantech Investment 

A no-buyer market isn’t the only problem facing Canadian innovators. Our Cleantech ventures routinely report access to capital as one of the major barriers preventing the commercialization and scaling of their solutions. In 2022, 36% of Canadian cleantech firms reported that raising capital is their number one overall challenge. 

Barriers to adoption and access to capital create a vicious cycle that’s stalling Canada’s climate action. Without capital, ventures can’t scale up their innovation to a level to which it can be commercialized and adopted. Without consistent and early industry adoption, solutions don’t have a chance to be tested in real-world settings, limiting the opportunities to scale them. 

Canada has no shortage of investable cleantech solutions. We are at the forefront of carbon management, renewable energy, water purification, sustainable agriculture, and many more. However, to scale to a viable business and impact, many of these ventures turn internationally for support. Take Carbon Engineering, for example. A leader in CCUS, after developing one of the first commercially viable direct air capture technologies, the BC company was bought by an American oil company for $1.5B. Similarly, Ballard Power Systems, a pioneer in hydrogen fuel cell technology, sold nearly 20% of its ownership to a Chinese firm for $163.6M. CarbonCure Technologies, able to inject captured CO2 into concrete, has significant investment from American giants Amazon and Microsoft, among others. The list goes on. 

These are what we consider our success stories—Canadian innovation being bought or predominantly supported by international investors. And the issue is on both sides. Canadian investors and Canadian innovators are looking elsewhere for viable opportunities. 

According to BCG’s The Canadian Venture Opportunity, international investors drove more than half of investments in Canada, while Canadian investors deployed roughly four-fifths of their capital internationally.

Solving the adoption challenge will increase the rate at which investors see returns, giving them more capital to inject back into markets and creating new opportunities for startups working on sustainable solutions. 

Canada desperately needs a progressive financial policy that will incentivize international and domestic investors to fund the development of made-in-Canada cleantech solutions. 

Now is the Time for Policymakers to Lead 

By now, the scale of the climate crisis is obvious. Even the most oppositional groups and individuals have pivoted away from outright climate denial. From environmentalists to ultra-conservative governments, the need to tackle the impacts of a changing climate is apparent. Yet our actions don’t seem to line up with the urgency. If the climate emergency is an emergency, why aren’t we treating it like one? 

For Canada, climate change is an opportunity to build an environmentally sustainable, globally competitive, and innovation-driven economy. 

However, for Canada to transform its economy and lead the global transition to net zero, we must overcome the adoption and access to capital challenges. 

The policy we need should be objective-based and outcome-focused. The outcomes we need to achieve are clear: increase the rate of domestic adoption of clean technologies and incentivize Canadian investors to fund made-in-Canada solutions. Achieving one will certainly help the other. 

Companies that can demonstrate a robust roster of customers will be able to show investors a clear pathway to achieve returns. Those companies will have more success attracting investors than ones who struggle to sell their products. This, in turn, could potentially reduce the financial burden on the Canadian government, which is currently the largest procurer of cleantech in the country. 

Providing Canadian industries with incentives to adopt cleantech solutions, including first-of-a-kind innovations, could streamline the adoption process. Likewise, providing financial support to adopters can reduce their risk and ensure that they can see the economic benefits of adopting cleantech solutions. This will mitigate some of the challenges facing Canadian cleantech innovators with regard to customer procurement.

These are the objectives that our cleantech policy must address. 

Canadian policymakers can and should drive all of these actions that would have positive impacts across our entire economy. Industries could be connected with game-changing cleantech solutions. Investors would see a higher return on investment. Cleantech innovators would keep their solutions, profits, and jobs in Canada. We could be a go-to country for sustainable solutions. 

This is Canada’s opportunity to usher in a future with a stable climate, a prosperous workforce, and a productive economy built on clean technologies. Policymakers, let’s not allow it to pass us by.