By Maike Althaus, Executive Director, Canada Cleantech Alliance
It is budget season in Canada, and the hopes and expectations preceding the 2023 federal announcement are huge. The global economy is undergoing a dramatic transition that naturally impacts Canada’s economy. What does this mean for Canada’s cleantech sector? What role will and can it play going forward?
A shifting global economy
The “post-COVID,” post-lockdown world is marked by a few significant events that caused the world to make a major shift from “business as usual” and shaped a new landscape for Canada’s cleantech sector.
The latest and most violent expression of impactful geopolitical tensions is undoubtedly Russia’s war on Ukraine, which is causing Europe to finally address its energy dependence. New political measures are accelerating the energy transition and spurring clean growth in Europe. The war on Ukraine also incentivizes the EU to replace its reliance on the world’s rogue states to source critical minerals. This is further fuelled by the massive clean growth spending package the United States passed last summer, future-proofing the American economy: the Inflation Reduction Act (IRA).
With the IRA, a clean growth competition between two of the world’s largest economies has started. On top of that comes the recent collapse of Silicon Valley Bank (SVB), an institution that has been essential for the growth and well-being of Canada’s clean technology sector, as well as many cleantech companies across the globe.
Where does this leave us?
Access to capital has become more challenging
Canada’s cleantech companies have always had bigger challenges gaining access to capital compared to their American peers. You could say that once a Canadian company is fully commercialized, it is often American-owned and at times even U.S.-based. Gone are the economic benefits that could have been reaped in Canada – and so, too, are the investments Canadian tax dollars made in the company’s growth. Access to capital in Canada has become even more challenging since SVB’s breakdown and it leaves a significant gap in Canada’s cleantech funding landscape.
Not only is the U.S. cleantech funding landscape more lucrative, the Biden administration, as well as many state governments, are throwing big money at the climate tech sector, and with good reason: The global demand for cleantech is increasing dramatically. The International Energy Agency (IEA) is projecting the global market for clean energy technologies alone to more than double by 2030, to $970 billion, and to generate 14 million jobs.
Meanwhile in Canada, we are reluctantly patching up the holes in our climate and climate tech funding policy landscape.
Canada’s future economic growth depends on cleantech
We certainly don’t need and most likely can’t take the same approach President Biden is taking, nor might it make sense. But Canada’s cleantech sector – and Canada’s economy, quite frankly – needs decisive action and a clear industrial strategy.
Canada’s future economic growth and competitiveness are dependent on its cleantech sector. The global clean economy is growing, and there is a huge demand for climate tech solutions and for sustainably sourced critical minerals from friendly economic partners.
Canada’s cleantech sector has huge potential to fill the rising demand: 12-15 Canadian cleantech companies make it onto the annual Global Cleantech 100 list regularly, and our country ranks fourth on the Global Cleantech Innovation Index, punching well above our weight.
The need for decisive action and a clear strategy
The absolute minimum that the federal budget needs to provide this spring are mechanisms that help us level the playing field with the United States and facilitate access to capital for Canada’s cleantech companies.
Canada Cleantech Alliance has been advocating for a manufacturing tax credit and a broader scope of the 30% clean energy Investment Tax Credit that was announced in the Fall Economic Statement. These two mechanisms, along with a clear path forward, would be a good start. We also need a strategic plan that fosters Canada’s cleantech advantage and integrates traditional industrial sectors with the cleantech sector.
In Canada, we have a tendency to underestimate our strengths and the role we can play in the global (clean) economy. At this stage we don’t have time to waste on feeling “less than.” Let’s take some decisive action and harness our full potential to seize the tremendous opportunities that lie ahead of us.