Clean Slate: How Canada Can Spur Growth by Procuring From Its Own Cleantech Startups

Canada’s success in transitioning to a low-carbon future will depend on two related factors: the degree to which governments, businesses and households adopt clean technology, and the degree to which those cleantech goods and services are provided by Canadian companies.

Across the country, tech entrepreneurs are striving to bring innovative solutions from the laboratory and prototype stage to commercial reality, both at home and in export markets. With the right support, these companies will grow into economic powerhouses, generating good jobs and tax revenue for decades to come in Canada.

Employment in the environmental and clean technology sectors was 317,085 jobs in 2018, up 30 percent in a little over a decade, according to Statistics Canada. Tens of thousands more jobs were created by clean technology startups that are just moving into commercial operation. Responding to a MaRS survey, 369 cleantech venture firms reported employment of 17,265, an average of 47 people per firm.

The combination of the COVID-19 pandemic and ongoing concerns about the growing climate crisis makes 2020 a pivotal time for the cleantech sector. Governments around the world are ramping up stimulus packages to rescue their battered economies and collectively allocating trillions of dollars toward the low-carbon transition.

Canada is one of 72 countries that has committed to achieving net-zero greenhouse gas emissions by 2050. That effort will require a massive deployment of new technology to reduce the carbon footprint of existing activities and displace old industries with new low-carbon ones.

The sector is also export-oriented, as the global market for climate-change related goods and services continues to grow. The global cleantech market is expected to hit $2.5 trillion (U.S.) by 2022. Canadian exports for cleantech goods and services hit $7 billion in 2018 and could nearly triple to $20 billion by 2025, according to a 2018 report by a government advisory group.

The cleantech sector includes companies that work across the economy, providing goods and services that lower the environmental footprint of an existing activity or supplanting a more polluting process with a cleaner alternative. They deploy nanochemistry, advanced manufacturing, digital controls, artificial intelligence and more to enhance the productivity and lower the environmental footprint of energy and industrial systems.

We’ve already seen some remarkable successes as Canadian startup ventures move into the big leagues. They supply hydrogen-powered vehicles; they commercialize applications for modern power grids and electric vehicles; and they market technologies that allow companies to capture carbon dioxide and either sequester it or turn it into valuable products.

Still, the deployment of that technology could be dramatically accelerated with more supportive policy. Many cleantech companies rely on new processes or facilities that are capital intensive but create value by increasing efficiency, reducing environmental impact or reducing energy or water use. Those companies can face significant financial hurdles in finding their first customers and translating their innovations into profitability.

Venture capital investment, which funds earlier-stage cleantech development, has risen sharply, with Canadian venture investors allocating $407 million to cleantech startups, compared to $133 million five years ago. But that in turn is dwarfed by the venture capital invested in information, communications and telecommunications startups, which typically reach the market faster with lower capital costs.

Companies need government assistance to get across what is often described as the “valley of death” – the gap between pre-commercial product development and commercial sales.

One common theme that most cleantech entrepreneurs agree on is that governments could boost commercialization efforts through procurement programs. Innovation Economy Council research on fast-growing cleantech firms found that just three percent of their revenues came from procurement.

Ventures also need partners in incumbent industries to provide markets for their technology, while guiding them over real-world hurdles that may not appear in laboratory-based pilot projects. Technology hubs can also provide important resources for these startups, including market analysis, connections to peers and industry mentors and, in some cases, financial support.

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