A three-pronged approach is needed to bring together the two countries.
By Akshay Dubey, CEO, CVW CleanTech
The clean technology sector holds great promise for economic growth and environmental sustainability. Globally, capital flows for clean technologies are estimated to have been over US$2.8 trillion in 2023.
However, a gap between Canadian and American cleantech investments is clearly identifiable. While the U.S. has seen over $300 billion in investment since 2022, Canada’s growth has not been as strong.
While many different factors have contributed to this divide, political uncertainty, slow and ineffective government incentives and regulations have been identified as primary issues. In the U.S., passing the Inflation Reduction Act saw rapid and considerable investments in cleantech by offering clear and strong incentives. On the other hand, disagreements between different levels of governments in Canada have created an unstable environment discouraging investment and stalling incentives.
The Canadian tax credit system, despite its many benefits, can be complex and challenging to navigate, while securing a single patent through the Canadian Intellectual Property Office is costly and can take up to six years.
Despite these impediments, there exists a wealth of investment opportunities that should not be overlooked. A lack of investment does not mean that innovation isn’t happening in the country. In the oil and gas industry, companies like ours, as well as Ekona Power and Svante, are addressing a number of issues, including reducing fugitive methane emissions from tailings ponds, hydrogen production, and carbon capture and storage.
Last December, the Canadian government released draft legislation that would require the oil and gas sector to reduce methane emissions by 75% by 2030. While some industry leaders have claimed this can only be achieved through production cuts, cleantech players are putting up their hand with solutions. All they need is investment.
In order to resolve environmental challenges in an economically productive way, collaboration will be the key. With the growing recognition of cleantech as a critical component of future economic stability, resolving the impediments and fostering collaboration will only drive more advancements and much needed commercialization of these technologies.
To bridge the investment gap with the U.S., Canada must:
- Simplify tax incentives (to improve the accessibility and simplicity of tax incentives to leverage the benefits);
- Streamline regulatory processes (to reduce approval times for adoption of commercial ready technology and lessen the burden on companies, allowing them to focus on innovation and growth); and
- Align policy frameworks with market needs (to support the commercialization of technologies that both reduce
greenhouse gas emissions and create positive economics).
The government has laid out a clear list of priorities including decarbonization, reconciliation with Indigenous groups, development of green industries and growth of critical minerals production. And while clean technology investment tax credits were the flagship program designed to spur investment in technologies, when looking at the narrow and flawed definition of the programs, important clean technologies are falling through the cracks.