Green transition offers a chance for Canadian wealth creation

TORONTO—Canada is investing tens of billions of dollars in subsidies to companies to help fund the transition to a clean energy economy and, by 2050, a country with net-zero emissions. The investments needed to make the transition to the climate-friendly green economy will be huge—both here and around the world—running into hundreds of billions of dollars from now to 2050 in Canada alone. But a big question is whether these investments in the green transition will lead to the emergence of Canadian-controlled clean energy tech firms with their own intellectual property, providing good jobs, enabling the emergence of Canadian suppliers, and creating the ability to produce high-value products and services that can be exported globally. Rather than importing all the technologies that will be needed, our goal should be to design and manufacture advanced technologies for domestic use and for export. That will be an key essential new source of wealth creation as fossil fuels are phased out. It is an opportunity not to be missed, but will we seize it? We were early players in the development of hydrogen and fuel cell systems, but public policy gave little support, and we paid the price for this neglect. A number of our key companies have been acquired by foreign corporations, and we have lost the leadership potential in hydrogen and fuel cells we once had. Will it be different now? This is the test facing the Canada Growth Fund (CGF), a federal investment vehicle for clean technology launched last year by the Trudeau government with a capital commitment of $15-billion over five years. Roughly half of that funding is to de-risk planned carbon capture and storage projects by providing 15-year contracts at set prices to purchase carbon emissions. Such contracts are needed to make projects commercially viable, and to attract other investors since a market for emissions credits has yet to develop. The other half is available for equity and other investments to scale up promising Canadian firms operating in a wide range of green energy technofixes, or developing and processing strategic minerals. The CGF mandate includes the scaling up of Canadian companies as a source of patient, long-term capital, and keeping intellectual property in this country. The CGF's role is not to fund start-up companies, but to scale up businesses that have proprietary technology, and need long-term capital to grow into larger companies with scale and scope for ongoing commercial success. Its mandate, it says, “is to invest in Canadian clean technology businesses that are scaling technologies currently in the commercialization stage of development.” Given the lack of support in Canadian financial markets, it’s vital for government to be a source of patient capital if we are to successfully grow our promising companies. Too often, these companies and their intellectual property have been acquired by foreign investors because domestic financial markets and investment funds would not provide the patient capital for growth that they needed. The CGF’s first equity investment—$90-million—was in a promising Canadian cleantech company, Eavor Technologies Inc. The firm has already attracted international attention for its proprietary technology in geothermal energy with a growing presence in Europe as well as looking to potential in Canada. A private business, it has also attracted investments from serious investors in Asia, the United States, and Europe. In a much larger project—a $200-million investment along with a 15-year take-up contract for a million tonnes of carbon emission credits at $86.50 a tonne—CGF could become a 20 per cent owner of Entropy Inc., this one with proprietary technology in carbon capture and storage systems developed with the University of Regina’s clean Energies Technology Research Institute. It currently is building a carbon capture and storage facility that will capture 90 per cent of emissions from a natural gas power plant in Alberta. In a different kind of investment, CGF has invested $50-million in Idealist Climate Impact Fund, a Montreal private equity fund that invests in a range of companies developing technology for decarbonization and clean energy systems. Idealist Climate has been building its fund with a portfolio of clean tech firms, and has a target of $500-million so that it can make larger investments in the companies it is supporting. If CGF supports early-stage companies, it will likely be through investments of this sort. Earlier this month, CGF announced its latest project: an investment of US$100-million in Svante Technologies Inc., a company with proprietary technology in carbon capture and storage, including the removal of greenhouse gases from the air. A recent International Energy Agency report—Advancing Clean Technology Manufacturing—noted that to seize great future opportunities, governments around the world are developing industrial strategies for clean technology manufacturing. It focused on solar, wind, batteries, electrolysers, and heat pumps. Most of this manufacturing is centred in China, the European Union, and the U.S., with some other countries—notably Japan and South Korea—also important participants. Canada, heavily reliant on branch plant manufacturing, is not high on the list. But that could change with a concerted effort, and with CGF as a key player. The report said that, given the high costs, advanced countries like Canada should rely heavily on innovation from R&D and other intangible investments, and focus on high-value technologies. It estimated global corporate R&D interment focused on clean energy at about US$130-billion a year. As a result of growing R&D investment worldwide, “patents from clean energy technologies, which represent the most formal measure of intellectual property, are growing faster in number than the patents for all inventions globally.” But it is not enough for Canada to do good research or graduate good talent. Innovation takes place in businesses. Without them, we won’t realize our potential. This puts the onus on CGF to go all-out to support our entrepreneurs aspiring to build a new generation of globally competitive but Canadian-owned clean energy companies that will do much to sustain our future well-being. Providing patient, long-term capital for our future winners is critical. David Crane can be reached at crane@interlog.com. The Hill Times