Canadian policymakers today face a litany of challenges unlike any encountered in the last decade: Putin’s war in Ukraine, record inflationary pressures, a looming global recession and the battle to get ahead of the ongoing climate crisis.
It’s this latter crisis that will have disproportionate, long-term impacts on Canada’s economy. The good news is that the climate crisis is not merely a massive challenge we must solve; it’s also a multi-trillion-dollar economic opportunity for our region, its businesses and workforce.
Consider these two facts alone: the global cleantech market is projected to exceed US$3.3 trillion in 2022, accounting for 2% of global GDP. On a global scale, bold climate action could deliver more than US$26 trillion in economic benefits in the lead-up to 2030.
Canada has a head start in the race to lead the emerging climate economy, with world-leading innovators and a booming tech sector. Earlier this year, research firm Startup Genome recognized the Toronto-Waterloo corridor, Vancouver and Calgary as the country’s best cleantech start-up ecosystems. In fact, clean technology products represented 3.3% of Canada’s total GDP in 2020, accounting for almost 323,000 jobs. Notably, 13 Canadian companies made the prestigious 2022 Global Cleantech 100 list: no small feat for an economy of our size.
Now is the time for Canadian governments at every level – and from every political stripe – to capitalize on this economic opportunity. By adapting and implementing climate strategies today and homegrown technologies, we can reach our climate targets by 2040 and lay the underpinnings for a stronger, more internationally competitive economy as we emerge from today’s period of acute economic uncertainty.
The Board of Trade’s in-depth conversations with our members have shown us that businesses are ready to invest in reducing their emissions but require a stable and competitive policy environment to do so.
Clean technology investments often have high upfront capital costs and long payback periods. Governments at all levels should introduce a more comprehensive set of incentives to de-risk business investments in clean technology solutions.
Federal cleantech investment tax credits should be stackable, transferable and applicable to a wide range of cleantech investments. Provinces such as Ontario should also provide targeted support of electricity rate guarantees to secure investment in large electrification projects – such as the current proposal to introduce a more affordable interruptible electricity rate for hydrogen production.
For smaller and medium-sized manufacturers in particular, these investments in decarbonization, while highly desirable, are less commercially attractive, particularly in today’s high interest rate environment.
American Climate Economy
Recent developments in the United States have changed the global landscape for climate action; we risk losing investments and jobs to our southern neighbour without a robust policy response.
In August, U.S. President Joe Biden signed the Inflation Reduction Act into law. The legislation will result in dramatic investments to meet U.S. climate change goals through a mix of tax incentives, grants and loan guarantees aimed at boosting clean energy and transportation.
The legislation contains some of the most robust clean energy tax credit programs in North American history – a fact that is not lost on Canadian businesses looking south for expansion.
When she delivered the federal government’s fall economic statement in early November, Deputy Prime Minister Chrystia Freeland called for a “green industrial transformation comparable in scale only to the Industrial Revolution itself.”
The mini-budget provided more details on several key measures to boost Canada’s competitiveness in these sectors, including business tax credits for clean technology and hydrogen investments and the creation of a $15-billion Canada Growth Fund targeted at domestic businesses that invest in the net-zero economy.
These new initiatives are a start, but more is needed.
The federal budget this spring will need to include measures to materially support key climate economy and advanced manufacturing investments to stem the southward flow of capital because of the Inflation Reduction Act. The budget should enhance tax credits for carbon capture and storage technologies to be more competitive with the new Inflation Reduction Act provisions.
With reputable cleantech innovators, willing businesses and ambitious climate goals, the Toronto region has what it takes to be a North American leader in the climate economy. Toronto-based clean technology developers, such as e-Zinc, ecobee and Li-Cycle, have already proven their capacity for practical, real-world, results-driven innovation. And many organizations such as ArcelorMittal Dofasco, the University of Toronto and Toronto Pearson Airport have already taken impressive steps to green their operations.
Globally, the climate economy has the hallmarks of a new goldrush: the next frontier. With the U.S. now making unprecedented investments in the climate economy, Canadian policymakers, in partnership with the business community, must leverage the “climate economy” narrative to avoid being left behind. Now is the time to seize the opportunity for our country’s growth and competitiveness over the coming decade and beyond.