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Federal budget sets new standard for Canadian clean tech

The latest federal budget could prove to be a watershed moment for the clean-technology industry in Canada, and signals that the transition to a low-carbon economy remains a national priority.

At the very time that the Trump administration is backtracking in the United States, the Trudeau government is moving forward with a clear commitment to increase clean tech's contribution to GDP, which is good news for economic growth and job creation.

Backing it up with more than $2.2-billion in new clean-tech spending, the budget shows Ottawa is moving beyond a focus on research and development and now is seriously committed to taking the next step: boosting the demonstration, adoption and export of Canadian energy and environmental technologies.

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In clean tech, R&D is tremendously important, and Canada's support for it has been good, if not consistent, over the years. Smart people in labs, garages and basements have invented and innovated, assisted by provincial and federal grants. Innovation hubs and incubators helped nurture the entrepreneurs that emerged. Private venture-capital firms invested early in companies that have worked to become market-ready.

The result is a clean-tech "farm team" that Canada has been growing for about a decade. But, as coaches often say, we didn't come this far to only come this far.

Clean tech is now a $1-trillion global game – and growing. Spending on R&D is always welcome, but won't get us into the big leagues on its own; it doesn't magically transform innovations into commercial winners.

Customer orders are what matter, as well as having enough capital to fill those orders and kick-start the early revenues required to drive growth and enter new markets.

Herein lies clean tech's chicken-egg problem: Customers and funders won't come to the table if a technology hasn't been successfully demonstrated on a commercial scale, but getting those first commercial deployments requires customers and private investors who are willing to take on daunting first-time risks.

The budget tackles this conundrum head on, recognizing that clean tech is a hard, capital-intensive journey that's too risky and takes too long for traditional venture capitalists.

So on top of committing $430-million in R&D toward clean energy, transportation and natural resource innovation, the budget is putting nearly $1.4-billion over three years into the hands of the Business Development Bank of Canada and Export Development Canada. About $450-million of the new money will be used to finance first-of-kind clean energy and technology projects. Another $380-million will go toward equity financing for clean-tech firms, with the rest available as working capital to help firms buy inventory, hire talent, accelerate sales and boost exports.

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And remember, these are strategic investments – not handouts. By using public dollars to shoulder more risk, the new money is expected to leverage private-sector investment that might otherwise flow elsewhere. The end effect, according to the budget, will be to "increase the amount of capital available to Canada's clean-technology firms as they grow their businesses and create more good, well-paying jobs for all Canadians."

The budget goes much further. Sustainable Development Technology Canada, which for a decade has used grants to attract private-sector investment in demonstration projects, is getting $400-million over five years to continue its mission. The clean-tech sector will also get support through a $1.2-billion Strategic Innovation Fund, which has traditionally only been accessible to the aerospace and automotive sectors.

Another $40-million will be spread between the creation of a national clean-tech database for more accurately tracking the health and growth of the sector, and efforts to promote the adoption of Canadian clean tech in other countries. The government will also streamline and simplify federal support programs and establish a "clean growth hub," which is still to be defined.

To stimulate domestic demand for clean-tech innovations, nearly $400-million will support efforts to get rural and remote communities off diesel fuel and boost adoption of "smart city" technologies. This comes on top of the government's commitment to purchase low-carbon technologies for its own use, and the spread of carbon pricing across the country – including Ontario's cap-and-trade program, which recently held its first carbon allowance auction.

Having come this far, it's now time for the industry to step up to the plate. All stakeholders – ventures, private investors, innovation support organizations – need to be at the table as the federal government works to put its plans into action.

Ottawa has been listening, and over the coming months it will seek industry advice on how new programs and initiatives supported through the budget should be structured for success. It shouldn't alone have to shoulder the responsibility of an effective roll-out.

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It's now up to industry to live up to the high expectations that this budget sets.

Tom Rand is a senior adviser and Tyler Hamilton is business development manager of clean tech at MaRS.

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