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Tuning up Canada’s clean innovation system

By Michelle Brownlee      

This time next year we need to be lauding the early signs of Canada’s renewed growth in global market share for clean innovation. That would be a win-win for the environment and the economy.

Canada's federal Environment Minister Catherine McKenna. The Hill Times photograph by Sam Garcia
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More Canadian clean innovators, less global success. That’s the common message found in a spat of recent reports on Canada’s clean technology sector.

It’s a troubling finding. It means that in spite of the promising technologies being developed by researchers and entrepreneurs across Canada – on everything from battery storage and bio-chemicals to wastewater treatment and wind energy—our clean innovations are having trouble getting to market.

This trend could lead to two missed opportunities for Canada. First, the job and wealth creation opportunity associated with supplying a global clean-tech market projected to reach $2.5-trillion by 2020. Second, the opportunity for cutting edge, made-in-Canada solutions to step in and bridge the gap between Canada’s current greenhouse-gas trajectory and the targets agreed to in Paris.

So how do we convert more promising Canadian inventions into global clean innovation successes?

The answer is to tune up a clean innovation system in which researchers, investors and firms are running into well-known road blocks.

A policy brief released by Smart Prosperity Institute helps explain how.

It identifies four policy areas—PULL, PUSH, GROW and STRENGTHEN—that need to be advanced in lockstep in order to fix the market failures and market barriers in the clean innovation system.

PULL policies are about stimulating market demand for clean innovation. Because “clean” isn’t always fully valued by consumers (since environmental costs are mostly external costs), clean innovations don’t benefit from the market pull that other innovations typically do. Government can help strengthen that market pull by pricing pollution, crafting well-designed environmental regulations, or generating demand through government procurement.

Policies like these are complemented by PUSH policies, which help drive new ideas and inventions at the early stages of clean innovation. Examples of PUSH policies include support for government labs, good intellectual property regimes, and promoting business research and development. The numbers show that Canada performs strongly at these early stages of clean innovation thanks in part to a historical government focus on PUSH policies for innovation.

Yet in between the creation of a new invention and connecting that invention with a market, companies face the hurdles of scaling up and commercializing. For Canadian clean innovators this is a particular pressure point. It is where many promising solutions end up withering on the vine instead of growing into globally marketable successes that compete with their Chinese, German, and American counterparts.

Thus there is the need for GROW policies, which help firms overcome market barriers like high upfront capital requirements and long-term payback periods through tools like grants, loans, and growth capital.

Finally, these three policy areas—PULL, PUSH and GROW—work best when supplemented by STRENGTHEN policies that ensure that the clean innovation system is optimized and resilient. Policy examples here include talent strategies, good data collection and sharing, cluster and incubator support, and sectoral visions.

The good news is that federal, provincial and territorial governments are displaying a grasp for this kind of policy framework. Budget 2017 earmarks funds in all four policy areas. It includes $400-million for research and development in clean energy and transport among other clean technologies—a distinctly PUSH policy.

It also includes a new $50-million government procurement program intended to give a leg up to new Canadian innovations – a PULL policy. Not to mention the carbon pricing system announced at the First Ministers meeting in December, which will be pivotal in stimulating the market demand for low-carbon innovations.

Budget 2017 also includes GROW policies, with $1.4-billion for the Business Development Bank of Canada and Export Development Canada to invest in the scale up and commercialization of clean technology firms, plus an additional $400-million for Sustainable Development Technology Canada to support clean technologies at the demonstration stage.

And there are STRENGTHEN policies too, with commitments to developing a skills agenda, the still-to-be-defined “superclusters,” a Clean Technology Data Strategy, sector tables, and a Clean Growth Hub within the new Innovation Canada.

Is this the right mix of policies to drive Canada’s clean innovation success? We should anticipate some adjusting and some tinkering. But the answer ultimately will come from the entrepreneurs, investors and private firms who are the real drivers of Canada’s clean innovation future. A smart combination of PULL, PUSH, GROW and STRENGTHEN policies needs to unleash the private sector’s inventiveness, unlock its capital, connect it with markets, and pave its way to profitability.

This time next year we need to be lauding the early signs of Canada’s renewed growth in global market share for clean innovation. That would be a win-win for the environment and the economy.

Michelle Brownlee is director of policy at Smart Prosperity Institute.

The Hill Times 

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