2008 was the best of times, and the worst of times. It truly was a tale of two ‘ecos’: the economy, which had grown long and strong, a stunning double-length growth cycle analysts were calling a high-growth ‘new normal’. And then there was the resulting global environmental system wracked by ozone depletion, climate change, and increasing catastrophic effects of natural disasters. With a legacy of inadequate international accords that tried but failed to fix the problem, new approaches were needed. In the aftermath of the 2008 economic crisis and subsequent disasters (e.g., Japan), the global clean technology industry has flourished, driven by imperatives of clean, sustainable, inclusive growth. Will this trend continue?
Before answering, it’s important to know why the ‘cleantech’ industry blossomed. As we now know all too well, that 2008 ‘best of times’ economic fairy tale turned into a nightmare. What ensued was actually a colossal role reversal: what became the worst of times for the economy arguably became the best of times for cleantech. Given the great strain that had been put on the ecosystem, hundreds of billions of dollars of what may well have been the most significant, swift and synchronized stimulus package the world has ever seen were devoted to cleaning up the environment – in both industrialized and emerging markets alike. In this way, the Great Recession was actually a great gift.
So what exactly is cleantech? It’s defined as any process, product or service that reduces [adverse] environmental impacts. Cleantech permeates all sectors of the economy, as our environmental footprint can be found in every conceivable activity. The most common applications are found in manufacturing, mining, oil & gas, transportation, power generation, water, agriculture, recycling and other energy efficiency activities.
Since 2008, momentum in the cleantech industry has taken on a whole new meaning. Huge impetus for advancement of the industry was given by the Paris Agreement. The COP-21 process has led countries, states and cities to commit to tangible emission-reduction goals. Known as ‘nationally determined contributions’, these efforts are at the forefront of the transition towards a lower-carbon economy. There is also special attention on countries at particular risk of environmental degradation, notably islands and other low-lying areas.
Other key factors are increasing demand for cleantech solutions. Increasingly, consumers are looking for products and services with a lower environmental footprint, and in many cases, will pay more for them. Corporations are far more aware of the reputation effects of poor environmental stewardship, especially in today’s social media context. Capital is much more available for cleantech applications. Competition is yet another factor: formulate new and cost-effective clean technologies, and it can be a bonanza. In that vein, innovative research and development is driving down costs and the need for subsidies. All this is enabling multi-front changes in the environmental code. Also known as regulation, this function will remain a key factor that drives innovation and presses demand ever further, as amply shown in places like Germany, Scandinavia and California.
The global cleantech industry is growing rapidly, with major investments forecast for all modes of transport, industrial applications, and solar and wind, battery storage and smart grids in the power sector. China alone made nearly $270 billion in green investments in 2016 and plans to commit nearly $300 billion annually in the next four years. India’s targets will require between $120 and $130 billion in green investments by 2022.
Canada is in the game. Canada’s share of the global cleantech market is estimated at 1.5 per cent. We currently have 800 companies in the industry, with collective revenue of $10 billion. Nearly 80 per cent of these are exporters. EDC has made support of these and emerging cleantech exports a key part of our strategy – a topic that our CEO Benoit Daignault is discussing at the Economic Club cleantech event on Monday, November 27 in Ottawa.
The bottom line?
Post-recession initiatives are fusing together the economy and the environment in ways that may well make them mutually reinforcing – perhaps for the first time.
This commentary is presented for informational purposes only. It is not intended to be a comprehensive or detailed statement on any subject and no representations or warranties, express or implied, are made as to its accuracy, timeliness or completeness. Nothing in this commentary is intended to provide financial, legal, accounting or tax advice nor should it be relied upon. Neither EDC nor the author is liable whatsoever for any loss or damage caused by, or resulting from, any use of or any inaccuracies, errors or omissions in the information provided.