Elected officials are wrong to think that “clean tech” is about to reshape the Canadian economy
There’s no evidence that “clean-tech” innovation is about to reshape Canada’s economy, no matter how desirable that would be.
Across Canada, politicians have become bedazzled by the potential of the clean-tech sector to drive economic growth. The 2017 federal budget earmarks more than $2.2 billion in new spending to boost the industry, with a focus on accelerating the commercialization of products and technologies that promise to lessen the environmental impact of energy and water use, transportation and other industrial activities.
Policy-makers’ interest in clean tech is understandable. Globally, it’s a rapidly-developing sector that will continue to expand as demand grows for products and processes that improve environmental performance, increase energy efficiency, and reduce carbon and other emissions.
There’s certainly scope for clean tech to become a sizable Canadian industry. We have a number of successful companies in the sector, along with a strong cadre of academic researchers and technical innovators who have made notable contributions as the industry has evolved.
That said, some politicians are overweighting clean tech’s economic significance as they contemplate strategies to bolster economic growth in Canada. The recent federal budget, for example, devotes pages to extolling the virtues of clean tech, while paying relatively little attention to natural resources, manufacturing, tourism, and other industries that play far larger roles in our economy and industrial structure. Oddly, the budget documents don’t include a definition of clean tech, leaving it unclear exactly what kinds of products and technologies – and which firms – Ottawa intends to support.
How might we go about getting a handle on the economic footprint of the clean-tech sector (leaving aside the question of how to define it)?
One approach is to look at exports. The goods and services that Canada sells to other countries offer valuable insight into the industries and product categories where we arguably possess some kind of comparative advantage.
The export statistics don’t give comfort to those convinced that clean tech is the country’s most compelling growth opportunity. Clean tech products don’t appear in the list of Canada’s top 25 exports, based on the Harmonized Commodity Description and Coding System for classifying traded goods. The only product category that might be considered “clean/green” is electric energy, which ranked 22nd as a source of Canadian export receipts last year. But it seems a stretch to count a fairly basic commodity like electricity as part of the emerging clean-tech sector. And in any case, the value of electricity exports for all of 2016 amounted to less than 2.5 weeks’ worth of Canada’s automotive exports in that year.
What are Canada’s leading exports?
Motor vehicles and related parts generated $65 billion in export earnings in 2016, followed by crude and light oil products ($62.8 billion), gold ($16.4 billion), lumber ($10 billion), and natural gas ($8.7 billion). Canola, wheat, coal, aluminum, pulp, copper ores and concentrates, finished engines, potassium chloride (used to make fertilizer), ethylene and helicopter parts also make the list. Among goods that fall under the heading of “high technology” products, exports of Canadian-manufactured aircraft netted $7.5 billion, while sales of packaged medicines garnered $6.6 billion.
This data should serve as a caution to the many elected officials who believe – wrongly – that clean-tech innovation is about to reshape the entire economy.
Clean tech can help to diversify Canada’s economy, and improve the environmental track record of existing and traditional industries. But even if the sector doubles in size in the next decade – a realistic and desirable goal – it would hardly make a dent in Canada’s overall export picture.
In a market economy, changes in industrial structure and in the composition of a country’s exports tend to occur slowly, regardless of the hopes of politicians.
In addition to looking for ways to nurture the growth of clean tech and expand access to emerging markets for Canadian environmental goods and services, our governments would be wise to spend more time working to strengthen the competitive environment for the industries that underpin our prosperity today.
By Jock Finlayson
Jock Finlayson is executive vice-president of the Business Council of British Columbia.