Canada’s transition to a stronger, cleaner, more innovative economy received a substantial boost when Minister of Finance Bill Morneau tabled the 2017 Federal Budget.

• Clean technology/innovation a major focus – The budget announces $1.4 billion for cleantech financing, plus additional funds to support Research & Development (R&D). Perhaps most importantly, it recognizes cleantech as an important, growing economic sector, for example by:
  • identifying cleantech as a potential priority area for major funding as a “supercluster”
  • creating Innovation Canada (a new platform to coordinate and simplify public support programs for innovators), and picking clean technology and clean resources as two of the six focal sectors for new Economic Strategy Tables
• Building a low-carbon economy – The budget commits $650 million in new funding for implementation of the Pan-Canadian Framework on Clean Growth and Climate Change, on top of Budget 2016 funding (such as the $2 billion Low Carbon Fund, which is being reprofiled). It targets particular areas, such as moving Canadian communities off diesel, boosting energy efficiency, and addressing transport emissions. And it confirms the path forward on carbon pricing, with the commitment to a consultation paper “in the coming months.”
• Other environmental initiatives – In addition, there’s funding (both for new initiatives and to prevent existing ones from ending) for other environmental priorities in the areas of invasive species, freshwater protection, parks, trails and air quality.

A number of other initiatives also have the potential to support clean growth objectives – including the $21.9 billion previously announced green infrastructure funding which is fleshed out further in Budget 2017; more strategic government procurement to boost Canadian innovation; and a broad skills and training agenda.

Overall the budget is an important signal that the federal government stands behind its words that “the economy and the environment go hand in hand” to the benefit of Canadians.  It builds on the Clean Growth and Climate Change Framework, with further funding and programs to help accelerate the transition to the low-carbon, clean growth economy that Canada needs to be able to thrive in the coming decades (as emphasized in the recent Bank of Canada speech).  But there is still lots to do – the budget sets broad direction and funding, but the hard work of designing and implementing these programs and policies lies ahead, and will be the key to success. 

For more detail, keep reading our day-after wrap-up on how Budget 2017 recognizes the opportunity for Canada to become a global leader in driving clean innovation and supporting Canada’s transition to a clean economy.

Clean Technology & Innovation

Budget 2017 includes a number of new initiatives that strengthen the clean innovation ecosystem in Canada – from those that boost early development of new ideas (by supporting R&D), to those that help companies grow ideas into products and bigger companies (via financing), to those that help build demand for those innovative products and services (via things like export support, clean procurement and smart climate change mitigation policies).

Research and development

The budget reaffirms Canada's commitment to Mission Innovation to double its investments in clean energy research, development, and demonstration over the next five years. As part of this commitment, the budget includes $229 million over 4 years (starting in 2018-19) administered by Natural Resources Canada (NRCan) and Transport Canada to support R&D in clean energy and transport,  as well as $200 million over 4 years to NRCan, Agriculture and Agri-food Canada, and Fisheries and Oceans Canada for cleantech R&D, development, demonstration, and adoption. This is in addition to the $401 million for clean technology provided in Budget 2016, which concludes in 2017-18.

Financing

The budget proposes $1.4 billion in new financing for cleantech firms to be administered by the Business Development Bank of Canada (BDC) and Export Development Canada (EDC). Specifically:

• BDC will provide $380 million over 3 years in equity financing to support cleantech firms looking to scale up, and administer a $570 million working capital fund.
• EDC will provide $450 million for high-capital-intensive clean technology firms for early-commercial-scale deployment.

Also, Sustainable Development Technology Canada is to be recapitalized with $400 million over 5 years through the SD Tech Fund to support demonstration of innovative clean technologies.

Policies that target the entire clean innovation system

Budget 2017 also includes a number of initiatives that target the clean innovation system as a whole, including:

• Support for building knowledge and awareness of Canada’s cleantech sector  through international business development ($15 million over 4 years to Global Affairs Canada).
• A Clean Technology Data Strategy: $14.5 million over 4 years to NRCan and Innovation, Science and Economic Development (ISED) to “foster innovation, improve knowledge in the private sector and stakeholder communities, and help inform future government decision-making”
• Clean Growth Hub: $12 million over 4 years to NRCan and ISED to establish a Clean Growth Hub to provide a new single-service window for cleantech firms, to streamline client services, improve federal program coordination, enable tracking and reporting on clean technology results across government, and connect stakeholders to international markets
• Innovation Canada, a new platform led by ISED, will coordinate and simplify the support available to innovators with six sector-specific Economic Strategy Tables -- including one for clean technology and one for clean resources. These sector tables will “set ambitious growth targets, identify barriers, and layout specific strategies to help sectors achieve their targets.”
• “Superclusters” - The budget includes plans to launch a competition for funding for industry superclusters, with up to $950 million over five years, targeted for highly innovative industries “that have the greatest potential to accelerate economic growth,” such as “clean technology, advanced manufacturing, digital technology, health/bio-sciences, clean resources and agri-food, as well as infrastructure and transportation.”
• Mission-oriented challenges will be launched through the new Impact Canada Fund, initially focused on two streams: a Cleantech stream supported by $75 million over 2 years to address challenges for Canada’s rural and remote communities in transitioning from diesel to renewable and cleaner power sources; and a Smart Cities Challenge supported by $300 million over 11 years to find innovative ways to “improve the  quality of life for urban residents, through better city planning and implementation of clean, digitally connected technology including greener buildings, smart roads and energy systems, and advanced digital connections for homes and businesses”, a vision that echoes the Smart Prosperity Initiative’s vision for healthy, vibrant, and green communities.
• While not explicitly a cleantech initiative, Budget 2017 also proposes to make government procurement more innovative, including providing up to $50 million to launch a new procurement program, Innovative Solutions Canada, modelled on the U.S. Small Business Innovation Research program.

A number of other initiatives, in areas like skills and training, a new intellectual property (IP) strategy, and infrastructure spending (more on that below) can also have positive impact on Canada’s clean innovation performance.

And perhaps most importantly, the budget’s various clean innovation initiatives target all aspects of the clean innovation cycle -- from research and development to commercialization and adoption -- and that is exactly what is needed to grow clean innovation in Canada. (More on that in Smart Prosperity Institute’s upcoming policy brief on Accelerating Clean Innovation in Canada -- coming soon).

Building a low-carbon economy

Budget 2017 reaffirms the commitment to carbon pricing across Canada and commits to a discussion paper to be released in the coming months.

In addition to the $2 billion Low Carbon Fund from Budget 2016 (which is being re-profiled), Budget 2017 includes an additional $650 million over the next 5 years for implementing aspects of the Pan-Canadian Framework on Clean Growth and Climate Change, including:

• Supporting the transition to a cleaner electricity grid: $11.4 million over four years, to Environment and Climate Change Canada to support the accelerated replacement of coal-fired electricity generation by 2030, and set leading performance standards for natural-gas-fired electricity generation  
• Transitioning to lower-emission alternatives for communities reliant on diesel fuel for electricity and heating, with $21.4 million over 4 years (from 2018) to Indigenous and Northern Affairs Canada to continue the Northern Responsible Energy Approach for Community Heat and Electricity Program:
  • $220 million over the next 11 years to reduce diesel reliance in remote communities south of the 60^th parallel; and
  • $400 million in an Arctic Energy Fund to address energy security north of the 60^th parallel.
• Using wood in building construction: $39.8 million over 4 years (from 2018) to NRCan to support projects and activities that increase the use of wood as a greener substitute material in infrastructure projects helping to create new markets for sustainable Canadian products
• Improving energy efficiency: $67.5 million over 4 years (from 2018) to NRCan to renew and continue existing energy efficiency programs
• Emissions from Governmental operations: $13.5 million over 5 years for NRCan to provide expertise to other federal departments in the best approaches to implement energy efficiency and clean energy technologies, to retrofit federal buildings, and to reduce or eliminate emissions from vehicle fleets
• $260 million for climate adaptation and resilience, for a number of measures, including creating the new Canadian Centre for Climate Services
• Policy, communications and engagement: $162 million for a whole-of-government approach to climate change and support for Indigenous collaboration on climate change

Further, for the previously announced infrastructure spending, new details were announced in Budget 2017 that show how infrastructure can support the implementation of the Pan-Canadian Framework on Clean Growth and Climate Change.  As announced in the 2016 Fall Economic Statement, the Government will invest $21.9 billion in green infrastructure, including initiatives that will support the implementation of the Framework.  While there is still lots of work to be done to ensure infrastructure investment won’t lock Canadians into a high-carbon path, Budget 2017 helps to clarify how the green infrastructure funds will be spent, including identifying three distinct funding streams:

1. Integrated bilateral agreements ($9.2 billion over 11 years) directly to provinces and territories
2. The Canada Infrastructure Bank (at least $5 billion over 11 years)
3. A series of national programs ($2.8 billion over 11 years) including:
   • $100 million to support next-generation smart grid, storage and clean electricity technology demonstration projects
   • $200 million to support the deployment of emerging renewable energy technologies nearing commercialization
   • $220 million to reduce the reliance of rural and remote communities south of the 60th parallel on diesel fuel, and support the use of more sustainable, renewable power solutions
   • $120 million to deploy infrastructure for electric vehicle charging and natural gas and hydrogen refuelling stations, as well as to support technology demonstration projects
   • $182 million to develop and implement new building codes to retrofit existing buildings and build new net-zero energy consumption buildings across Canada
   • $2 billion for a Disaster Mitigation and Adaptation Fund to support national, provincial and municipal infrastructure required to deal with the effects of a changing climate.

Other Environmental Initiatives

Budget 2017 also includes a number of initiatives around environmental protection and nature conservation – including:

• Recommitting to Budget 2016 funding and providing some new funding ($405 million over 5 years) to continue programs that would otherwise be ending in areas such as: funding for national parks, protecting marine and freshwater ecosystems, and improving air quality
• A commitment of $30 million to complete the TransCanada Trail

It also includes small tax measures to address Canada’s commitment to phase out fossil fuel subsidies by 2030, and a favourable tax change for geothermal energy.