Response to the Financial Post piece written by Philip Cross

By Stephan Ouaknine

Cleantech and green energy has always faced criticism and downright attacks from supporters of fossil fuels and dirty energy production, and one of the latest, most high-profile critiques continues the trend of completely misinterpreting nearly every facet of how cleantech functions, both as an industry and as a collective of individual energy solutions.

In his recent piece for the Financial Post, writer Philip Cross argued that green industries are “worthless” to Canada’s economy - a prime example of the sort of conversations we ought not to be having about Canadian Cleantech: dissing a budding industry that is working against macroeconomic forces and centuries of entrenched industrial development. His piece, a reaction to StatCan’s recently published report on the state of the Canadian Cleantech economy, makes the central argument that this industry is not yet developed, as it represents roughly 3.1% of Canada’s GDP, and should therefore be abandoned. The notion that something that has not yet happened will never happen is completely nonsensical. Did the USA give up on developing the Oil and Gas industry when it too only represented 3% of GDP? Of course not! In fact, the federal government heavily subsidized the industry to bring it to scale. A point Phillip fails to cross.

Cross posits that government subsidies indicate an unsustainable energy market for green energy, but, when looking at the level of subsidy each energy technology received during the first fifteen years of its deployment, O&G received roughly five times that of renewables, and nuclear nearly ten times this amount (as a percentage of inflation-adjusted spending). Therefore, renewables are not an outlier in this regard. Government support is a necessary part of any emerging energy technology. In fact, recent increases in Cleantech subsidies are a good sign the industry is maturing. However, it is important to note that it is actually forward-thinking investors who understand the importance of grappling with the effects of climate change, not governments, that are truly driving change here. A recent Financial Times article illustrated the importance of institutional investors in driving the adoption of clean technologies to push big polluters like the oil and gas industry to meet emissions reduction targets – Royal Dutch Shell’s announcement to halve its carbon footprint by 2050 spun out of dialogues with its investors. Therefore, it’s pointless to worry about your tax dollars being wasted on a “worthless” industry when the real change is being driven by asset managers – which is the mission at Inerjys. My team and I understand the importance of impactful investments in mitigating the adverse effects of climate change and strongly believe in the benefits of investing in technologies with the potential to shift us into a low-carbon world.

In an attempt to convince readers that green tech is expensive, Cross puts forward arguments that misrepresent the clean technology industries entirely.  Cross bashes hydro’s extremely expensive “mega-projects” that he claims raise retail electricity rates for consumers. While it is true that hydro projects tend to be extremely large (hundreds of megawatts to gigawatts), and up-front capital intensive, these projects end up generating the cheapest electricity per unit of energy over their lifetimes out of any other technology. This is why many Canadians experience some of the cheapest electricity rates in the world. The explosion of natural gas in the last half-decade has drastically reduced the competitiveness of incumbent generating technologies, namely, coal. In Alberta, wholesale electricity prices have decreased nearly fivefold in the last few years due to the province’s NG oversupply. Only cheap hydro and renewables can compete. The problem here isn’t in the clean technologies; it’s their method of deployment.  

Although clean-energy jobs will never represent a significant share of the countries’ opportunities due the fact that energy jobs are more capital than labor intensive – a point Cross makes but fails to realize applies to all energy technologies – they do represent an opportunity for Canadians. Citizens concerned with job-creation can rejoice in the fact that Cleantech jobs tend to be higher paying than the national average. Additionally, more jobs tend to be created for wind and solar per unit energy created than for hydro. Cross may be touching on a point that is bigger than energy – most industries are increasingly capital intensive relative to labor as automation proliferates agriculture, manufacturing, construction, etc.

Canadian Cleantech is projected to be Canada’s top five exporting industries, nearly tripling the sector’s current value for exports to $20 billion annually by 2025. Moreover, announcements made by countries and global companies within the last two years will drive unprecedented growth. Canada is already working towards positioning itself to be an important exporter of goods, services, and energy to this emerging industry. Export Development Canada has committed $450 million for Canadian clean technology projects. Domestically, Canada’s federal carbon tax will drive some growth. However, there is still a large gap between goals and actionable policy. Cross’ article moves the conversation around Cleantech in the wrong direction. We need optimism and ingenuity to drive clean, profitable solutions to our dirty industries.

Finally, an important conclusion to make with Cross’ piece is that it lacks objectivity and context. Cleantech represents an opportunity to proactively internalize the true costs or externalities associated with energy generation, manufacturing, transport, etc, before pollution destroys more of our livelihoods. If anything, Cross’ article is a good warning: the Cleantech industry is too small, but we need to engage, not disregard, this increasingly important opportunity, because it’s already too late.

JJ