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CTC #25 - Playing catch-up with the U.S., Canada opens billions in supports for climate tech

CTC #25 - Playing catch-up with the U.S., Canada opens billions in supports for climate tech

Plus- seed rounds for building decarbonization and satellite monitoring, COP27 kicks off, and electric vehicle sales hit an all time high.

Hey there,

Welcome to another issue! It’s been a busy few weeks in climate with lots to cover, including new incentives for climate tech investment in Canada, two new federal investment funds, COP27 kicking off in Egypt, and some exciting seed rounds. Let’s get into it!

The fall fiscal update was released last week, hyped as the first part of Canada’s response to the U.S. “Inflation Reduction Act”. This mini budget included a ton of announcements around affordability and inflation, as well as measures to address climate change and spur more investment into climate tech. We’ll dig into what’s been announced, what wasn’t included, and what’s next.

Climate tech investment tax credit

The headline climate investment, these investment tax credits were announced but not funded in Budget 2022. They’re seen as a direct response to similar credits implemented in the IRA. The tax credits are worth up to 30% of investment costs and apply to specific climate tech areas:

Clean electricity generation (including small modular nuclear reactors)
Electricity storage systems that don’t use fossil fuels
Low-carbon heating equipment
Industrial zero-emission vehicles and related equipment

The credits come with some caveats, notably labour and apprenticeship requirements (still to be developed), which, if not met, reduces the tax credit to 20%

Not included:

Carbon capture utilization and storage. Fossil fuel companies put a lot of pressure on the feds for additional funding for CCUS tax credits (on top of the $2.6B announced in April) and many expected more funding to be on the way.
Hydrogen. A separate tax credit will be announced for this in Budget 2023, after consultation on how carbon-intensity will affect the tax credit. The least carbon-intensive will likely be eligible for a 40% credit.

The Canada Growth Fund

A new, $15B fund focused on de-risking climate tech investments and getting new technologies to scale. Also announced in April, the Canada Growth Fund (CGF) will be launched by the end of the year.

The fund is specifically targeting less mature technology that needs stable backing to act as an anchor for private investments and help companies make the journey from pilot to scale that often takes much longer with climate tech. It won’t focus on R&D or venture investing.

The fund will also have several funding tools in its belt, including “contracts for difference”. These contracts establish a break-even point or “strike price”. When prices are lower than the strike price, the CGF pays the difference. When prices are higher, CGF either receives payment for the difference or participates in revenue sharing depending on the type of contract in place. These are interesting because they’re focused on mitigating future risk. I.e. a new government comes in and changes the price on carbon or market prices for hydrogen change.

Stock buyback tax

Yet another measure also found in the U.S. Inflation Reduction Act is a new tax on stock buybacks.

These are intended to discourage companies from using revenues to buy their own stock, and instead use those funds to reinvest in their business (i.e. transition to low-carbon or take action on net-zero pledges). For context, Canadian companies spent $69B buying their own shares just this year.

The new tax comes as some have called for “windfall” taxes for oil & gas producers, and the environment minister called them out for not reinvesting those profits in climate action.

Other measures:

$1.1B for “net-zero skills” investments, including a Sustainable Jobs Training Centre to help upskill 15,000 new workers and support for union-based training for 20,000 apprentices & journeypersons in the skilled trades.
$1.28B to Impact Assessment Agency of Canada and other federal depts to increase permitting capacity and efficiency.
Re-affirmed $1B to the new Innovation and Investment Agency
$1.3B for Hurricane Fiona relief

What it means

A more level playing field between Canada and the U.S. The investment tax credits may encourage more investment in Canada climate tech and avoid capital moving to the U.S.
More support for scale-ups. This has often been cited as a gap in Canada’s climate tech funding ecosystem. Getting to scale has a huge impact on our ability to realize emissions reductions.

While it’s been positioned as a response to the IRA, a lot of these measures were already in the works and were announced well before the U.S. On the one hand, it's maybe not as ambitious as it could have been, but it also shows the government is ahead of the game in some areas.

Funding and growth

Audette (Victoria, BC) raised $12.8M in seed funding to scale up its building decarbonization software. Audette uses artificial intelligence to analyze building data, create decarbonization roadmaps, and support capital planning for real estate portfolios. The round included a number of US and industry players like air conditioning company Johnson Controls.

Wyvern (Edmonton, AB) raised an additional $9.45M in seed funding to send their first three satellites to space in early 2023. These initial launches will focus on getting hyperspectral data to paying customers and iron out the data delivery and customer success processes. Wyvern offers hyperspectral satellite imaging which captures data across various wavelengths for use in agriculture, GHG emissions monitoring, forestry and more.

Plugzio (Burnaby, BC) closed its seed round, raising an undisclosed amount led by real estate heavyweight RET Ventures. Plugzio offers smart plugs that can be dropped in to existing outlets, allowing property owners to easily manage and sell access to power as a service.

Suppli (Toronto, ON) secured 100K from the Canadian Food Innovation Network to develop the technology to manage and scale their operations. Suppli offers a reusable packaging platform for food businesses.

Radish Cooperative (Montreal, QC) secured 98K from CFIN for its digital twin technology for restaurants. The technology allows restaurants to easily monitor and predict inventory levels, thereby avoiding food waste and cutting emissions.

Other recipients of CFIN funding include Forward Water Technologies (lower-carbon food processing), Cascadia Seaweed (sustainable seaweed-based foods) and Escarpment Laboratories (local fermented foods).

Milestones & Growth

Business Development Bank of Canada launched its second climate tech fund, with $400M committed. The fund will focus on investing in Canadian companies that are in scale-up or commercialization mode to help Canada drive down emissions. BDC’s first climate tech fund saw $600M committed to 50 companies, bringing the total investment across the two funds to $1B.

Circular Opportunity Innovation Launchpad received a $250K donation from Desjardins to support the new Climate and Circularity Solutions Hub. The hub helps local companies adopt circular principles and reduce emissions.

Vancouver-based mCloud is partnering with Google to integrate its AssetCare platform stuff with a range of Google Cloud services. mCloud uses visualization technology to measure, locate and correct emissions. mCloud will integrate with services like Google Earth Engine, Vision AI, Natural Language AI, TensorFlow and more to give customers more tools to identify emissions.

Sarnia, Ontario’s Aduro Clean Technologies is partnering with University of Western Ontario on a research project to improve plastics recycling and eliminate expensive sorting systems. Aduro was also accepted into Shell’s “GameChangers” accelerator program to develop its plastics recycling technology that allows for greater reclamation and reuse.

Hydro-Quebec launched a new subsidiary, Cleo, a turnkey solution for medium- and heavy-duty EV charging.

In the news

The federal government announced it will apply stricter foreign investment rules to major transactions in the critical minerals sector. The new rules aim to protect national interests and critical supply chains and are already having an impact, with three Chinese companies ordered to divest their Canadian holdings.

Also in minerals, Canada is considering an “ESG passport” for EV batteries in order to increase transparency and address concerns over the environmental and social impacts of mineral extraction.

The federal government and the Cement Association of Canada launched the “Roadmap to Net-Zero Carbon Concrete by 2050” to guide decarbonization efforts for the industry. The roadmap includes goals for 2030 in market development, innovation and adoption, and positioning Canada as a world leader. Want to learn more? Check out our issue from this summer on decarbonizing concrete.

From COP, Canada signs up for more sustainable shipping, joining the Zero-Emission Shipping Mission and creating a “Canadian Green Shipping Corridors Framework” to develop zero-emission corridors between ports.

Former environment minister Catherine McKenna also introduced recommendations to prevent greenwashed net-zero commitments in her role as the chair of the High-Level Expert Group on the Net-Zero Emissions Commitments.

At the provincial level, Ontario government passed sweeping changes to housing and land-use regulations, aimed at increasing supply and speeding up development. However, the changes appear to throw out climate action in the process, leading to more sprawl around major cities, gutting municipal energy-efficiency standards for buildings, and encroaching on greenspace and wetlands.

British Columbia launched a new one-stop regulator, Hydrogen BC, for low-carbon hydrogen in the province. The move simplifies and centralizes the regulations around hydrogen development.

A rogue cloud of methane was spotted near gas pipelines in Alberta by the European Space Agency, calling into question industry monitoring efforts. Oil and gas operators are only required to report unintended or uncontrolled releases of methane.

Hydro-Quebec proposed suspending 270MW of energy allocation to the blockchain industry in an attempt to deal with growing power demand.

NS Power paused involvement in the Atlantic Loop project which would allow the province to tap into Labrador and Quebec’s hydropower. The pause was a response to Nova Scotia’s legislation to cap rates, which the utility said limited its ability to invest in large projects.

Zero-emission vehicle registrations hit a new record in Q3, making up 9.4% of all new sales in Canada.

What’s going on

📅 The Hydrogen Business Council is hosting the “Implementing the Hydrogen Economy” virtual conference from November 17-18th. The event brings together experts from across the hydrogen ecosystem.

📅 Circular Economy Leadership Canada is hosting “Funding for Circular Initiatives in Canada” on November 26th. The online event will share insights on what funding is available in Canada and how companies can position themselves for successful funding.

📅 Electric Autonomy is hosting a series of webinars focused on EV charging. Upcoming sessions will look at the impact of EV charging on grid capacity (November 16th), simplifying the charging experience (November 23rd) and more.