Tariffs hit the energy transition

POLICY

Tariffs hit the energy transition

What happened: The US announced a huge new set of tariffs last week, slapping a baseline 10% on basically every country and up to 50% on others. Canada now faces 25% tariffs on vehicles, imports that don’t comply with USMCA, plus 10% on energy, potash, and critical minerals. Have you said thank you??

The context:

• These new tariffs come on top of 25% steel and aluminum tariffs implemented in March

• More sector-specific tariffs on lumber, copper, and semiconductors could be coming

• Many affected materials are essential for clean energy and climate tech

Why it matters: Beyond the broad economic impacts, the new set of tariffs will disrupt supply chains for American climate tech, materials, and clean energy industries that depend on imported resources.

The apparent goal of the tariffs is to rebuild US manufacturing capacity, but standing up domestic supply chains (where it’s even possible) will be a long and costly process.

• The US sources nearly 70% of its grid-scale lithium cells from China, now subject to a 54% tariff

• Canada is a key supplier for the energy transition, including grid transformers, uranium, and rare earths

Yes, but: Canadian companies are now on a more level playing field as countries competing with Canada in the US now face similar trade barriers. 

The bottom line: The IRA gave the US a massive boost in the energy transition, but now economic chaos, policy uncertainty and rising costs could make other markets more attractive. Canada - and its allies - have an opportunity to step in and lead.

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CLIMATE CAPITAL

♻️ Cyclic Materials (Toronto, ON) added Amazon’s Climate Pledge Fund to its oversubscribed Series B round (announced in Sept last year). Cyclic is building a circular supply chain for rare earth elements and other critical materials.

🌱 AdvancedAg (Raymond, AB) raised $2 million for its microbial agricultural products that boost plant growth and disease resistance. Raven Indigenous Capital Partners led the round.

☀️ TotalEnergies, a France-based oil company, bought the 184MW Big Sky Solar project in Alberta from renewables developer RES and over 800MW of projects in development. Two-thirds of the energy from the Big Sky project will be sold under long-term PPAs, and generate carbon credits in Alberta’s regulated market.

MILESTONES & PRODUCT

💨 MaRS pre-purchased $120,000 in carbon removal credits from six Canadian startups including TerraFixing, CarbonRun, and SkyRenu. The purchase is part of an educational partnership with a group of Japanese companies including Mitsubishi which aims to equip them with the tools and knowledge to make their own carbon removal purchases.

🚌 Smart transit startup Argo launched their Smart Routing transit system and will replace local fixed bus routes over the coming months. Argo’s system includes electric buses, smart route-planning software, and operations management.

🔋 Li-Cycle reported a 53% bump in revenue while cutting expenses, but says it’ll need to adjust its operations or file for bankruptcy. The company is evaluating a proposal from Sweden’s Glencore.

🚌 Electric bus-maker NFI Group could be exempt from Canadian counter-tariffs on US materials so they can stay competitive on both sides of the border. 

⛏️ Vancouver’s Lithium Americas will officially go ahead with its Thacker Pass lithium project in Nevada, closing a $250 million investment from Orion Resource Partners

🏗️ Intelligent City started production on a nine-story mass timber building in Toronto. It’ll be tallest mass timber building in the city.

VOICES

Incentivizing geostorage for carbon removal

There’s a growing consensus that reducing emissions alone won’t be enough to meet our climate goals - we also need to remove carbon that’s already in the atmosphere. But the removal isn’t complete until that carbon is locked away permanently.

I spoke with Kim Vinet, CSO at Affirmative Sustainability and a geologist with nearly two decades in energy and corporate sustainability, about the barriers to commercial sequestration, and financial tools we can borrow from the oil and gas industry to incentivize high quality, gigatonne-scale geostorage.

What is geologic storage and why does it matter for carbon removal?

“Geologic storage (or geostorage) refers to the storage of emissions in underground geological formations. When CO2 is captured from industrial processes or directly from the atmosphere, we can purify it, compress it, and inject it underground where it is trapped within naturally occurring rock formations.

Achieving permanent storage is critical to unlocking emissions reductions for hard-to-abate sectors, but the economics of these projects can be challenging. We need to do more to incentivize and accelerate these projects, and tools borrowed from the oil and gas sector could be the key.” 

What are the challenges in building out geostorage capacity?

“A major bottleneck to scaling up geostorage is up-front capital. These kinds of projects are complex, with multiple stakeholders managing capture, processing, transportation, infrastructure, permitting and other costs. Operators need to build out all of this infrastructure in order to start receiving and storing CO2, requiring large up-front capital investments.” 

How can we incentivize more geostorage to scale up carbon removal?

“We need to get sequestration capacity on the balance sheet. Oil and gas companies have used reserves-based lending (RBL) for decades to access capital. This same reserves-based lending model could be applied to carbon storage, unlocking up-front capital to commercialize and scale CDR projects.”

Interested in contributing? Reach out at hello@climatetechcanada.ca.

IN THE NEWS

⚛️ Small Modular Reactors get the green light: The Canadian Nuclear Safety Commission approved Canada’s first SMR project. Ontario Power Generation will build a 327MW reactor at its Darlington Nuclear Generating Station. It’ll be the first SMR in a G7 country. [G&M]

💰️ BDC pivots IP, deep-tech funds: The Business Development Bank of Canada closed its IP fund and laid off most of it’s deep-tech fund team. The government-backed fund, Canada’s biggest, is facing a capital crunch, seeing few exits and reporting a $220M loss in 2024 and $805M in 2023. BDC says it plans to merge its IP work into other programs, double-down on growth-stage financing, and is working on a refreshed second deep-tech fund. [The Logic]

🛢️ Billions funnelled into fossil fuels: Canada gave more than $29 billion in financial support to the oil and gas industry last year, up almost $10 billion from the year before. The feds previously said they would phase out fossil fuel subsidies by the end 2024 as part of its commitment to global efforts to end public support for unabated fossil fuels. [BIV]

🔍️ CleanBC up for review: BC is reviewing its CleanBC program, putting all options on the table to close a $1.8B hole blown in its budget by cancelling the consumer carbon price. The province’s EV rebates could be on the chopping block, while home energy efficiency programs are likely to continue. [CBC]

BIG PICTURE

An unexpected climate benefit: tariffs are dragging down the oil industry

Nature tech funding reached $2.1B last year, a turning point for the sector

Is defence the new trend for climate tech VCs?

Trump’s team could shutter hydrogen hubs, DOE Clean Energy Office

The OECD says delivering climate action = delivering economic growth

International Maritime Organisation weighs a carbon tax on shipping

“Sodium stopped making sense” - why this battery startup decided to shut down and return investor capital

COMMUNITY

🚀 Call for Proposals in the Future of Mining & Energy: DIGITAL is co-investing $22M in projects that unlock opportunities in mining and energy. Applications open on a rolling basis.

➡️ Discover more opportunities.

🗓️ Smart Energy Halifax: A showcase of the innovation, people and systems catapulting Canada towards a cleaner energy future. Halifax, April 14-16.

➡️ Discover more climate events.

💻️ Cascadia Seaweed is hiring a Director of Sales to help scale seaweed-based solutions for regenerative agriculture, enhancing crop yields while reducing emissions.

➡️ Find more open roles.