CALGARY — For much of the business world, pledges to reach net-zero emissions are no longer simply pledges. Long-term climate targets have become embedded in the economy, with tech companies from Microsoft to Shopify betting big on carbon credits, fossil fuel producers turning to carbon sequestration projects and private equity giants like BlackRock shifting toward investments that reduce greenhouse gas emissions.
All of this puts a greater spotlight on the clean technologies that might get us there—expanding beyond classic innovations like renewables and biofuel.
An RBC analysis estimated Canada’s energy transition will cost around $2 trillion, and require a range of new technologies. As pressure to eliminate CO2 emissions grows, the industry has put greater emphasis on carbon removal, carbon capture and carbon trading. Technological advances in areas like hydrogen and the circular economy may also help improve the energy system’s efficiency, or fill in the gap left by reduced fossil fuel consumption. Most of all, it will require people: the entrepreneurs, dreamers and investors that make it all happen.
Here’s a look at some of the key players shaping the future of Canadian cleantech.
The contract negotiator
Michael Belenkie (Entropy)
As CEO of Entropy, a Calgary-based carbon capture and storage company, Belenkie will be the first energy executive to test drive Ottawa’s new carbon contracts for difference (CCFD) regime. Late last year, Entropy signed a landmark $1.3-billion agreement with the federal government’s Canada Growth Fund that will guarantee the company receives at least $86.50 for every tonne of CO2 it successfully sequesters.
CCFDs act like a floor under the price of carbon credits. Many heavy polluters operating commercial facilities like concrete plants or oil refineries aim to eventually generate revenues by sequestering carbon. But the companies say the process is currently prohibitively expensive. CCFDs guarantee the price that heavy polluters or cleantech developers receive for carbon they capture or remove from the atmosphere, lending greater financial stability to capital-intensive projects.
Entropy was just the first to ink a CCFD deal with the Canada Growth Fund, which has allocated $7 billion for such arrangements. Belenkie said the contract changed the landscape for the carbon sequestration industry—“up until a few days ago, we saw Canada as being un-investible,” he told The Logic following the deal. The industry will be watching Entropy—which uses a solvent-based technology to separate CO2 from commercial exhaust systems—in coming years as it attempts to be the first company to set Ottawa’s carbon-contract gambit into motion.
The carbon remover
Stacy Kauk (Shopify)
Shopify is Canada’s largest buyer of carbon credits, and the seventh-biggest buyer worldwide, outranking American behemoths like Google and JPMorgan Chase. Kauk, the e-commerce giant’s head of sustainability, is the person tasked with buying those credits.
Under Kauk’s direction, the company has invested $55 million in 40 cleantech companies in recent years to meet its sustainability targets—part of a strategy first laid out by CEO Tobi Lütke in 2019. It has purchased tens of thousands of credits from companies developing carbon-removal technologies that gather CO2 directly from the atmosphere and, in many cases, store it. (Such technologies are distinct from carbon offsets, which involve heavy polluters cutting their emissions in exchange for credits.)
Shopify has backed some of carbon removal’s leading companies, and invested in a broad range of technologies. Those include Carbon Engineering, the Squamish, B.C.-based startup acquired by Occidental Petroleum for US$1.1 billion last year, and Swiss direct air capture company Climeworks. Captura, which separates CO2 from seawater, and Charm Industrial, which wrings CO2 out of agricultural leftovers like corn husks and stalks, are also part of Shopify’s carbon credits portfolio.
“We’re making 40 different bets on 40 very different companies,” Kauk told The Logic in an interview earlier this year.
Shopify is among the most well-capitalized corporate investors backing carbon-removal technology, and they’ve already sunk funding into some of the most prominent names in the business. Where they decide to sprinkle their investments next may highlight other companies to watch in the carbon-removal space.
The solar powerhouse
Shawn Qu (Canadian Solar)
Canadian Solar isn’t exactly a household name. But the Ontario company has become one of the biggest solar developers in the country.
Founded in 2001 by Qu, a Chinese immigrant, Canadian Solar today manages a portfolio of 61 gigawatts of solar capacity and 20 gigawatt hours of battery storage spread across more than 20 countries. (Hydro-Québec, by comparison, owns just over 37 gigawatts of installed capacity.) Earlier this year, U.S. asset management giant BlackRock announced a US$500-million investment in Recurrent Energy, a subsidiary of Canadian Solar, as the smaller company continues to build out its project pipeline.
Early in the global pandemic, Canadian Solar and other cleantech developers defied analyst expectations and continued to generate profits even as other sectors struggled. That has begun to change in some cleantech corners as higher interest rates raise borrowing costs. Canadian Solar shares are down more than 30 per cent year to date amid a growing project backlog, and shares of its Chinese subsidiary CSI Solar, which went public in Shanghai last year, have failed to win over the market.
The cleantech industry has increasingly focused on next-generation technologies like CO2 removal, critical-minerals development and carbon-trading platforms. As a company that sticks to the nuts-and-bolts business of solar installation, Canadian Solar may serve as a signal for wider renewables development.
The reconciliator
Stephen Mason (Project Reconciliation)
Mason is a busy man. In an interview with The Logic, the longtime energy executive—who built a number of resource companies including Calgary’s Artumas Group, which later merged with Norway’s Wentworth—detailed multiple energy projects he’s currently working on.
As the head of Project Reconciliation, Mason and some Indigenous partners are looking to build a $900-million sustainable aviation fuel plant near Calgary equipped with carbon-capture technology. He’s also leading a bid on behalf of 120 Indigenous communities in Alberta and B.C. to buy a stake in the Trans Mountain pipeline from the federal government. Mason estimates the communities could generate as much as $430 million per year in free cash flow after expenses from such a deal—capital that he plans to funnel into a $1-billion wealth fund to invest in renewables and decarbonization technology.
It may be too early to say whether Project Reconciliation can create the “generational wealth base” Mason envisions. But his efforts point to a growing recognition that energy companies need to offer Indigenous partners equity stakes in projects in order to get them built. Energy producers and developers have been calling on Ottawa to introduce a loan guarantee program for Indigenous communities for much the same reason, saying it would help First Nations take meaningful financial positions in the developments on and around their traditional lands. On Tuesday, the Liberals’ budget included $5 billion for a new Indigenous loan guarantee program.
“It should be a conversation about ownership,” Mason said.
The concrete mixer
Robert Niven (CarbonCure)
Last year, Halifax’s CarbonCure hit a milestone when it announced it stored CO2 in the form of concrete at a California demonstration project. The company, backed by tech billionaires Jeff Bezos and Bill Gates, had previously earned widespread attention in cleantech circles in 2020 and 2021 when it secured an investment from Amazon’s US$2-billion climate fund and later won the global Carbon Xprize.
Niven, who founded CarbonCure in 2012, now has his eyes on the company’s ultimate goal: to store 500 million metric tonnes of CO2 per year. The company’s technology can be installed on existing concrete plants, where carbon is injected into fresh concrete. The CO2 reacts with the concrete and turns into a solid mineral that can be permanently stored within it. The company also sells carbon credits in exchange for the CO2 it stores.
Armed with US$80 million in fresh capital following a fundraising last summer—with investments from the Microsoft Climate Innovation Fund, Blue Earth Capital, and others—CarbonCure is working to scale its technology. If successful, it could help decarbonize the emissions-intensive business of concrete production. CarbonCure’s successful pilot project in California, Niven claimed in a company video at the time, was just one example of how the technology could be used.
“What we need to do is get a lot more CO2, and then that can be integrated with all concrete production.”
The investors
Susan Rohac (BDC Climate Tech Fund)
There’s something intuitively Canadian about a Crown corporation being one of the country’s largest cleantech investors. The Business Development Bank of Canada is undeniably among the most prominent players in the space. In late 2022, BDC launched its Climate Tech Fund II, a $400-million pool of capital that brought the federal agency’s total cleantech investments since 2018 to $1 billion.
But for Rohac, a finance veteran who’s been with BDC since 1992, the agency’s government backing lets it take a more patient approach to cleantech investments than some of their private counterparts. Unlike other sectors, cleantech often requires sizable upfront capital and complicated real-world infrastructure development.
“In most climate-tech opportunities, it can’t be two guys in a garage just hammering away at some new software application,” she said in an interview.
“The amount of capital needed to get new technology to market is so different in climate and cleantech. And unfortunately, that works against most people’s investment thesis.”
With Fund II, BDC is putting a greater focus on GHG reduction, including technologies that “upgrade our natural resources into what we call more high-value climate products,” Rohac said. So far Fund II has invested in eight companies, and plans to announce another four in coming weeks. It has invested roughly $50 million of the $400 million so far. Among those already announced are Calgary’s Summit Nanotech, which has developed a technology that extracts lithium out of saline groundwater deposits, and Montreal’s Deep Sky, a carbon-removal company. Rohac’s team is looking into a wide range of technologies, from biofuels to agtech proteins, she said.
“Because there’s so many industries that are considered high emitters, there’s lots of different technologies that we still feel that we can invest in.”
Murray McCaig (ArcTern Ventures)
When Toronto’s ArcTern Ventures raised US$335 million earlier this year for its Fund III, it immediately elevated it to among Canada’s—and even the world’s—largest climate technology venture capital investors.
The firm is unique, given its latest fund was not financed by the federal government through funds-of-funds. It’s backed by major institutional investors from the Canada Pension Plan Investment Board to Royal Bank of Canada. McCaig and ArcTern’s other managers are looking to back early-stage ventures with Fund III, particularly those undergoing Series A and Series B funding, and will focus on companies in North America and Europe. It plans to invest in companies that are cutting carbon emissions in areas including renewables and sustainable foods.
ArcTern expects to invest around $100 million in the next 12 months, McCaig said in an interview. That will make it one of Canada’s most noteworthy cleantech investors in an industry that, according to McCaig, has undergone an incredible rate of growth in the last 10 years as public policy nudges economies toward decarbonization.
“It’s like backyard shinny compared to the NHL,” McCaig said. “It has changed so much over the past decade [with] so much capital flowing into the space, the size of the investment rounds, the speed of which companies are moving—there couldn’t be a better place to be putting capital right now.”
Within ArcTern’s portfolio, McCaig said GreenMantra Technologies, an Ontario-based plastics recycler; Clir, a software company that aims to optimize wind and solar installations; and Hydrostor, the developer of a compressed air technology that can be used to store clean energy, are ones to watch. Toronto’s Hydrostor, backed by Goldman Sachs and CPP Investments, is a particular standout as it looks to raise another multi-$100-million round, McCaig said.
The dreamer
Fred Lalonde (Deep Sky)
Lalonde, the Montreal entrepreneur who built the online travel agency Hopper into one of the country’s largest private tech companies, has sky-high ambitions for his latest foray: making Canada into a carbon-capture superpower.
At Deep Sky, the company he co-founded to pursue that goal, Lalonde’s approach is much like any other carbon-removal developer. Deep Sky aims to remove carbon from the atmosphere, store the CO2 underground and convert that stored CO2 into credits that can be sold on the market.
Where Deep Sky differs from other companies is the breadth of its ambitions. The company has signed a flurry of partnerships with technology developers and other organizations—at least 15 in total since its founding in 2022—including with Swiss direct air capture company Climeworks, Burnaby’s Svante and Holland’s ReCarbn.
Lalonde’s past success building Hopper into a company with a US$5-billion valuation makes Deep Sky another startup worth watching. A bold headline on Deep Sky’s website characterizes its lofty plans: “Only bold endeavours will solve this crisis,” it says. Another reads: “The infrastructure that will transform the earth.”
The climate scientist
Anya Waite (Dalhousie University)
The ocean’s ability to soak up CO2 is changing the world’s largest bodies of water in ways we don’t understand. Waite, an oceanographer and head of Dalhousie’s Ocean Frontier Institute, is a lead researcher among a team of more than 170 people trying to figure out how—and what we can do to stop it.
The researchers are part of the $397-million Transforming Climate Action (TCA) program, a Dalhousie-led effort alongside post-secondary partners Memorial University, Université du Québec à Rimouski and Laval University. In April 2023, the federal government awarded $154 million to TCA—the largest grant in the university’s history—to pursue ocean research. (The remainder of the funding comes from institutional, public- and private-sector partners.)
They’ll tackle complex, fundamental questions like how particles and energy interact with oceans, and how sea floor biodiversity can inform climate change models. Baiyu Zhang, a Memorial researcher and one of the TCA’s 170 researchers, is looking to use marine algae to develop new ocean-based carbon-capture technologies.
The policy shaper
Steven Guilbeault (Environment Minister)
Federal Environment Minister Steven Guilbeault is currently negotiating the details of his office’s clean electricity regulations, which will shape how power companies expand their generation capacity.
The Alberta government in particular has opposed the regulations, which aim to establish a fully net-zero grid by 2035, on the grounds that it puts a deadline that’s too tight on power providers to eliminate emissions. Guilbeault, for his part, has agreed to rewrite aspects of the regulations, and industry players are awaiting a final draft, which is expected to be published this year.
“We’ve heard the challenges faced by some provinces for whom this is a bigger lift, whose power generation relies heavily on fossil fuels,” Guilbeault said in a press release detailing changes to the proposed regulations. “We’re coming to the table with substantial investment to support their path to a cleaner grid.”
