By Cheryl Slusarchuk   

While it’s commonly known that cleantech investment drives job creation, the value of such investment has been summarized in a recent report by the United Nations, titled “Why Clean Energy Public Investment Makes Economic Sense - The Evidence Base.” The data reveals some striking results including that green spending creates approximately three times as many jobs as traditional economic stimulants, such as tax cuts.

Creates More Jobs than Tax Cuts

For example, investment in biomass creates nearly three times as many jobs as tax cuts, and energy efficiency programs such as “smart grid” create 50% more jobs than tax cuts. Further, energy efficiency programs also reduce operating costs and, over time, save businesses money.

Not surprisingly, energy efficiency companies, primarily in the building and retrofit sectors, are in one of the hot investment areas for venture capitalist and private equity. While these types of investments result in lower energy usage and lower operating costs, they usually require a higher upfront capital investment.

This means that even if the NPV is positive and the ROI is strong, it can be a challenge for businesses from a cash flow perspective - especially over the last 18 months. As such, many of the cleantech stimulus programs focus on reducing the cost of the upfront capital investment or on similar economic incentives such as accelerating tax deductibility.

Cleantech 10^TM 2009
1. Westport Innovations (Vancouver, BC)
2. RuggedCom (Woodbridge, ON)
3. WaterFurnace Renewable Energy (Fort Wayne, IN)
4. Magma Energy Corp. (Vancouver, BC)
5. 5N Plus (Montreal, QC)
6. Canadian Hydro Developers** (Calgary, AB)
7. Carmanah Technologies Corp. (Victoria, BC)
8. NEO Material Technologies (Toronto, ON)
9. Stantec (Edmonton, AB)
10. Hemisphere GPS (Calgary, AB)
Source: Corporate Knights Inc. and Cleantech Group LLC

From a Canadian perspective, both the Ontario and British Columbia provincial governments are focused on developing new green industries, exports and jobs - ranging from a technology focus, such as smart grid and electric vehicle solutions, through to commodity products for export such as green electricity and low carbon fuels.

While Ontario and British Columbia both have a strong emphasis on smart grid and energy conservation, Ontario is also focused on manufacturing aspects - for example, in the area of electric vehicles. Due to British Columbia’s very low electricity prices, the uptake of electric vehicles is only a matter of time because it tops the list in North America (with Québec) for the greatest cost savings from switching to electric and hybrid vehicles (i.e., the difference between gas fuel and electricity costs). The fuel costs savings in British Columbia for a passenger vehicle is approximately $1,200 per year - a substantial savings for consumers.

Cleantech projects located in British Columbia can also have an additional revenue stream from monetizing a project’s carbon offsets under The Pacific Carbon Trust (PCT) program, which results in a better ROI for these projects. The PCT, a BC crown corporation, has been sourcing offsets since early 2009 and expects to be sourcing approximately 1,000,000 tonnes of offsets by 2011.

Ontario recently passed the Green Energy Act, a statute that aggressively promotes renewable energy projects and conservation. The provincial government expects that this Act will create 50,000 well-paid green jobs over the next three years and will spur billions of dollars of investment.

The Ontario government also launched a $250-million Emerging Technologies Fund. This fund matches investments from private sources in Ontario-based companies, making it easier for cleantech companies to secure needed funding.

After China, the 800-lb gorilla for cleantech stimulus is the US government, which is one of the biggest proponents for using cleantech to rebuild the lagging economy. American legislators have earmarked over $100 billion for cleantech spending and tax breaks in their last two stimulus packages. President Obama aims to create five million green-collar jobs over the next decade. And the US recently passed the Waxman-Markey Bill, which will promote clean energy and efficiency, implement a cap-and-trade system for emissions, and help that nation shift to a low-carbon economy.

Cleantech Explosive Growth

Despite the recent decline in oil and gas prices, analysts predict that cleantech growth will continue on an exponential curve as the fundamental drivers, such as energy security and carbon reduction, remain relevant.

Governments worldwide have made significant long-term commitments to adopting green energy mixes, both for electricity and fuels. Even countries that previously were reluctant to engage in this area - such as China and the US - now have renewable energy policies. New Energy Finance, a leader in the cleantech analysis sector, estimates that such measures will drive annual global investment in clean energy from US$155 billion in 2008 to $348 billion by 2020.

While Europe has been ahead of the curve for green investment, the Asia Pacific region is moving ahead rapidly. In 2009, China topped the list for government green stimulus investment at $221.3B, and South Korea allocated just over 80% of its stimulus money to green industries, with just over $30B invested by government.

Government stimulus and direct investment are driving the cleantech sector to the forefront of the global economy. Despite the recent economic downturn, cleantech companies continue to be funded and grow at rates that are exceeding most other industry sectors, and we in Canada have reason to be optimistic regarding the future of developing and exporting clean technology as well as green electricity and low carbon fuels.

Cheryl Slusarchuk is a partner in the Vancouver office of McCarthy Tétrault LLP practising in the Business Law and Technology Groups. Ms. Slusarchuk is the Chair of the Climate Action Team that advises the BC government on credible and economically viable climate-related targets and Chair of the Clean Tech Task Force for the Premier’s Technology Council. This article originally appeared in Corporate Knights, and is reproduced here with the kind permission of  Editor-in-Chief Toby Heaps.