The emerging green economy

Last Updated March 10, 2008

by Margo Kelly, CBC News

Suddenly, green technologies have become a hot commodity for investors hoping to cash in on the need for the world to cut emissions of carbon dioxide, one of the main greenhouse gases contributing to climate change.

"This is something big funds, pension funds, banks now see as something where they can make significant money in the next few decades," said Wal Van Lierop, president and CEO of the Vancouver-based energy venture capital firm Chrysalix.

Van Lierop was one of more than 900 investors and entrepreneurs who attended the Cleantech Forum in San Francisco at the end of February 2008. The gathering was organized by the Cleantech Group, set up in 2002 to help entrepreneurs with green technologies find investors.

"Cleantech has grown by 400 per cent in the last six years whereas other areas like semi-conductors have declined in terms of venture capital dollars," said Nicholas Parker, the Toronto-based co-founder of the Cleantech Group. "As the Canadian hockey great Wayne Gretzky said, 'If you want to be a winner, you don't go where the puck is, you go where the puck is going,' and it's pretty clear from here where the puck is going."

So, why the sudden interest?

"This year was a perfect storm," said Matthew Banks, who manages the World Wildlife Fund's Climate Saver program out of Washington, D.C. Record high oil prices, alarming reports by the United Nations Intergovernmental Panel on Climate Change, Al Gore's book An Inconvenient Truth and aggressive carbon emission reduction targets by California and some other governments have all pushed the green agenda, he said.

Manufacturers managing to cut emissions but grow profits

At the same time, some leading multinational corporations are taking action to slash their use of fossil fuels. Manufacturer Johnson and Johnson has reduced its greenhouse gas emissions by seven per cent while growing its business by 300 per cent in the past eight years, according to Banks.

"They're saving on average about $40 million a year. So, the rhetoric that this is going to hurt economies, that it's going to bankrupt companies, is simply not the case," said Banks.

Canadian entrepreneurs are hoping to take advantage of the growing appetite for clean technologies, which includes everything from efficient lighting to renewable energy. More than 70 Cleantech companies are now listed on the Toronto Stock Exchange, including many solar technology firms.

In San Francisco, forum participant John Coburn made a public pitch to investors. He's looking for $10 million for his Toronto-based company EnviroTower. The company has patented a process to dramatically cut the amount of electricity and water needed to run the air conditioning systems of office towers. EnviroTower has already lured some big corporations, including Heinz, as clients.

"The really sad thing is that we have to go outside the country to raise money," said Coburn. "That's an indication that in Canada the commodity-side people made good returns in oil and gas, but they don't take the risk with newer technologies. Hopefully, that changes over time."

As much as venture capitalist Van Lierop is a huge booster of Cleantech, he also advises caution.

"The key with clean energy is that no new technology has really broken through at scale. Many people will make money in this sector, but also many people will lose their shirt," he said.

Big change won't come without carbon cost

Entrepreneurs are focusing on reducing the costs of their new technologies, often with the help of government funding, both provincially and federally. The Ontario government is trying to position the province as a centre for Cleantech investment in the same way that Germany and California have done. Germany has created more than 250,000 jobs in the sector in the past five years, with big incentives to lure foreign companies, including a $35 million grant for an Ontario solar cell producer, ARISE Technologies.

"We're building a factory in Germany that will produce, in phase one, about 80 megawatts of solar cells," said Ian McLellan, the founder of ARISE. "The entire world production in 1996 was 88 megawatts — and we're doing that production with about 100 people. That's how quickly this industry is growing."

But some observers believe the green economy won't go mainstream in Canada or the rest of the world unless governments put a price on carbon emissions, as the B.C. government recently did when it introduced a carbon tax on fossil fuels in its 2008 budget.

"Once it becomes costly to emit carbon into the atmosphere — significantly costly — then you'll find the whole economy start to restructure itself, " said Thomas Homer-Dixon, noted futurist, scholar and author of the much-acclaimed The Upside of Down. "Entrepreneurship will flourish in all kinds of different ways — from the household all the way up to the most powerful companies in the world — to try to keep carbon out of the atmosphere."

The same market mechanisms that make it profitable to pollute, Homer-Dixon said, can be harnessed to restrict carbon emissions around the world.