Canada has significant advantages in the export of renewable energy, electric vehicles (EVs) and electrification solutions — cleantech sectors that are “resilient to geopolitical headwinds,” according to Export Development Canada (EDC).

The EDC report identifies strengths such as Canada’s comparative advantages in clean electricity and renewable energy equipment, its potential to lead in the EV battery sector, and expertise in developing technologies that help transition an economy from being powered by fossil fuels to electricity.

There are challenges for the cleantech sector, including as upended global trade, disrupted supply chains and the U.S. retreat on climate action.

But it also gets a boost from “a huge demand for energy driven by AI (artificial intelligence) and regional energy security,” Prerna Sharma, a senior economist at EDC, told Sustainable Biz Canada. She is the author of the EDC report titled Canada’s cleantech future: Scalable, profitable, essential.

Another problem is that the majority of Canada’s environmental and cleantech exports go to the U.S. (77 per cent in 2023), which is complicated by the ongoing trade war with the country. However, there is “lots of room for growth” in markets outside the U.S., Sharma added, such as Europe, Asia and South America.

“I don’t think we fully realize our potential when it comes to our cleantech and environmental exports,” she said.

Canada’s cleantech export strengths

Renewable energy’s prospects are bright, EDC assesses in the report. With ever-growing demand for electricity to power data centres that provide the computing for AI, renewables will be a strong option to provide the energy. For example, the costs for installing solar energy infrastructure have continued to nosedive, making it 56 per cent cheaper than the average cost of fossil fuel-powered alternatives in 2023.

Canada has opportunities in the export of cleantech, such as renewable electricity, air pollution and monitoring equipment, biofuels, green hydrogen fuel and heat pumps, EDC says.

The Crown corporation mapped out the country’s comparative export advantages compared to its peers in the Organisation for Economic Co-operation and Development. For example, Canada has the edge in biofuels, green hydrogen and wind energy compared to the U.S. Against South Korea, Canada leads on solar and wind energy, and waste management and recycling.

On the EV side, Canada has the “capacity to become a global powerhouse in battery manufacturing” and exporter of critical minerals, Sharma said. Factors that will help Canada reach that potential are:

• the country’s abundant reserves of critical minerals such as lithium, copper and graphite;
• the billions of dollars invested into EV battery manufacturing in Ontario and Quebec;
• access to clean electricity for low-carbon production; and
• Canada’s strong sustainability standards for mining.

Canada can be a “global leader” in electrification, the EDC report states. Canadian companies are adopting and developing technologies that help an economy transition from being powered by fossil fuels to electricity, such as heat pumps and electric arc furnaces.

Plus, Canada is deeply familiar with renewable electricity and is deploying innovations to manage intermittency such as flexible switching.

The country has “a lot of capacity and capability to transfer this wealth and knowledge and good electrification standards we have,” Sharma said.

Cleantech sector is growing despite stressors

EDC notes three factors that are harming investor sentiment for cleantech: limited funding, policy shifts such as reduced government support in the U.S. and elevated tariffs, and investors looking toward more commercially viable technologies.

While mindful of the hurdles, Sharma said global momentum toward low-carbon technologies has not stopped. Approximately US$2 trillion was invested in clean energy in 2024, more than double the money that went to fossil fuels, she said. Some cleantech subsectors, such as renewable energy, are becoming increasingly profitable, and can continue to be even more economically competitive.

In addition to Canada’s advantages in cleantech exports, the country has specialties such as a highly educated workforce, a strong research and development base, a healthy startup scene, and a federal government committed to the energy transition, Sharma explained.

Another major opportunity for Canada is the use of AI in cleantech. The topic of the EDC’s last report, Sharma said Canada has an opportunity to lead in applications like energy management, energy forecasting and grid planning.

“A good ecosystem that supports innovative startups and companies is really a recipe for success,” she said.