Canadian manufacturers are investing in clean technology, but not just for environmental reasons.

While environmental goals remain part of the conversation, some industry experts say the real momentum behind clean tech adoption is coming from internal business drivers, such as operational efficiency, cost savings and the need to remain competitive in a rapidly evolving global market.

That was the consensus among panelists during Plant’s webinar on June 23, Clean Tech in Manufacturing: Investment, Innovation and Opportunity, which brought together experts from industry, policy and finance to explore the state of clean tech adoption in Canada’s manufacturing sector.

“There’s been a real shift in the last three to four years from clean tech push to market pull,” said Bryan Watson, senior vice-president of business development at Venbridge, managing director of Clean Tech North and founding director of the Ontario Clean Technology Industry Association.

“And the difference really is that operational efficiency is now coming into industry through the clean tech lens.”

Watson noted that manufacturers are increasingly focused on technologies that improve productivity and reduce energy costs, whether that’s electrifying mining operations, capturing low-grade waste heat or modernizing equipment.

Martha Breithaupt, tax partner to the Credits and Incentives services team at BDO Canada, agreed with Watson that efficiency is a driver of clean tech investment. But, she added, in the face of a wide range of challenges, from labour shortages and regulatory hurdles to trade barriers and supply chain issues, her firm’s manufacturing clients are prioritizing business sustainability and continuity, as well as efficiency.

“If it also happens to be good for the environment along the way, that’s great from a social impact perspective. But that’s not what our Canadian manufacturers are looking for,” said Breithaupt. “They’re really looking to make an economically viable decision based on an investment ROI.”

Global forces are reshaping the playing field

While internal business goals are driving adoption, external pressures are accelerating it. Panelists pointed to a range of global trends, from tightening emissions regulations in Europe to rapid electrification in China, that are pushing Canadian manufacturers to adapt or risk falling behind.

“We’re living through an industrial revolution. This is a real one, not a notional one,” said Dr. Chris Bataille, adjunct research fellow at Columbia University’s Center on Global Energy Policy and a lead author for the Intergovernmental Panel on Climate Change (IPCC). “We’re seeing a complete transformation in how we make and do everything around the planet.”

Bataille urged manufacturers to pay close attention to developments in the European Union, where the Emission Trading System (ETS) — Europe’s cap-and-trade program for carbon emissions — is expanding to cover more sectors. He also noted the upcoming Carbon Border Adjustment Mechanism (CBAM), which will begin applying carbon tariffs on certain imports starting in 2026.

Bataille also highlighted China’s rapid progress in solar, battery storage and electrification technologies. These technologies have become significantly cheaper—so much so, he said, that they’re now emerging as viable alternatives to gas and coal heat. For manufacturers, that shift opens the door to more precise, electricity-based processes and makes it increasingly feasible to meet low-grade heat demands with solar and battery systems.

“So, if I were a Canadian manufacturer, I’d be watching very closely what’s happening in China and across Southeast Asia and the regulatory environment in Europe,” he said. “Because we’re going to have to at least match their standards if we want to sell into that market.”

Canada’s innovation gap: Strong ideas, weak execution

When it comes to research and early-stage innovation in clean technology, the panelists agreed that Canada is on solid footing.

“Our technologists and our researchers are as good as anybody in the world,” said Bataille.

However, he added, Canada struggles to carry those innovations through to full-scale deployment.

“We’ve gotten into a bad habit of sending our midstream commercialization to the States and then becoming a buyer of that technology,” Bataille said.

He noted that once technologies reach a certain level of maturity, or more specifically, a technology readiness level (TRL) of 4 or 5, Canadian firms often have to look south for venture capital.

Alex Greco, senior director of manufacturing and value chain at the Canadian Chamber of Commerce, echoed that sentiment, stating that while Canada benefits from “strong fundamentals” — including clean electricity, stable governance, and skilled talent — it lacks the policy coordination and investment speed needed to compete globally.

“Right now, in Canada we have a fragmented patchwork of programs that aren’t demand driven,” he said. “And we’re not being proactive in terms of what we need to do to get more capital investment for companies.

“Secondly, is the scale and speed of investments,” Greco added. “Manufacturers are tired of different pilot projects. They want to look at going from prototypes to production, and they want to do it fast.”

While Canada has “all the tools in the toolbox,” Greco said the challenge lies in execution, particularly in helping companies scale up, modernize equipment and reduce business costs.

“We have to focus on de-risking companies… and be in a position to stimulate new advancements in the next wave of an industrial revolution in Canada.”

What’s holding manufacturers back?

Beyond policy gaps, panelists identified several internal barriers that continue to hold manufacturers back from investing in clean tech.

Breithaupt believes time is the number one barrier, noting that manufacturers are often “too busy cutting wood to sharpen the knife,” or in other words, so focused on operational activity and running the business, they can’t focus on innovation advancements or technology-driven solutions that can improve efficiency and ROI.

She also emphasized that many companies dismiss clean tech solutions too early, often without factoring in available tax credits or grants as part of their ROI decisions.

Watson agreed, noting that financing remains a major hurdle, especially in an uncertain economic environment.

“Undertaking a plant retrofit or building a new process is not a cheap undertaking,” he said. “But if you factor in the clean technology investment tax credit — 30 per cent federally, plus provincial incentives — you’re looking at 40 to 45 per cent of your capital costs covered.”

He added that these tax credits are, in theory, receivable from the government and could eventually be used as collateral for financing.

“I’m hoping we’ll see lenders start to lend against that receivable to accelerate the process of recouping that capital so that you can do these things a little bit faster and cheaper,” he said.

Greco pointed to a lack of internal capacity, especially among small and medium-sized manufacturers, as another major barrier. Many companies don’t have a dedicated team to pursue clean tech projects or navigate complex funding programs. “If you’re dealing with a big grant application that’s 30 pages and you’re short staffed… it just goes to the bottom of the list,” he said.

He also raised concerns about the risk of stranded assets, where companies invest in technologies that may become obsolete or unsupported. “We need to de-risk those decisions and make it easier for companies to adopt and scale clean technology,” he said.

Bataille added that workforce limitations are a critical bottleneck, particularly the shortage of skilled trades needed to implement clean tech retrofits.

“We’re desperately short on certain trades — electricians, plumbers — and what we have tends to get pulled into the oil sector,” he said. “Manufacturers are focused on making their product. They don’t have the bandwidth to be thinking about alternative ways of getting heat and energy forms.”

His solution?  Specialized service providers who can handle clean tech retrofits quickly and efficiently, with minimal disruption to operations.

“There’s a missing layer of competent service firms that can come in, lay out a plan, and retrofit a facility over a weekend or a specified period that minimizes downtime, so it’s not on the mind of the manufacturers.

Advice for business leaders

One of the clearest messages from the panel was that manufacturers considering clean tech investments should not wait. With billions in federal and provincial incentives available for a limited time, now is the moment to plan, assess and move forward.

“Time is of the essence,” said Breithaupt. “We’ve got effectively the next decade to access and utilize this program. So, for manufacturers that are considering making these implementations, I would say, now is definitely the time to run those ROI calculations and leverage this program.”

She explained that the federal clean technology investment tax credit (ITC), which offers up to 30 per cent back on eligible capital costs, is available until 2034. The program has a $100 billion funding envelope, but companies need to begin planning now to take full advantage.

Watson encouraged manufacturers to take a closer look at their operations and consider where clean technologies could be applied to improve efficiency. He noted that many companies may not be aware of the full range of solutions available or how far the technology has advanced.

“Most folks out there in manufacturing don’t know what the art of the possible is with regards to clean technology,” he said. “There’s smart, programmable metals out there that can recapture your heat; there are exceptionally good ways, low-energy ways, to compress air for manufacturing processes; you can apply for these tax credits for forklifts.”

He recommended reaching out to industry associations, such as the Ontario Clean Tech Industry Association, or clean tech networks, to better understand which technologies are commercially viable and eligible for incentives.

Bataille encouraged manufacturers to focus on what is already available, rather than waiting for future breakthroughs. He noted that many clean technologies are already commercially viable and cost-effective, and that the priority should be to adopt what works now.

“Our job is just to adopt the best available technologies today,” he said. “You know, they’re out there. The companies are out there. They’re trying to sell this stuff. The future is already here, it’s just not evenly distributed.”

Greco reinforced the strategic importance of clean tech adoption. He noted that it is no longer just about environmental compliance, but about long-term competitiveness.

“Clean tech isn’t about going green; it’s about actually staying in the game,” he said. “We’re seeing more and more companies win new contracts because they’re already upgrading systems, digitizing operations and disclosing carbon.”

Want to hear the full conversation? Watch the complete panel discussion below.