With all of the chatter about it lately, you'd think that the "green economy" replaced hamburger flipping as the fastest-growing sector of the economy. Yet for all the press it receives, the green economy is ill-defined and poorly understood – few Canadians are sure of what it means or how large it is. That makes it a prime candidate for misuse, especially in political speeches where the more it gets mentioned, the better the response.
From an economics perspective, the term "green economy" captures two large yet distinct areas of Canada's business world.
The first area is renewable energy. This would be all forms of energy that are limitless in their generation capacity, such as solar, wind, geothermal and tidal. They don't rely on an input such as carbon, which is finite in quantity (even if the practical limit on the number of carbon molecules on Earth would far surpass our ability to burn them all).
It's open to debate, but hydroelectric energy is not truly renewable because it depends on the availability of water flow. If something disrupts that flow, such as long-term drought or falling water levels, energy production is disrupted as well.
Renewable energy is considered part of the green economy because it helps move us away from our reliance on carbon-based energy consumption. Disagreement persists on the degree to which human consumption of carbon is responsible for climate change. But notwithstanding President Donald Trump, the political and policy debate is settled firmly in favour of curbing emissions.
The second area of the green economy is clean technology, a catch-all term to describe any invention or innovation that reduces the environmental impact of human activity. It includes everything from new ways of composting coffee cups to nutrient recovery from agricultural waste water.
It's all about finding ways to tread gently on this old Earth of ours – and to improve the bottom line while doing so.
Clean technology also involves applications in the hydrocarbon industry to improve environmental stewardship and reduce waste – something both industry and governments have been keen to achieve. Alberta, the home of the majority of Canada's hydrocarbon extraction, has been especially eager to promote clean technology as a means to both improving its reputation and reducing the environmental impact of the energy sector.
But is the green economy really doing much to diversify the economy? Or is it all hype, only useful for feel-good sound bites?
The answer to both questions is yes: It really is doing something, and it really is hype. The green economy is hype if you're expecting a noticeable impact in 2017. But it does have substance if the goal is to create economic strength and diversity in five, 10 or 20 years.
Many of these technologies take years to develop and commercialize – and most of it requires significantly more capital than other pure ICT developments. Clean tech isn't like a cellphone app developed by some flip-flop wearing nerd in Silicon Valley, turned around and sold months later for millions of dollars. Often the technology applies to niche markets, such as the oil sands or transportation sectors, with limited potential buyers. The development and adoption is disruptive, and is complicated by political and financial challenges.
Most importantly, clean technologies act as enablers of other industries, allowing them to deliver economic results while improving their environmental stewardship. This is perhaps where Canada's green economy has its greatest potential. Innovations in renewable energy and clean technology can be transferred globally, ultimately putting Canada in the role of economic enabler to the world.
Don't let the naysayers tell you the green economy is just a bunch of hype. Sure, it won't turn Canada's economy around this month, or even this year. Renewable-energy development and clean-tech innovations are marathons, not sprints.
Todd Hirsch's is the chief economist at ATB Financial in Calgary. His new book Spiders in Space: Successfully Adapting to Unwanted Change is available at toddhirsch.com.
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