CEO Kevin Krausert provides feedback to the Competition Bureau regarding Bill C-59.
Executive Summary
Avatar Innovations, a leading clean technology developer and venture capital fund, submits this response to the Competition Bureau’s consultation on Bill C-59. While we recognize the importance of ensuring accuracy in environmental claims, we believe that, in its current form, the bill risks significantly chilling innovation and investment in Canada’s cleantech sector.
The challenges posed by Bill C-59 for Canadian cleantech innovators fall into three broad categories:
Additional Compliance Burden: Bill C-59 imposes another layer of compliance on Canadian clean technology startups, a burden not faced by innovators in other jurisdictions. This exacerbates the challenges within an already underperforming national innovation system.
Lack of Commercial Scaling Standards: Most clean technologies have not yet reached commercial scale. Moving from lab to pilot to commercial scale requires assumptions about environmental benefits, but the absence of internationally recognized standards for scaling emerging technologies leaves Canadian cleantech innovators at a competitive disadvantage.
Impact on Commercial Adoption: Commercial adoption is critical for the success of new technologies. However, many of Canada’s industrial players have set voluntary emissions reduction targets. By increasing the liability and risk for these adopters, the bill creates a chilling effect on the voluntary adoption of new technologies.
We understand that the Competition Bureau cannot change the legislation itself. Therefore, we propose several key recommendations to mitigate these impacts. Specifically, we recommend 5 recommendations:
1) Delay the enforcement of C-59 penalties by at least two years
2) Exempt Start-Ups & Small Businesses below a reasonable revenue threshold from Prosecution
3) Deliver Simplified Compliance Process for Scaling Emerging Technologies
4) Incorporate and recognize existing Canadian Standards in C-59 Enforcement
5) Exempt Commercial Adopters of New Technologies from Enforcement
By addressing these concerns, Canada can maintain its leadership in clean technology while fostering the next generation of innovators. Avatar Innovations remains dedicated to advancing this critical sector.
Introduction
Avatar Innovations is a leading energy transition technology developer and venture capital fund, founded in Canada and now operating in five countries. With 56 clean technologies under development, we are driving the global clean energy transition by accelerating the deployment of solutions that reduce emissions, improve energy efficiency, and fuel economic growth.
Transforming the Cost Curve of Emissions Reduction in Canada
To meet Canada’s climate targets, it is crucial to reduce the costs of emissions reduction technologies. Clean technology startups are key to this transformation, offering innovations in carbon capture, hydrogen, and energy storage. However, Bill C-59 risks stifling these efforts by imposing regulatory burdens that few startups have the resources to meet, further weakening Canada’s already struggling innovation system.
Technological advancements, such as the 80% cost reduction in solar energy over the past decade, have shown that innovation can drive down costs and lead to widespread adoption. For Canadian cleantech startups to have similar success, they need a regulatory framework that supports—not hinders—their growth.
The Role of Venture Capital in Innovation
Venture capital is essential for scaling early-stage, high-risk technologies. Bill C-59’s heightened compliance risks and penalties could deter investors, limiting the funding needed for clean technologies that are critical to reducing emissions and driving economic growth. Additionally, by making it more burdensome for adopters to deploy these technologies at scale, and therefore signal demand pull, investors will be far more reticent to invested needed risk capital into innovative clean technologies.
Canada’s Innovation Paradox and Existing Canadian Standards
Although Canada leads the G7 in R&D spending per capita, it ranks near the bottom in innovation output. This is due, in part, to the gap between research and commercialization. Agencies like ISED and NRCan have developed emissions reduction frameworks tailored to Canadian cleantech startups, which offer more appropriate standards than international ones, like ISO, that are suited for commercialized technologies.
Bill C-59 does not acknowledge these existing frameworks and imposes standards more applicable to large-scale technologies, potentially penalizing startups that are developing critical emissions-reduction solutions.
The Importance of Standards and the Risk of Greenwashing
Avatar Innovations is committed to preventing greenwashing and ensuring environmental integrity. However, the one-size-fits-all approach of Bill C-59 risks hindering early-stage startups that cannot yet meet the same standards as established companies. This could stifle the innovations needed to meet Canada’s emissions targets.
Additionally, few clean technology startups have the resources to engage in consultations on complex regulations like Bill C-59. We urge the Competition Bureau to consider the unique challenges facing these startups and ensure that the bill’s implementation does not hinder the innovation necessary to achieve Canada’s climate goals.
Impact on Clean Technology Startups and Commercial Adoption
The majority of clean technology startups in Canada are small, typically employing between 3 and 20 people. These companies already adhere to rigorous carbon accounting systems, reporting their emissions metrics to investors and government agencies to comply with non-dilutive funding requirements. There are numerous international standards that exist, and, while crucial for commercial projects, can be overly burdensome for early-stage startups working on scaling technologies.
Bill C-59 adds unnecessary layers of compliance that divert critical resources from innovation to regulation. Startups, which are often resource-constrained, may struggle to meet these additional requirements, putting them at a competitive disadvantage compared to their international peers. In other jurisdictions, clean technology startups are not burdened with the same level of regulatory oversight at early stages, enabling them to focus more on innovation and scaling their technologies.
Moreover, the success of clean technology startups is highly dependent on commercial adoption. Many large corporations in Canada have set voluntary emissions reduction targets, driving demand for new cleantech solutions. However, by increasing the liability and risk for these corporate adopters through Bill C-59, the legislation could hinder the voluntary adoption of innovative technologies. If corporations become reluctant to adopt new cleantech solutions due to regulatory risks, this could significantly slow down the commercialization of critical emissions reduction technologies.
Existing Canadian frameworks, such as those developed by Innovation, Science, and Economic Development Canada (ISED) and Natural Resources Canada (NRCan), offer more tailored and appropriate guidelines for startups. These methodologies are designed to support early-stage innovation and should be recognized to avoid overburdening small companies with compliance costs that are more suited for large, commercial-scale projects.
We encourage the Competition Bureau to recognize the uniqueness of Canadian Cleantech start-ups in the interpretation and enforcement of Bill C-59 to foster a greater Canadian clean technology ecosystem.
Canada’s Innovation Paradox: The Bureaucratic Burden & Risks Bill C-59
Canada’s non-dilutive funding programs, while critical to supporting clean technology startups, have gained a reputation for being some of the most bureaucratic in the world. The lengthy and complex application processes have fostered an ecosystem where many startups are forced to dedicate significant time and resources to navigating government grant applications, often relying on professional funding writers rather than innovators. This system, while essential for many early-stage companies, diverts attention away from innovation and product development toward administrative tasks, impeding the potential for true technological breakthroughs.
Bill C-59 threatens to add yet another layer of regulatory complexity to this already cumbersome process. The bill could place additional reporting and compliance burdens on clean technology startups, further detracting from their ability to focus on scaling and commercializing their innovations. This shift risks fostering a generation of companies that excel in meeting bureaucratic requirements rather than driving technological advancement and market competition. For an innovation ecosystem that already struggles with commercialization, adding regulatory hurdles could exacerbate Canada's "innovation paradox," where high levels of R&D spending are not translating into market-leading innovations.
The Competition Bureau has a unique opportunity to focus its efforts on driving competition and creating an environment that encourages innovation and commercialization, rather than reinforcing bureaucratic barriers. Simplifying the regulatory landscape and ensuring that compliance frameworks, like those in Bill C-59, do not disproportionately burden startups, will be critical to fostering a vibrant, competitive clean technology sector. Canada's innovation ecosystem needs fewer obstacles and more incentives to thrive, ensuring that resources are directed toward innovation rather than regulatory navigation.
Recommendations for Implementing C-59
To ensure that Bill C-59 achieves its objectives without stifling innovation in Canada’s clean technology sector, we propose the following recommendations for the Competition Bureau’s consideration. These measures aim to protect startups, encourage corporate adoption of new technologies, and prevent unnecessary regulatory burdens that could hinder Canada’s progress toward its climate goals.
1. Delay the Enforcement by at least Two Years
We recommend that the Competition Bureau delay the enforcement of penalties under Bill C-59 by at least two years. This would give startups and corporate adopters time to adjust to the new regulations, establish proper reporting mechanisms, and integrate carbon management frameworks without the immediate threat of penalties. A delay would allow for adequate education on compliance and prevent the stifling of innovation in its critical early stages.
2. Exempt Pre-Revenue Companies from Enforcement
Pre-revenue companies often lack the resources to meet complex compliance standards. By exempting these startups from enforcement under Bill C-59, the government would encourage the continued development of emerging clean technologies without the risk of penalizing companies still in the pre-commercialization phase. Early-stage companies need time to innovate and scale without the fear of compliance-related fines slowing their progress.
3. Simplified Compliance Explanation for Startups
We recommend that the Competition Bureau create a streamlined compliance pathway for startups and for companies still in the pilot phase of technology development. While internationally recognized standards exist for commercial operations, the majority for scaling technologies are not internationally recognized. The Competition Bureau should provide a simplified advisement system on how to calculate environmental benefits and carbon accounting when taking a new technology from lab or pilot to commercial operation.
4. Incorporate Existing Canadian Government Standards
We propose that Bill C-59 recognize and incorporate the carbon accounting frameworks already developed by Canadian agencies including ISED and NRCan as well as provincial agencies such as Emissions Reduction Alberta (ERA). These agencies have tailored emissions reduction methodologies specifically for Canadian clean technology startups. Allowing companies to report through these existing, more appropriate systems would reduce duplication of effort and ensure that startups are not subject to redundant or overly burdensome regulatory frameworks.
5. Exempt Early-stage Technologies from Enforcement
To incentivize the corporate adoption of new clean technologies, we recommend exempting early-stage companies that deploy these technologies from Bill C-59 enforcement during the initial stages of commercialization. Many of these early-stage companies and startups only have their emissions reduction claims to stand on when selling to early adopters, and by jeopardizing this claim through onerous regulations may harm adoption of nascent technologies by incumbent industry. This exemption would reduce the perceived risk of adopting unproven technologies and help drive the commercialization of innovative emissions reduction solutions.