By Dilene Mugenzi
Student Caseworker
Clean technology investments from Canadian venture capital have decreased immensely since 2022, falling from $1 billion in 2022 to $590 million in 2025. However, the federal government has strengthened investment programs and broadened tax credits to encourage and accelerate clean technology development and deployment, with public investment supporting around one-third of cleantech deals.
In March 2026, the federal government announced a $28.9 million investment through the Energy Innovation Program to accelerate the development and deployment of clean energy technologies, including $2.8 million dedicated to smart grid regulatory innovation and capacity building projects. The Energy Innovation Program generally supports early-stage carbon capture, innovative renewable heat or power generation and/or the integration of new applications that are locally beneficial. Among the funded projects are a more heat-efficient CO2 capture technology and techniques that allow for solar energy production without compromising land for crop production.
Public capital also supports early-stage research and testing for cleantech startups. The Canada Growth Fund (CGF) continues to fund projects aimed at addressing decarbonization, critical minerals, and low-carbon supply chains. The federal government established it in 2022, committing $15 billion to keep pace with other countries in developing clean technologies and working toward Canada’s climate targets. In 2026 alone, CGF has heavily invested in cleantech startups like EnerPure, aimed at developing a recycling process to convert motor oil to low-sulphur marine fuels, and Kanin Energy, which turns waste heat into power.
Challenges remain, specifically the ‘startup to scale-up support gap’. The ‘scale-up gap’ refers to the challenges founders face when scaling their startup. Given that most cleantech startups centre on hard technology rather than software, the costs of building prototypes or products are usually high. For example, building a commercial plant may require substantial non-dilutive capital. This makes it difficult to find lead investors who can support startups through the seed stage. Institutions such as MaRS Discovery District and Boston Consulting Group have sounded alarms regarding the scale-up challenges in the Canadian cleantech ecosystem.
Coordination strategies that manage different funding streams and ensure sufficient capital to sustain momentum are crucial for cleantech startups. For example, Convertus Group, a startup that converts organic waste into biomethane, secured $135 million through both public funding and private capital, demonstrating that combining public and private funding can lend itself to significant capital.
Tax incentives remain a helpful tool in addressing barriers to commercialization. The Clean Economy Investment Tax Credits (ITCs) have been reinvigorated through Budget 2025 Implementation Act in hopes of fueling the energy transition and keeping Canada on track to meet the 2050 net-zero carbon emissions goal. Programs now range from the Carbon Capture, Utilization, and Storage ITC to the Clean Hydrogen ITC.[1] While these tax incentives aim to propel the clean technology sector forward, lenders and investors are factoring in potentially long reimbursement wait times when making investment decisions, due to delays in the Canada Revenue Agency’s review process for ITC claims.
Accelerators offer founders key avenues for support in scaling and commercialization. Programs such as Foresight Canada’s cleantech acceleration provide startups with tools and support needed to commercialize clean technology and scale internationally. MaRS Discovery District’s new Adaptech Accelerator program aims to help startups scale up and adopt climate change adaptation technologies across the country.
As global demand for climate technology continues to accelerate, Canadian cleantech startups will require diverse funding streams. Founders will need to coordinate public and private funding, tax incentives, and support in commercialization to bridge the gap between developing clean technology and bringing it to the market.
[1] https://www.torys.com/our-latest-thinking/torys-quarterly/q2-2026/clean-economy-investment-tax-credits
