Low-carbon economy

In a business context, the low-carbon economy is associated with operating in a way that reduces the reliance on fossil fuels and other high-carbon energy sources. It favours cleaner, renewable energy alternatives like solar, wind and hydropower.

The basic principle of a low-carbon economy is to minimize how many emissions are produced while delivering economic and social benefits to people. In other words, the low-carbon economy aims to reduce emissions across all sectors while ensuring that businesses remain viable and competitive.

Sandra Odendahl, Senior Vice President and Lead, Sustainability, DEI and Social Impact at BDC, explains that adopting an approach that supports the low-carbon economy is about looking for alternatives that make good economic sense.

Why do we need a low-carbon economy?

The primary reason to move to a low-carbon economy is clear: Our current GHG emissions levels are causing the climate to change in a way that is incompatible with life on Earth as we know it.  

This stark reality highlights the importance of reducing emissions to mitigate the worst impacts of climate change.  

Improving efficiency

Adopting the principles of a low-carbon economy can help your business improve its efficiency and reduce waste. High emissions are often a signal of inefficiency. By reducing emissions, businesses can frequently lower costs.  

How big is the low-carbon economy?

While the exact size of the low-carbon economy is difficult to quantify, its potential is vast. The transition will impact virtually every sector, from transportation to manufacturing, construction and agriculture. As Odendahl explains, “To truly have a low-carbon economy, significant shifts across every sector need to occur. We have to change the way we do everything.” She adds, “Changing the product is not always going to be the answer, it will be also about the service we get from a product.” Odendahl gives the example of a self-driving car that is rented on a per-use basis, resulting in a decrease in the need for car ownership overall. 

This means that businesses across industries will need to adapt, creating significant opportunities for innovation and growth. Entrepreneurs who recognize these opportunities and position themselves to meet the demands of a low-carbon economy can find themselves at a competitive advantage. 

Features of a low-carbon economy 

• Electric vehicles (EVs) 
  The transportation sector is shifting from gasoline-powered cars to electric vehicles. EVs reduce emissions and fossil fuel dependence while providing essential transportation services. 
• Renewable energy 
  Solar, wind and hydropower are key energy sources in a low-carbon economy. These alternatives—even when used with non-renewables—can reduce carbon emissions and help businesses operate more sustainably. 
• Building efficiency  
  Upgrading commercial and residential buildings to improve energy efficiency is another example. This includes using insulation, triple-glazed windows and smarter heating and cooling systems powered by electricity from renewable sources. 

What are the pathways to a low-carbon economy?

Transitioning to a low-carbon economy requires changes across all areas of the economy. Here are specific strategies that would support this shift.  

• Electrification of everything 
  One of the biggest levers in achieving a low-carbon economy is electrifying sectors that currently rely on fossil fuels. This means electrifying everything from buildings to cars to industrial processes. We will need to shift toward electricity for our energy needs, and that electricity must come from clean, renewable sources. 
• Energy efficiency 
  Another major pathway is implementing aggressive energy efficiency measures. Upgrading building insulation, installing energy-efficient windows, and using smart heating and cooling systems, for example, are essential to making buildings more efficient. It also results in energy savings and decreases reliance on carbon-intensive energy. 
• Decarbonizing heavy industry 
  Industries like steel and cement production are difficult to decarbonize because the processes they use to create their products emit large quantities of GHGs. New production methods are in development, but in many cases, industrial operations will need to rely on technologies such as carbon capture and storage (CCS) to reduce their carbon footprint. 
• Carbon removal technologies 
  Despite these efforts, some emissions will remain. Carbon removal methods and technologies will be necessary to absorb excess carbon dioxide from the atmosphere. 

These pathways demonstrate that while transitioning to a low-carbon economy will not be easy, it is achievable with the right mix of innovation, policy support and business leadership. 

What are the benefits of a low-carbon economy for entrepreneurs?

Entrepreneurs stand to benefit significantly from the transition to a low-carbon economy. There is a growing list of opportunities, particularly in areas like renewable energy, energy efficiency and clean technology.

Increased opportunities

As Odendahl notes, “The journey to a low-carbon economy has significant opportunities, particularly for entrepreneurs who are in businesses that are part of the supply chain—these are happening now and will only grow as the transition continues to advance.” Whether you are producing insulation, electric vehicle components or solar panels, the demand for low-carbon products and services is only going to increase.

The competitive edge

Businesses that embrace a low-carbon model often find themselves with a competitive edge. More consumers and large companies are prioritizing sustainable practices in their purchasing or procurement decisions. Having a strong sustainability strategy can make you a more attractive partner or supplier.

The impact of the low-carbon economy on entrepreneurs

While there are significant opportunities in the low-carbon economy, there will also be challenges for entrepreneurs who fail to adapt. Businesses that are slow to adopt low-carbon practices may find themselves left behind, especially as large corporations and governments increasingly prioritize sustainability.

“Large clients are increasingly looking for suppliers that also have a favourable carbon footprint,” says Odendahl. “This means that even small and medium-sized businesses will face pressure to reduce their GHG emissions and provide transparency about their environmental impact.”

What can entrepreneurs do to prepare for a low-carbon economy?

To prepare, start by understanding your business’s carbon footprint. This involves assessing how much GHG emissions your operations produce and identifying ways to reduce emissions.

Tools like BDC’s simplified GHG calculator can help you estimate your company’s emissions and prioritize areas for improvement.

Staying informed about your clients’ sustainability priorities is also key. As large corporations and governments make stricter sustainability demands, being proactive in aligning your business with these expectations will help you stay competitive.

What is Canada’s Low Carbon Economy Fund?

Canada’s Low Carbon Economy Fund (LCEF) supports projects that reduce greenhouse gas emissions, including those led by small and medium-sized businesses.

The fund provides financial support to businesses that are involved in:

• reducing Canada’s GHG emissions
• generating clean growth
• building resilient communities
• creating quality employment for Canadians

This is a key part the Canadian government’s goal to build a sustainable net-zero emissions economy by 2050.

Who Qualifies for the Low Carbon Economy Fund?

The LCEF is open to a wide range of businesses pursuing projects aimed at reducing emissions. If your business is investing in clean energy, energy efficiency or other low-carbon initiatives, you may be eligible for funding. This support can help offset the costs of transitioning to a low-carbon business model, making it easier for entrepreneurs to embrace sustainable practices.

There are four different streams of funding under the LCEF:

• Low Carbon Economy Challenge
  
• Indigenous Leadership Fund
  
• Low Carbon Economy Leadership Fund
  
• Implementation Readiness Fund

Next step

Find everything you need to reduce your company’s carbon footprint in BDC’s Climate Action Centre.