The real G7 story is the quiet reassertion of Canadian energy

Globe and Mail

5 hours ago

Kevin Krausert is chief executive officer and co-founder of Avatar Innovations, a global energy transition venture studio.
The most surprising image from this weekend's G7 summit wasn't the formal handshakes or choreographed photo ops – it was U.S. President Donald Trump, famously allergic to multilateralism, wearing a USA-Canada lapel pin. In a world fraying under the weight of war, economic instability and geopolitical tension, this is a quiet symbol of something deeper – Canada's long-practised capacity to forge compromise amid global disorder. Our long-touted middle-power status, diminished in recent decades by falling productivity and declining military investment, has quietly reasserted itself in the Alberta Rockies.
It is fitting that the summit was held in the beating heart of Canada's energy industry. If Canada is to re-emerge as a global voice of reason and calm, there is no more powerful tool than our energy sector – a sector capable of attracting investment, creating prosperity and responsibly supplying a world increasingly hungry for secure, low-emissions energy.
So it should come as no surprise that Canadian civil society, energy executives and politicians of all stripes are suddenly aligned in recognizing both the regulatory bottlenecks that have long stalled progress – and the urgency of clearing a path to build again.
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It's been more than a decade since Bay Street, Parliament Hill and Stampede City have danced in step like this. A new national energy consensus is in the making. By making it easier for the private sector to invest in Canada's conventional energy industry, we can build projects that will generate the revenues needed to drive innovation and reduce global emissions. In essence, we increase energy revenues today to fund the technologies of the future.
This moment of alignment is more than inspiring – it's transformative. But turning this chorus of consensus into lasting harmony requires recognizing the current global energy landscape.
Increasingly volatile commodity prices are pushing investors around the world to demand that energy companies – both conventional and clean – return capital to shareholders, rather than risking it on new long-horizon projects.
Public purses across the developed world have been strained to the point that there is little appetite to subsidize emerging energy technologies that have up until now only driven up the price of energy. And the euphoria of the Silicon Valley-style of energy venture capital born out of the pandemic has ended with a five-year hangover of lower-than-expected returns with little ability for follow-on investments into even the most promising technologies.
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The trick, it would seem, would be to figure out how to mobilize private capital back into the energy industry. This is where the hard work begins for Canada to ensure that this springtime of consensus can turn into a lasting era of energy prosperity.
The good news is that Canada can leverage this unique moment to become a global model for energy investment with fresh ideas on investing in the future of energy.
As we move from overhauling the regulatory regime into driving investment, we can learn from our past to supercharge private investment in new energy projects. Taken together, the following initiatives would leverage Canada's abundant and world-class energy resources and expertise to become the world's leading hub for science and innovation, while encouraging investors to take bigger risks for bigger returns. And none of these require a single dollar of government spending.
In the 1970s, Canada implemented a flow-through share tax regime that enabled junior mining and oil and gas companies to raise large amounts of private capital while transferring their tax credits to the investors buying their shares. This resulted in several of Canada's junior resource companies expanding and unlocking generational wealth for resource communities from Sudbury to British Columbia's Highland Valley. A flow-through share program focused on Canadian energy technologies and corporate venture capital that reduce global emissions could similarly enable private capital to flow into new energy projects that drive innovation.
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In 2007, Alberta became Canada's first carbon market by establishing the Specified Gas Emitters Regulation. While flawed, it enabled Canadian energy companies to start thinking about how to drive returns in their investments by lowering emissions. Modernizing and simplifying Canada's carbon markets to allow capital to flow through could drive the next wave in Canadian emissions-reduction technologies.
In 2013, the Government of Canada introduced the Venture Capital Action Plan allocating $400-million to stimulate venture capital investment. This initiative supported four private-sector-led funds, which collectively attracted more than $900-million in private capital and invested in more than 100 Canadian startups between 2013 and 2016. Recognizing the moment of reckoning that is confronting the global energy venture-capital sector, we can similarly unlock a new wave in Canadian energy technology innovation by creating a risk-return-adjusted energy technology investment fund.
Finally, amendments to Canada's Scientific Research and Experimental Development credits could benefit technology developers and arrest Canada's frequently cited innovation problem. If these developers – typically relatively small enterprises – could transfer their tax credits to adopters of their technology, large energy companies would be incentivized to take on the risk of adopting new technologies.
What's clear now is the choice before us isn't between supporting traditional energy and embracing innovation – it's about leveraging our current strength to build future leadership. In short, we can build the new energy system by powering the existing energy one.