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Instead of asking why we aren’t getting out of oil and gas altogether, Canadians should ask how we can fully leverage our energy resources to become world leaders in the transition to a lower-carbon future.TODD KOROL/The Globe and Mail

Kevin Krausert is the CEO & co-founder of Avatar Innovations Inc., Canada’s first energy transition corporate venture studio.

The global oil and gas sector is on a roll. Record profits, soaring share prices, robust production. It hasn’t always been this way. Canada’s energy industry only recently emerged from one of the longest and harshest downturns in its history. And given the cyclical nature of oil and gas, it’s a safe bet there are good and bad times ahead.

Some pundits believe the industry’s current good fortune means we’re on the wrong track. They argue that to achieve Canada’s climate goals, oil and gas companies should wind down production and focus on renewables instead of reinvesting in new oil and gas technologies and rewarding their shareholders.

There’s a certain populist appeal in these arguments. But they are misinformed and ignore the larger forces at play in the world today as countries move to address the dual challenge of reducing carbon emissions while ensuring energy security for their citizens.

Global scientific, governmental and industry groups agree the world must move to net-zero GHG emissions by 2050. They also agree that to get us there, trillions of dollars of investment in the energy system are required every year – including in oil and gas. And since we can’t realistically electrify everything, the only rational solution is to invest in all energy solutions, renewable and non-renewable, including the things the oil and gas sector is really good at, such as carbon capture, hydrogen and biofuels.

This is where Canada comes in. Instead of asking why we aren’t getting out of oil and gas altogether, Canadians should ask how we can fully leverage our energy resources to become world leaders in the transition to a lower-carbon future.

Framed through this lens, a few things are obvious to me. First, there’s no energy transition without massive investment. In the global race to attract that investment there will be winners and losers. Canada is well-placed to win both environmentally and economically, if we get our act together.

Second, investment capital will flow to wherever it can get the best return, as it should. Through programs such as the federal investment tax credit for new carbon capture, utilization and storage projects, Canada is moving in the right direction, but not nearly fast or far enough for us to compete. Far more generous government support in other countries, such as incentives in the recently passed U.S. Inflation Reduction Act, are making Canada an uneconomic place to invest in the energy transition.

Third, while it’s easy to take shots at shareholders, they’re absolutely critical in all of this. Today’s oil and gas investors are not some caricature of a Texas wildcatter from the 1920s. They’re people like you and me, our parents and grandparents. They’re pension funds investing on behalf of working people who are saving for their future. It’s these investors, not CEOs, who are ultimately deciding how energy industry profits should be directed. This includes the reasonable expectation of a return on their capital after sticking it out through challenging times. And it includes investing in new technologies to ensure a vibrant Canadian oil and gas industry that can compete in a low-carbon future.

Finally, this is not the oil and gas industry of a hundred or even 50 years ago. For decades, new technologies, designed by some of the smartest people on the planet, have been driving advances in exploration and recovery techniques along with significant environmental improvements. And now, more than ever, the industry is focused on innovation to achieve our shared goals of net-zero by 2050.

Simply put, Canada needs to end its obsession with which energy projects to stop; and instead become obsessed with how we build the energy projects of the future.

The energy transition is the greatest investment opportunity of our generation. And our abundant resources, know-how and the current strength of the Canadian energy sector are assets, not liabilities. The conversation we should be having, at both provincial and federal levels, is how to create an environment where Canada can generate the best returns on global climate investment dollars and take our place as emissions reduction leaders. Then we can unleash these record-breaking oil and gas cash flows, while they last, into an engine of opportunity and innovation for our country.