Dave McKay is president and chief executive officer of Royal Bank of Canada.
Canada is at a turning point in energy. Lower world oil prices and a renewed global commitment to addressing climate change are opening a new energy conversation. Unfortunately, Canadians are polarized about oil and gas when we should be focused on how cleanly we can produce it, how safely we can transport it and how wisely we can consume it.
The oil and gas industry accounts for 20 per cent of Canada's exports, and provides an average of $20-billion a year in public revenue – enough to cover everything our governments spend on universities. Oil and gas production is critical to our economy and to government revenue; it will also be critical to helping to finance the innovation we need for a cleaner economy.
Developing a consistent and effective approach to carbon pricing can help us solve Canada's biggest environmental challenges. The revenue from a carbon-pricing model can be used to finance our energy evolution to cleaner energy sources, including natural gas.
We have all the raw ingredients. No other country has the same combination of natural resources, brainpower, democratic integrity and love of land, air and water. If we work together, we can develop a new approach to carbon efficiency that will benefit the entire country, and perhaps even provide a model for the world: The Canadian Model.
But to make production cleaner, we will need more capital and better access to global markets than we're seeing now. The federal government's efforts to keep Canada at the forefront of the global climate-change debate is important. If we're going to thrive in the coming decades, as we have in previous decades, we need to secure the confidence of the public, at home and abroad, and of capital markets, at home and abroad.
We can do that with three commitments: a coherent approach to pricing carbon; a world-leading approach to energy innovation; a transparent, respected and effective approach to infrastructure that allows businesses, investors and communities right across the country to plan their futures around clean energy, including cleaner oil and gas.
Environment Minister Catherine McKenna's announcement on Monday of a federal price on carbon is a welcome step. We now have a chance to bring together our mosaic of carbon taxes and cap-and-trade regimes under a national plan that adds clarity, meets our carbon targets and helps Canadian industry become a world leader in technology and innovation.
Our resource companies are among the best innovators in Canada, in their own labs and in the partnerships they've developed with Canadian scientists and entrepreneurs. We need to apply that same Canadian imagination to the next big challenge: finding technologies to bring down emissions and costs. Some of our new carbon revenue needs to support pure science labs, many associated with our great universities, which need secure funding and long-time horizons to test promising ideas.
The revenue should also support the commercialization of the hundreds of Canadian clean-tech firms trying to go global. To become a global destination for clean-tech investing, we need clear, market-oriented support. If new funds are made available, they should be allocated by arm's-length expert groups, the way we've done for decades in other fields of science. And it's important that any public investment be temporary and targeted.
We need to develop a better ecosystem for clean-tech companies, and banks have a role to play. New financing will be important as firms move into commercialization and global markets.
But ultimately, we won't have the resources for those innovations if we don't monetize the natural resources we have now – and that means getting those resources to market as sustainably as possible.
Canada has huge gas reserves and the world's third-largest accumulation of oil assets. We can't squander or shut that down. Oil comes from the ground and the safest way to transport it is on the ground – through pipelines. We know how to do it: For generations, we've built pipelines that meet social, environmental and regional concerns.
Of course, the Canadian context has changed. Real, meaningful and lasting consultations with First Nations are imperative and public interest in safety has grown too.
But it's also important for Canadians to act. If we don't build the energy infrastructure that we so clearly need, the world will move on, and we will lose our opportunity to lead the global energy transition.
We have the opportunity to make this Canada's project for the 2020s. Ultimately, we can use our strengths to develop the energy sector of the future, or we will cede that opportunity to others.