Fuel for Thought: A New Mechanism to Fund Canadian Innovation

With the emergence of America First, Canada now has no illusions about its place in U.S. strategy. That means thinking big and acting fast, especially on both natural resource extraction and innovation. For the first time in a generation, Canada has the ingredients for a real grand bargain: rare political alignment, surging global demand for resources, and a federal mandate to act. Last month’s election settled the question. Both major parties ran on expanding resource development, and the public backed them.

But without a plan for a Canadian innovation economy, this moment risks collapsing into another short-term boom. When resource exports surge, they inflate the currency and squeeze out manufacturing, a pattern economists call Dutch Disease. Canada has been here before.

So, Canada can double down on raw extraction and watch its industrial base continue to erode, or it can make a smarter trade: tie fast-tracked approvals and access to federal lands to excise tax contributions into a permanent innovation fund. It’s time for a win-win grand bargain, one that doesn’t just extract value, but reinvests it in the future.

Canada’s permitting regime has become a chokepoint. Whether for energy or critical minerals, projects stall under fragmented reviews, under-resourced regulators, and unclear timelines. The costs ripple downstream, from plastics to EVs and semiconductors. And any serious bargain on permitting must involve Indigenous rights holders, not as stakeholders, but as governments with authority over land and resource decisions. Meanwhile, at a time when global demand for critical inputs is exploding, Canada’s resource edge has never been more valuable, or more underleveraged.

The materials and energy the world wants are in Canada. Fast, predictable approvals and guaranteed access to strategic federal lands are essential, but they should come with a condition: A share of the value must be reinvested in Canadian innovation and commercialization.

Other countries have done this in principle, if not in mechanics. Norway turned its oil wealth into national resilience not just by saving, but by building. It invested early in advanced industry, technical capacity, and the institutions that convert resource rents into long-term industrial strength. Canada should take a page out of their book, not by copying their model directly, but by adopting the principle: Use today's resource windfall to fund tomorrow's industrial edge.

And without building that industrial edge, Canada risks slipping back into the old pattern of a resource economy that exports raw materials but builds little with them. Federal and provincial policies have made some progress, but they are nowhere near the scale required. Canada needs to invest far more, not just in R&D, but in turning innovation into real production.

Imposing a modest federal excise levy on raw material output in exchange for streamlined permitting and guaranteed access can provide the revenue to fund that R&D and commercialization, something the federal government has long lagged on.

For natural resource firms, the upside is speed and resource access. A predictable path through permitting and guaranteed access to high-value federal lands is worth more than the marginal cost of the levy, especially in a market where delays kill competitiveness. The levy would apply only to firms that opt into the streamlined permitting and access regime.

The revenues would flow into a new, arms-length federal innovation agency with a single goal: Get real technologies into production. Not for ribbon-cutting announcements, and certainly not for general government revenues, but to back applied R&D, support commercialization, and anchor advanced industries of the future.

The agency would blend the best elements of two long-standing but incomplete ideas. Canada doesn’t need to choose between the previously proposed Canada Innovation Corporation support system and a DARPA-style mission machine. It needs both, but under one roof, working in sequence, not in silos. One track would back early-stage technologies with commercial promise. The other would help firms adopt and scale those technologies here at home. Projects would flow from one to the other, moving from idea to prototype to production without leaving the system. The goal is to turn ideas into outputs, and outputs into industries that stick.

This is neither a gift nor an attack on extraction firms and resource-rich regions. Nor is Ottawa rerouting value out of the West and North. It’s a trade. The latter get what they value most: faster permitting and guaranteed access to high-value Crown lands. In return, a portion of that value is reinvested in the future Canadian economy, in the companies building the next generation of advanced industries and the ecosystems they need to scale.

Everyone agrees Canada needs more R&D and better commercialization. Everyone knows the government has a role to play, and that Canada lags in government-funded R&D, especially the kind that helps firms turn knowledge into innovation and production. What no one agrees on is where the money comes from. This is the answer. A share of the upside from accelerated permitting and expanded access is the most politically and economically viable funding mechanism on offer. It creates a dedicated stream without raising taxes or cutting spending, and it links Canada’s natural advantages to its future industrial strength.

The world needs what Canada has, but Canada has the talent to do more than dig things out of the earth and immediately ship them off. No energy boom lasts forever. But if Canada plays this right, it won’t just weather the boom—it will use it to build the foundation of its next industrial era.