Why doesn’t Freeland rule out fossil fuels in clean investment definitions?

Finance and environmental experts say Finance Canada is undermining sustainable investing with a multi-year effort to include fossil fuels in guidelines intended to help capital flow toward clean alternatives.

The guidelines would be Canada’s next sustainable finance taxonomy: a classification system that defines what types of investments count as “green” or “transition-related.” Budget 2024 confirmed Ottawa will provide an update sometime this year, but did not offer any details on what the taxonomy might include or specific release timelines.

A taxonomy does not restrict the financing of fossil fuel projects. It simply defines what is considered sustainable and what is not to allow sustainable projects to receive better financial conditions as banks allocate more and more capital to clean projects. For climate advocates, tilting the business case toward renewable energy and away from fossil fuels through the use of a taxonomy is a crucial missing piece of Canada’s climate strategy.

In mid-April, more than 55 climate groups wrote to Finance Minister Chrystia Freeland, Environment and Climate Change Minister Steven Guilbeault, and Energy and Natural Resources Minister Jonathan Wilkinson, urging them to rule out the inclusion of fossil fuels in the taxonomy.

“There should only be a Canadian taxonomy if it credibly aligns with the overall goals of the Paris Agreement,” the letter says. The Paris Agreement is an internationally binding treaty that Canada has signed that aims to keep global warming to 1.5 C and no more than 2 C. To achieve this, scientists say the burning of fossil fuels must be phased out quickly.

“To align with the global scientific consensus on what is required of Canada on climate action, Canada’s taxonomy must exclude any expansion of oil or gas production, as well as any carbon capture related to these sectors,” it adds. the letter.

As previously reported by Canadian National ObserverConfidential documents revealed that carbon capture technology for tar sands production was included in the first recommendations to the federal government.

Experts say including coal, oil or natural gas in the taxonomy will not be seen as credible by investors and would ultimately hurt Canada’s ability to attract capital for clean energy projects.

But Freeland doesn’t rule out fossil fuels. When asked if fossil fuels are being considered in the taxonomy, Freeland’s press secretary, Katherine Cuplinskas, dodged the question.

“The goal of a taxonomy is to eliminate greenwashing, and Freeland’s office seems hell-bent on doing the opposite.” #cdnpoli

“The government is working on the taxonomy, together with many partners, to complete the process as quickly as possible,” Cuplinskas said. “We will provide an update on the development of a Canadian taxonomy later this year.”

When asked to clarify whether Freeland was considering including any fossil fuels in the taxonomy, Cuplinskas stopped responding to Canadian National Observer.

“Experts have been saying for a long time that you can’t have a credible taxonomy that includes fossil fuel investing, particularly the expansion of fossil fuels like [liquified natural gas (LNG)]”said Adam Scott, executive director of Shift: Action for Planet Wealth and Planet Health, a climate finance advocacy group. “So it’s very confusing as to why Finance is still pushing this and it’s not clear on that.”

The fossil fuel industry has long argued that liquefied natural gas can serve as a transition fuel for some countries that still rely on burning coal to generate electricity. If a Canadian taxonomy defines LNG as a “transitional” fuel, it is expected that LNG companies will be able to sign agreements on better terms with banks, which could tip the balance towards greater investment in fossil fuels.

But LNG is anything but sustainable. It is a fossil fuel composed mainly of methane, a powerful greenhouse gas that is a top priority for reducing emissions. Over a 20-year period, methane is approximately 80 times more powerful than carbon dioxide to trap heat in the atmosphere.

“Another key issue with LNG projects is that they are highly capital-intensive and are therefore generally expected to be used for decades to come,” explained Mike Coffin, head of oil, gas and mining at the think tank Carbon Tracker. “New [fossil fuel] The developments further lock society into continued long-term use of fossil fuels, even as rapid renewable energy weakens demand.

“For many countries, moving directly from coal-based electricity to renewables-based electricity is a financial advantage and a climate benefit.”

Scott says he is concerned about evidence of oil and gas lobbying by Finance Canada officials aimed at greenwashing the taxonomy by including fossil fuels.

“The goal of a taxonomy is to eliminate greenwashing, and Freeland’s office seems hell-bent on doing the opposite,” he said.

Although it is not known exactly what was discussed, according to the federal lobbyist registry, dozens of meetings were recorded over the past year between Finance Canada officials and companies and industry groups pressuring the government to adopt greater extraction of fossil fuels, including Canadian Natural. Resources, Cedar LNG, the Canadian Gas Association and others.

“The Minister of Finance owes Canadians a stable, green financial system that is aligned with climate action,” said Julie Segal, senior climate finance manager at Environmental Defence. Canadian National Observer. “More than three-quarters of Canadians want government rules that clear up greenwashing by banks and other companies.

“But progress on implementing a sustainable financial labeling system has been incredibly slow, and it is still unclear whether the next steps will result in a credible label,” he said.

Years late

In the past year fall economic statement, Finance Canada revealed it was committing $1.5 million to develop its sustainable finance taxonomy. It’s unclear how exactly that money is being used, but Finance Canada says the work will be supported by “external technical experts.”

But that announcement is not a sign that Finance Canada is leading the charge; rather, it is picking up the pieces after two previous attempts failed.

In 2018, Ottawa created a panel of experts to advise on how the country could move toward a cleaner economy. The panel’s 2019 report recommended a taxonomy that was never developed.

Then in 2021, the federal government launched its Sustainable Finance Action Council (SFAC), a 25-member group made up of representatives from banking, insurance and pension funds. Civil society groups, climate experts, and indigenous organizations were not included.

The SFAC was tasked with providing recommendations to the government on what should be included in a taxonomy. Those recommendations were delivered in 2022 and appear to be collecting dust on Freeland’s desk ever since.

The SFAC’s mandate expired in March without accomplishing much. In the days following the group’s dissolution, its president Kathy Bardswick, chief executive of Co-operators Group, said he Globe and mail It was frustrating for members to have little interaction with the government, even after being tasked by the government to provide recommendations.

In November, Mark Carney, UN special envoy for climate action and finance and former governor of the Bank of Canada, told attendees at a meeting on sustainable finance in Ottawa that SFAC had provided Finance Canada with an excellent fact sheet. route on how to develop a taxonomy. But he then appeared to take a shot at Freeland saying, “We need someone to drive the car.”

After six years and two panels of experts, Finance Canada is taking over writing the taxonomy.

“So, third time’s the charm,” Scott said sarcastically. “Are we going to continue this silly process that when the industry doesn’t get the response it wants, we’re not going to move forward?

“Certainly Finance is causing harm here by continuing to fail to advance the taxonomy,” he said. “Canada is falling further and further behind.”

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