The backroom politics around defining “sustainable” finance in Canada continue, with the vast majority of people shut out of this critical public policy issue.
You may remember earlier chapters of this saga as the CSA Group convened industry and finance stakeholders behind closed doors to try to define a “transition” taxonomy for Canada but failed to achieve consensus, only to send their work to the equally unrepresentative and unaccountable Sustainable Finance Action Council.
This time it’s Export Development Canada (EDC), fresh off supposed commitments to stop subsidizing fossil fuels, that has issued a Sustainable Bond Framework, which is like a mini-taxonomy for its own financing, but given that it’s a government agency could be misconstrued by some as a Canadian standard.
The Framework has various categories for Green, Social, and Sustainable bonds, but its with the Transition category that things fall off the rails. EDC says projects or companies qualify as “transitional” if:
- There is a decarbonization strategy in line with the Paris Agreement;
- There is a significant reduction of greenhouse gases relative to industry norms; and
- It does not lead to carbon lock-in
It then goes on to say that carbon capture utilization and storage (CCUS) is an eligible transition activity as long as it doesn’t include enhanced oil recovery.
Here’s the problem: when applied to the oil and gas industry (which let’s face it is what we’re talking about here) those criteria are contradictory and represent the opposite of transition.
A decarbonization strategy in line with the Paris Agreement necessarily requires transitioning off oil and gas, not merely making it a bit better per unit of production. This is because the end use of these products is where the vast majority of emissions lie.
Furthermore, CCUS is the very definition of carbon lock-in, necessitating more production in order to pay for enhanced infrastructure, again leading to more end use emissions.
There is a refusal in Canada’s financial sector to grapple with the true meaning of the word “transition” and what the math of that entails. This is driven in part by the fact that there isn’t a single energy company in Canada with a plan to actually transition away from fossil fuels and into clean energy – and those companies represent the major clients of the finance industry.
We see this in the press release that RBC issued along with the EDC Framework claiming credit as one of the lead advisors. That RBC is facing its own controversies over “sustainable finance” deals that increase emissions is not mentioned.
Again, this brings us to the issue of accountability. Why is a public agency allowed to hide in the backrooms with fossil fuel-conflicted advisors to make public policy in this way? The bad results are predictable. It’s time for the Canadian government to bring these conversations out into the open so that we can get better results.