Pumpjacks draw out oil and gas from a wellhead near Calgary.Jeff McIntosh/The Canadian Press
The scope of a Canadian guidebook aimed at attracting billions of dollars for climate-friendly investments is being expanded to cover decarbonization projects for oil and gas production, a contentious move that environmental activists warn could slow the shift to a low-carbon economy.
The Canadian Taxonomy and Transition Planning Council, which is leading the effort, begins a five-week public consultation period on Thursday to gather feedback on its methodology report for the new taxonomy. The document is aimed at helping to fill a need for at least $115-billion in capital annually for Canada to meet its net-zero targets by 2050.
The draft guidebook had previously been split into two categories for eligible investments: Green, covering non-emitting projects such as renewable energy, and transitionary, including activities that decarbonize high-emitting industrial processes.
Now, the council is recommending a third option – abatement measures. It would comprise such projects as methane reduction, as well as carbon capture, utilization and storage in oil and gas production, processing and distribution.
With its transition-related category, the council acknowledges that some activities, such as steel and concrete manufacturing, will be in high demand during the shift to a low-carbon economy, but also require decarbonization themselves, council chair Marlene Puffer said in an interview. However, fossil fuels remain a major source of Canadian emissions that must be dealt with, she said.
“We’re trying to attract both domestic and foreign capital into sustainable activities that help Canada get to net zero,” Ms. Puffer said. “So, in balancing that with the fact that in Canada, the oil and gas sector makes up about 30 per cent of our emissions, this is an approach that will help to start the discussion around what sort of activities related to this sector qualify.”
Abatement would include “robust guardrails” to ensure projects meet specific climate goals, the council said in its draft for public comment.
Institutional investors have pushed for a taxonomy that meets standards that are in use, or are soon to be, in 70 jurisdictions around the world. The effort is aimed at attracting capital for a range of activities needed to meet the country’s climate objectives under the Paris Agreement.
Last month, the council listed six industrial sectors it will focus on over the next year and a half for potential investments that deal with climate action, from electricity to forestry and agriculture.
Canadian guidebook for green and transitional investments will target six industrial sectors
The process has taken years to get to this point after a number of false starts. Late last year, Ottawa provided funding to develop and enact a taxonomy that reflects the makeup of the Canadian economy. Investor-led organization Business Future Pathways is overseeing the effort, while the Canadian Climate Institute is in charge of research and technical aspects.
On Tuesday, a coalition of three dozen environmental organizations called Credible Taxonomy published a report explaining why they believe oil-and-gas-related projects should be excluded outright. The coalition, including Environmental Defence, Climate Action Network Canada and West Coast Environmental Law, among others, said allowing such investment could be used as cover while fossil fuel production increases.
That could erode the taxonomy’s “interoperability” – the ease with which its features can be compared with those in other countries, it said.
None of that spending would address the highest proportion of emissions from fossil fuels – the burning of petroleum products by end users – Credible Taxonomy said, adding that it opens the door to potential greenwashing.
“A taxonomy is providing a gold star, and any gold star to oil and gas is muddying the waters instead of clarifying them,” said Julie Segal, senior manager of climate finance for Environmental Defence.
Ms. Segal, who also serves on the technical advisory group for the taxonomy, pointed out that disagreements about whether to include oil and gas contributed to the stalling of past efforts.
However, Jonathan Arnold, head of sustainable finance at the Canadian Climate Institute, said breaking out oil and gas projects into their own stream helps preserve the credibility of the transition category.
The green and transitionary categories are slated to go into operation before the end of this year, including technical screening criteria for the various industries. The abatement measures are to be developed further in 2027, the draft report said.