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Canada’s financial heavyweights are trying to convince the federal government to let them keep pumping money into the oil and gas sector, using loopholes unsupported by climate science, confidential documents obtained by Canada’s National Observer reveal.
The Sustainable Finance Action Council (SFAC), whose members include representatives from Canada’s major banks, insurance companies and pension plans, was set up in 2021 to advise Finance Minister Chrystia Freeland on how to best build a sustainable finance market.
With trillions of dollars worth of assets under their control and the ability to invest in climate solutions, SFAC’s members are set to play a crucial role in the country’s energy transition. But confidential documents from the council reveal an ongoing effort to continue investing in oil and gas projects as long as they’re equipped with speculative carbon capture technology.
In a report dated summer 2022 and labelled “Confidential — Not for Distribution,” SFAC recommends policymakers develop “green” and “transition” definitions to guide sustainable investing. Green activities would include commonly accepted climate-friendly ventures such as electric vehicle battery production, net-zero buildings, and producing hydrogen using renewable energy like wind and solar. However, the council also recommends continuing investment in “transition” activities, including producing hydrogen using natural gas equipped with carbon capture, and upgrading oilsands production using carbon capture and storage (CCS).
Including carbon capture for oilsands production in a transition definition is greenwashing, climate advocates say, because it can only capture emissions from the production stage, which represents only a fraction of oil’s emissions. Roughly 80 per cent of emissions come when the fuel is burned, like in the engine of a car.
Defining which industries and investments are climate-friendly and which are not is part of a global effort to develop a common taxonomy, or a set of standardized terms. The European Union published its own taxonomy last year, designed to guide investments in ways that lower greenhouse gas emissions, but faced criticism for labelling nuclear and gas as transitional investments as long as they were used to displace dirtier sources like coal and oil. Austria filed a lawsuit against the EU over that decision.
These definitions do not prevent financial institutions from investing in fossil fuels, but seek to direct money toward sustainable investment, explained Adam Scott, an executive director with advocacy group Shift: Action for Pension Wealth and Planet Health.
“If a bank wants to continue (financing fossil fuels), it can, they just can't inappropriately label it, and that's what we're really worried about here,” he said. A taxonomy is “specifically designed to prevent greenwashing, and they've basically said, ‘Yes, you can include some greenwashing in your standard.’”
Climate science is clear that to avoid catastrophic global warming, all fossil fuels must be phased out entirely. In other words, to be aligned with climate science means switching from fossil fuels to renewable energy. Using carbon capture to produce somewhat cleaner fossil fuels that when burned still release greenhouse gas emissions and cook the planet doesn’t cut it, Scott said.
Creating “certificates for CCS for oilsands could be potentially hugely misleading, by giving stakeholders the perception that ‘something is being done’ about emissions… When it's likely that not much will (be) done at all — i.e., only partial offset/sequestration of emissions from some of the production,” Carbon Tracker founder Mark Campanale, an expert in climate finance, told Canada’s National Observer in an email.
Having a transition label for investments that go towards polluting industries makes sense, provided those industries have a credible pathway to decarbonization that the money is supporting, Scott said.
“Steel is a perfect example of an activity where it's difficult and it's going to be expensive … but we see a path towards making steel zero-carbon steel,” he said. But oil and gas doesn’t have a credible transition pathway because it can’t be decarbonized. For that reason, Scott said the SFAC has “blown it” with a transition definition that allows for oilsands investment using carbon capture technology.
“If you're going to invest in transition for oil and gas, what you need to invest in is the actual transition activities, which are electric vehicles, public transit, active transportation, all of the ways in which we're going to get off fossil fuels,” he said.
Scott’s view is backed by climate science. The Intergovernmental Panel on Climate Change (IPCC) — an international collection of scientists whose reports are considered the gold standard for climate science — considers carbon capture to be among the most expensive and least helpful climate solutions.
But Canada is making a huge bet on carbon capture. Ottawa is rolling out a $2.6-billion carbon capture investment tax credit for oil and gas companies, and it also plans to use natural gas equipped with carbon capture to produce what’s called “blue” hydrogen. As previously reported by Canada’s National Observer, the federal government is interested in persuading financial institutions to invest in blue hydrogen as part of an ongoing effort to help diversify oil and gas companies through the energy transition.
The initial reason to create a “made-in-Canada” set of standards “is very clearly the result of a desire to have special carve-out rules for Canada's oil and gas industry,” Scott said.
“The worry was if we don't create our own taxonomy in Canada that specifically continues to allow oil and gas finance, international taxonomies like the EU one will be adopted here and the door will close, and it will be a problem for the industry,” he said. “I think that's the message the banks have been carrying on behalf of their oil and gas clients.”
‘Drowning in greenwash’
Last year, United Nations Secretary-General António Guterres tapped Catherine McKenna to spearhead the UN’s fight against greenwashing, appointing the former Canadian environment minister to chair the UN’s High-Level Expert Group (HLEG) to define what credible net-zero plans look like.
In an interview, McKenna told Canada’s National Observer that credible net-zero commitments require actually reducing planet-warming emissions. Organizations making net-zero pledges can’t also be supporting the expansion of fossil fuels like coal, oil and gas.
Many of the companies in SFAC would be at risk if McKenna’s recommendations were adopted in Canada. While making net-zero promises, Canada’s largest banks have financed oil and gas companies to the tune of $911 billion since the Paris Agreement was signed, and expect to see a return on their investments. Insurance giants like Manulife and Sun Life collectively have more than $25 billion tied up in fossil fuels, and many pension funds are deeply entangled with coal, oil and gas companies.
Scott says with the billions of dollars Canadian financial institutions have invested in oil and gas, it means they’re in a conflict of interest when advising the government on regulations.
“We're absolutely drowning in greenwash right now, and if that continues, we won't be able to hold any of our institutions accountable and we'll continue missing targets,” he said. “It's as simple as that.
“It sounds boring, it looks boring, the term ‘taxonomy’ makes everybody's eyes water, but in reality, this is the underlying set of rules that determines what's green and what's not … and if we don't have these rules, I don't hold out a lot of hope the banks, pensions, or other big financial institutions will meaningfully change their practices.”
SFAC’s 25 members include Canada’s largest banks, pension funds, and insurance companies, including RBC, TD, CIBC, BMO, Scotiabank, Sun Life, Manulife, Canada Pension Plan, AIMCo, and the Ontario Teachers’ Pension Plan. SFAC is chaired by former CEO of the Co-operators Group Kathy Bardswick.
Bardswick has previously acknowledged the need for consistent global definitions in sustainable finance. In a letter sent to the International Sustainability Standards Board in July, Bardswick noted the importance of common taxonomies.
Financial institutions “operate in global markets, and require consistent climate-related disclosures” to effectively manage risks and opportunities across jurisdictions, she wrote. When there are different sets of rules, it adds to investors’ costs and risks making financial markets less efficient, she added.
Finance Canada did not return a request for comment by deadline on why Canada was developing its own set of rules or if it would rule out definitions not aligned with climate science.
Comments
Excellent article. With the conservative attack on institutions, it has never been more important to hold them accountable in order to make them beyond reproach so as to HAVE a standard. I'm very disappointed in the facile "made in Canada" excuse. This upcoming cap on emissions had better be good, but waffling is more likely. More widespread and deadly heat domes may be the only thing that finally works.
I am still holding out hope for the rule of law somewhat, from the suits against big oil to this Austrian one against the EU, but if Trump isn't indicted that doesn't look promising either....
Reading this article about "Greenwashing" investments, and then the article about the Caribbean young people planting trees was such a disturbing vision into the mind set chasm between the fossil fuel/extractive brand of capitalist investment and the hands on community investment of the Caribbean young people planting trees, that my brain was knocked out of its usual grooves.
For years now I've been largely skeptical of the capitalist myths floating around in the clueless media and government circles. Most financial reporting is pure puffery, touting the bona fides of the "successful" or on occasion, excoriating the "failures", the fraudsters, the flim-flam con artists. Far too much money has been devoted to bolstering the dead hand of capitalism as it has been practiced for most of the modern era. Capitalism originated as a way of marshaling investment in risky ventures - often involving lengthy sea voyages. Capitalism spread the risk. The growth of Tontines and other insurance schemes was another way of spreading the risk, and spreading the risk is still actively pursued . What has changed is the mindset. Not merely spreading the risk but gaming the system, scavenging around the edges of investment to make a living (or a killing) by perverting the system, by scamming governments, by stripping the assets rather than investing IN those assets to make productive gains that creates and shares earnings. Capitalism now thrives on outsourcing liabilities while hoarding proifits, Reducing the costs of labour in ruthless ways, reducing and controlling the costs of raw materials., sneakily adulterating the end product (shrinkflation, quality degradation, quantity manipulation) eliminating employee benefits which puts the burdens of health care, "retirement", sheer survival on the individual or the taxpayer.
Capitalism rarely invests in research and development, or innovation. Capitalism buys up the innovators, the developers, it licenses the basic academic research that has advanced to the point of usable technology, processes, or knowledge - most of which has been funded, not by capitalism, but by government grants, or charitable foundations established by capitalists discovering that they really cannot "take it with them".
Industry funded basic research, as in the Bell Labs, has melted away under the growing heat of the sun and the demands of instant, unearned wealth. For the most part capitalism is the plaything of unearned wealth.
The contrast between modern predatory capitalism, lobbying frantically to preserve its unearned wealth, gained by the exploitation of the earth's resources or the labour of humanity's surplus population; and the real investments being made by young people trying to preserve a livable planet, could not be more stark.
Interesting commentary.
I'm not sure where Indigenous youth earning their tickets in electrical engineering building private Indigenous-owned wind farms on First Nations land in southern Alberta, selling clean power to the private capitalist electrical grid would fit into the above definition. Nor on the emerging worker shortage to support an economy with an ageing population in a nation with a very low birthrate, with world demographic trends distinctly slowing in population growth.
But it makes for an interesting (if dated) narrative.
"Including carbon capture for oilsands production in a transition definition is greenwashing, climate advocates say, because it can only capture emissions from the production stage, which represents only a fraction of oil’s emissions."
And CCS captures only a fraction of upstream emissions.
Fake climate solution at huge cost to taxpayers.
Polluter pay?
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CCS captures a tiny fraction of emissions at high cost — only from large emitters. Viable, if at all, only for concentrated CO2 streams. Not feasible where sources are many, small, and diffuse. E.g., oilsands mines. Methane leaks. Tailpipes.
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The Pembina Institute acknowledges that in the oilsands sector "most CO2 is emitted in low concentration streams, and the efforts to capture it will be challenging and expensive."
"Public Policy Forum urges government to help finance oil and gas emission reductions" (March 17, 2022)
As per 2022 Pembina Institute "Getting on Track" report, heaters and boilers generate low-concentration CO2 streams. The only practical CCS application in the oilsands is hydrogen production plants associated with upgraders:
The cost and effectiveness of CCS depends on several factors, including the size of the waste stream and the CO2 concentration. For carbon capture to be economical/practical, CO2 concentration and volume need to meet minimum requirements. It is more expensive and less worthwhile to try to capture CO2 from small or diffuse CO2 sources. In case of many small or diffuse CO2 sources, total emissions may be high, but CCS is not economical or practical. Low-concentration CO2 streams incur high compression costs. Distributed in situ projects (over a wide area) also incur high transportation costs. Thus, in situ projects are at a double disadvantage.
In the oilsands, upgrader hydrogen plants (hydrogen production from natural gas) have high-CO2 (16-18%) streams. In situ projects (natural gas combustion --> steam generation: steam boilers and cogeneration plants for SAGD; large gas-fired turbines, boilers, and heaters) have low-concentration (4-8%) CO2 streams.
CCS is practical only for upgrader hydrogen production plants, but much more expensive and less likely for in situ projects. CO2 from small or diffuse sources like vehicles, heavy diesel powered machinery and trucks, tailings ponds, and mine deposits cannot be captured at all.
The Pembina Institute estimates that "full deployment of CCUS in all high-concentration streams could result in a decrease of c 7 Mt CO2e annually, which equates to 8% of total oilsands emissions."
Getting on Track (Pembina Institute, March 2022)
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David Keith, then at the University of Calgary (now Professor of Applied Physics at Harvard) and a CCS "expert": "Keith is a firm believer in CCS. He says it can work, but he doesn't think it will work for the oilsands and he doesn't know how large we can scale it up."
"…Oilsands companies have backed away from CCS, realizing the technology will likely not help the industry reduce CO2 pollution because the oilsands have too many diffuse emission sources."
"In 2008, the CBC obtained internal federal briefing notes that explained that CCS is better suited to large single-point industrial sources of CO2 such as coal-fired plants. 'Only a small percentage of emitted CO2 is 'capturable' since most emissions aren't pure enough. Only limited near-term opportunities exist in the oilsands and they largely relate to upgrader facilities.'
"Despite this, the AB govt insists CCS will somehow help the oilsands in a significant way."
"Burying CO2: Fix or folly?" (Graham Thomson, Edmonton Journal, 19 Oct 2009)
"Yet even RBC admits that a rapid deployment of [carbon capture] technology isn't very likely.
"'It's pricey, slow to build, adds costs, relies on complex engineering, and sometimes fails to capture or store emissions effectively,' RBC explains in the April report (2022). 'The technology also needs to be tested in large-scale settings. As yet, there are no major plants that capture CO2 from the combustion of natural gas, which is the primary application for the oilsands.'
"But there is one clear advantage to be gained from carbon capture and storage — it buys the oil and gas industry time.
"To climate experts like Richard Brooks, director of the climate finance program at the advocacy group Stand.earth, RBC's current climate strategy is merely an excuse to keep fossil fuel profits flowing as long as possible.
"'RBC says it wants to achieve net zero by 2050,' he said. 'But you scratch slightly below the surface, not very far, and you can see that they have no plan to get there.'"
"What Haunts Canada's Banks? A Green Pivot from Oilsands" (The Tyee, 4-May-22)
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"CCS carries the promise of business as usual with a minimum of inconvenience to the consumer. Under the promise of CCS, we can keep on burning massive amounts of fossil fuels.
"To implement CCS on the scale necessary to combat global warming will be a 'large, massive, daunting task.' The scale is staggering.
"However, the effort necessary would not be merely 'big' but so immense as to be impractical, according to Vaclav Smil, an energy expert at the University of Manitoba.
"Smil, a self-described 'intellectual agent provocateur,' has declared 'carbon sequestration is irresponsibly portrayed as an imminently useful option for solving the challenge (of global warming).'
"...oilsands companies have backed away from CCS, realizing the technology will likely not help the industry reduce CO2 pollution because the oilsands have too many diffuse emission sources. In 2008, the CBC obtained internal federal briefing notes that explained that CCS is better suited to large single-point industrial sources of CO2 such as coal-fired plants. 'Only a small percentage of emitted CO2 is 'capturable' since most emissions aren't pure enough. Only limited near-term opportunities exist in the oilsands and they largely relate to upgrader facilities.'
"Burying CO2: Fix or folly?" (Edmonton Journal, 2009)