Green investment guidebook authors hold off on adding carbon capture for oil, gas after pushback

The developers of a Canadian guidebook for climate-friendly investments have tapped the brakes on including carbon capture for oil and gas production in the document after significant pushback during a public consultation.

The expert group authoring the long-awaited sustainable-finance taxonomy said it will need to study the feasibility of adding carbon abatement for fossil fuels more before deciding whether to include it as a category in the document.

The Canadian Taxonomy and Transition Planning Council, a non-government group of sustainability and finance professionals behind the effort, released its final methodology report to the public on Tuesday, describing the design and principles of the document’s initial two categories – green and transitional. The former covers non-emitting projects such as renewable energy, and the latter includes activities that decarbonize high-emitting industrial processes.

The taxonomy is aimed at helping attract at least $115-billion in capital annually for Canada to meet its net-zero targets by 2050. In the summer, the council suggested the addition of oil and gas CO2 abatement as a separate category, saying conventional energy accounts for about 30 per cent of the country’s emissions.

Canadian guidebook for green and transitional investments will target six industrial sectors

However, two-thirds of about 200 respondents to a recent call for public comment opposed its inclusion. The majority of those responses were from individuals and non-governmental organizations, who raised concerns about extending the life of oil and gas assets, locking in carbon-intensive energy supplies and clashing with taxonomies adopted in other countries.

The council said the majority of responses were broadly supportive of its approach to social and environmental safeguards, as well as the definitions of the green and transitionary categories, said Marlene Puffer, the group’s chair.

Asked about adding carbon abatement for fossil fuels, she said the council wants more information before deciding whether or not to include it.

She pointed out that some taxonomies in other jurisdictions specify activities as green and transitionary, but none has an abatement category. One of the tenets of Canada’s effort is interoperability – the ease with which its features can be compared with those in other countries – so that was identified as a potential hurdle.

However, the council is looking to increase its knowledge of how taxonomies can be structured to suit Canada’s specific needs. “And we have a large allocation to the resource sector in our economy and it makes up a large part of our emissions. So we’re doing the homework,” Ms Puffer said. The council will study the abatement question next year.

Institutional investors have pushed for a taxonomy for several years, and there have been a number false starts. The current process has gone farthest, and has the support of Ottawa – though it is not a government program. The authors are working to develop a document that meets standards that are in use, or soon will be, in 70 jurisdictions around the world. The voluntary effort, driven by members of the financial industry, is aimed at attracting capital for a range of activities needed to meet the country’s climate objectives under the Paris Agreement.

The council has listed six industrial sectors it will focus on for potential climate-friendly investments, from electricity to forestry and agriculture.

An investor-led organization known as Business Future Pathways is overseeing the process, while the Canadian Climate Institute, an environmental think tank, is in charge of research and technical aspects.

Besides interoperability, the document is being designed with credibility and usability in mind. When implemented, the authors aim to keep the document adaptable, specific to various regions and subject to good governance, according to the methodology report.

There is also a provision for minimal social safeguards for eligible projects, including Indigenous rights criteria, to be developed in co-operation with First Nations, Metis and Inuit. They will align with the constitutional duty to consult and the United Nations Declaration on the Rights of Indigenous Peoples Act.

A draft covering the first three sectors is expected by the end of this year, and then the council will consult with the industry players before finalizing that work in the first half of 2027. The remainder is expected to be completed by the end of next year, Ms. Puffer said.