Canada to end international fossil fuel financing, with some exceptions

Canada’s long-awaited plan to end public financing for international fossil fuel projects is here at last and, despite some loopholes, represents a major milestone, environmental groups say.

The guidelines, announced by Natural Resources Minister Jonathan Wilkinson on Dec. 8, follow through on Canada’s commitment to the 2021 Glasgow Statement, in which nearly 40 countries and institutions pledged to use public resources to support a clean energy transition and end unabated international fossil fuel financing by the end of 2022.

The pledge only applies to unabated fossil fuel projects _ those that don’t use technology to capture greenhouse gas emissions when producing oil, coal or gas. Unabated or not, all fossil fuels create planet-warming pollution when burned, and there’s no way to capture the greenhouse gas emissions coming out of a tailpipe.

The policy contains exemptions for natural gas, hydrogen made using fossil fuels and carbon capture, utilization and storage (CCUS) technology, among others.

Whether this policy is “implemented with integrity to really close the door on those exceptions” remains to be seen, Julia Levin, national climate program manager for Environmental Defence, told Canada’s National Observer.

“The conditions attached to the exceptions are really strong,” said Levin. For example, one of the three conditions for a natural gas exemption requires there to be no viable renewable alternative, and there’s almost always a cheaper, viable renewable alternative, she added.

The guidelines also state any project receiving public finance must align with a pathway consistent with limiting global heating to 1.5 C, and the science is clear that new fossil fuel projects are incompatible with that goal. In theory, this should keep fossil fuels in the ground.

The natural gas exemption “is a huge pill to swallow” and emblematic of the immense pressure the government of Canada always receives when it comes to tackling the gas and oil lobby in this country, said Eddy Perez, international climate diplomacy director of Climate Action Network.

Groups will continue to fight against the natural gas and CCUS exemptions, but by far the biggest concern is exceptions for national security, said Levin.

This exemption “allows for support for projects on national security grounds, including ensuring the energy security requirements of Canada, an ally, or other recipient country deemed important to Canada’s national interests, on a case-by-case basis,” the guidelines read. Other signatories to the Glasgow Statement do not have this sweeping loophole, and Russia’s invasion of Ukraine could provide easy justification, said Levin.

The new policy goes into effect on Jan. 1 and applies to all federal departments, agencies and Crown corporations. The most impacted will be Export Development Canada (EDC), a Crown corporation and prolific financier of fossil fuels that provided up to $18 billion for oil and gas companies in 2022 and just $790 million for clean energy, according to an analysis by Environmental Defence.

The policy will redirect $2.5 billion of EDC’s fossil finance towards implementing climate goals, and Natural Resources Canada says the Crown corporation “plans to continue scaling its annual financing for clean technology with an objective to grow investment from $6.3 billion in 2021 to $10 billion by 2025.”

As EDC shifts public financing away from fossil fuels and towards cleantech, projects must be done in a way that respects and upholds Indigenous Peoples’ rights, is people-led, aligns with a climate-safe future and centres the health and safety of communities, Perez emphasized.

“Today’s decision actually helps make the case that with the proper amount of pressure, resistance from civil society, from experts, from members of Parliament, that kind of effort pays off,” said Perez.

The next step? Tackling public financing of fossil fuels at home.

The majority of public financing continues to be for domestic fossil fuels, said Levin. The federal government has committed to “to phase out and rationalize inefficient fossil fuel subsidies” by 2023 and end domestic fossil fuel financing, but the latter has no timeline attached and today’s release offered no next steps on that commitment.

“But this does set us up well, for a really strong phaseout of domestic public financing in the very near future,” said Levin.

________________

Natasha Bulowski, Local Journalism Initiative Reporter, CANADA’S NATIONAL OBSERVER