This is a guest blog by Jessica Carradine, lead author of The Taxonomy Fossil Fuel Conflict: Why Oil and Gas Inclusion Would be Counterproductive
All submissions to the public consultation on the proposed methodology for Canada’s sustainable finance taxonomy are now publicly available. The results of the consultation show that the majority of respondents disagree with including an oil and gas abatement measures category. Out of every organization and individual who participated in the consultation, 52 per cent reported that they disagree with the category being in the taxonomy. Now, the Taxonomy and Transition Planning Council – which governs the development of the taxonomy – must respond accordingly.
Since the publication of the Methodology Report in July, the abatement measures category has sparked debate. As proposed, the category would focus primarily on upstream oil and gas production. It would aim to reduce emissions from this sector by “enabling select, tightly ring-fenced emissions-reduction investments” – like a carbon capture and storage (CCS) retrofit on an existing fossil fuel production facility, for example. None of the 40+ other taxonomies that exist in other jurisdictions around the world include such a category.
With the end of the consultation, the debate has been settled – at least in the court of public opinion. The Taxonomy Consultation: Abatement Category Responses chart below shows the full breakdown of responses to the question in the consultation that asked, “Do you agree or disagree that the taxonomy should include a third “abatement” category, as proposed, that covers demand-decline activities?”
The ‘Other’ category includes respondents who skipped the question or selected, “Prefer not to answer.” Nearly 200 individuals and organizations made submissions. Data was recorded manually by reviewing each submission individually.
When the consultation was launched, the Taxonomy and Transition Planning Council recommended that the taxonomy should include the abatement measures category. Marlene Puffer, the Chair of the Taxonomy and Transition Planning Council, told Corporate Knights that, “Leaving the abatement category out would leave a black hole in the Canadian marketplace.” However, she also noted that, “If and how the taxonomy ultimately includes an abatement category is an open question.”
This question has been answered by the consultation, and the Council must heed the input of the nearly 200 respondents who participated: the abatement category presents serious challenges to the credibility and scientific validity of Canada’s taxonomy. Respondents raised a wide variety of concerns in their submissions to the consultation. Environmental Defence also made a submission detailing our concerns with the abatement category.
Given that a voluntary taxonomy has no enforcement mechanism, respondents to the consultation pointed out that the abatement measures category may result in capital flowing to oil and gas companies based on commitments to decarbonize that are never upheld. Carbon lock-in, when fossil fuel systems delay or prevent the transition to low-carbon alternatives, is a major risk for the abatement category that came up in many submissions. The Methodology Report itself acknowledges that the abatement category may contribute to carbon lock-in.
Abatement investments for oil and gas production facilities are still investments in the oil and gas industry – an industry which is fundamentally misaligned with long-term pathways towards achieving the goals of the Paris Agreement. The whole point of the taxonomy is to identify investments that are consistent with Canada’s commitment to the 2015 Paris Agreement. Global expert bodies like the United Nations’ Intergovernmental Panel on Climate Change are clear that there are no Paris-aligned scenarios in which abatement technologies like carbon capture and storage (CCS) would allow the continued use of fossil fuels at current levels. CCS, which is one of the primary examples of an abatement investment in the taxonomy, is not proven to result in significant emissions reductions but is regularly used to paint oil and gas expansion and new pipelines as climate friendly. The Methodology Report also acknowledges that these underlying activities are not Paris-aligned, and this is a concern that came up many times in submissions to the consultation.
Finally, the practicality of the proposed guardrails for the abatement measures category, which would theoretically prevent taxonomy-aligned finance from going towards oil and gas expansion, was questioned heavily by respondents. Under the proposed guardrails, companies that are expanding oil and gas production could access taxonomy-aligned finance for specific abatement activities – like CCS – while still increasing their overall emissions. It’s not clear how the guardrails will actually be workable and enforceable.
This response comes from a diverse group of stakeholders – including climate advocates, research institutes, international organizations, financial institutions, and individuals. Oil and gas industry groups also participated, many of whom disagreed with the abatement category in the name of lobbying for more mainstream inclusion in the taxonomy. They rejected the framing of oil and gas as a ‘demand decline’ sector and wanted abatement technologies to receive transition-aligned labels, in spite of the Methodology Report stating that would not happen.
Past iterations of the Canadian taxonomy failed, in part due to conflict of interest concerns (e.g. the finance sector writing its own rules). To respect the governance and processes that the Council has set for itself, the controversial abatement category must be removed given that the consultation results so clearly voted against it.
