The Canadian government has been working on a 'taxonomy' to define and label which projects or investments credibly align with achieving net-zero emissions by 2050. A taxonomy does not judge whether a investment is good or bad, but whether it is sustainable or not. 

To support real climate action in Canada, the taxonomy should reflect scientific and economic analyses for how to limit global warming below 1.5 degrees Celsius. 

Projects related to 'natural' gas are incompatible with this goal and therefore should not be labelled as a sustainable investment. The global credibility of a taxonomy is key to its utility, and including ‘natural’ gas as eligible in Canada’s version risks discrediting and invalidating the effort to date.

Including fossil fuels like ‘natural’ gas under a sustainable finance taxonomy would muddy the waters rather than clarify them. It would counter the expertise of climate scientists, and would damage the label’s credibility internationally, invalidating the entire effort.



Sean Kidney, Co-founder and CEO at Climate Bonds Initiative

“Taxonomies must aim to channel investment to green activities and facilitate the transition to a net zero future — and there is no room for new fossil fuels in that future. Investor concerns around methane leakage and the risks of stranded assets mean that including fossil gas in taxonomies may reduce demand for a specific region’s green bonds. It is vital that taxonomies and locally issued green bonds are aligned with investor requirements and scientific consensus, which means prioritizing renewable energy and rapid decarbonisation, not further investment in fossil fuels.”


Hadewych Kuiper, Managing Director at Triodos Investment Management

“A sustainable taxonomy is to be welcomed because it should help investors to gain a better understanding of what sustainable investment is, which in turn should drive the sustainable transition and combat greenwashing. However we believe fossil fuels such as 'natural' gas do not belong in such a taxonomy. The science is clear that ending new exploration and expansion and phasing-out fossil fuel production is critical over the next decade to keep the world in line with global climate goals and to avoid catastrophic climate disruption. With global leaders falling short, the financial sector should now step up. Financial institutions have a choice to be part of the solution by taking their own responsibility. Only with truly green investments can we accelerate towards a sustainable, low carbon economy.”


Tzeporah Berman Founder Fossil Fuel Non-Proliferation Treaty Initiative 

"Including LNG or other fossil fuel expansion within a framework of sustainable investment is like saying filtered cigarettes are okay in a health plan. The science is clear, we need to stop expanding fossil fuels and phase them out if we want to meet our climate targets.  Including LNG and gas expansion in a sustainable finance taxonomy is quite literally like throwing gas on the fire." 


Across the globe, countries are developing new guidelines to identify what can qualify as a “sustainable investment”. This is primarily done through a system known as a taxonomy.

A taxonomy of sustainable finance is a scheme that labels which investment projects are credibly aligned with addressing climate change and achieving net-zero emissions.

In 2021, the Canadian government tasked a Sustainable Finance Action Council (SFAC) to advise on a Canadian sustainable labelling system (taxonomy).  However, the government filled the council with financial experts, with not a single climate expert, leaving the door open to greenwashing and a lack of scientific insight into what projects are sustainable. 

In 2023, SFAC released its recommendations in a Taxonomy Roadmap Report.  The report noted that coal, new oil fields, and industrial projects that fail to significantly reduce emissions should be ineligible for the sustainability label. The group recommended that any eligible project must establish a net-zero transition plan that is grounded in science and aligned with achieving net-zero emissions by 2050.

Despite this there is serious concern that fossil fuels like liquified natural gas (LNG) and CCUS (carbon capture, utilization, and storage) could be labeled as sustainable. 

Labelling fossil fuel activities as sustainable is like including a harpooned whale under Ocean Wise, or describing a peanut butter and jelly sandwich as nut-free. 

The “sustainable investment” label should be reserved for real climate solutions like renewable energy such as wind and solar.

This summer, the federal government is expected to announce its next steps on the taxonomy. We are therefore faced with an opportunity to contribute to the conversations shaping this policy. We need to tell the government: fossil fuels are not the new green investment.

Our government should be accountable to us, not the financial industry. Right now, only the financial sector has a seat at the table. We need to get our voices heard too. Fossil fuels are not a good investment, for either the planet or our economy. We want our financial institutions to fund climate solutions, not mislead us about harmful investments. Natural gas should not receive a sustainable label.

Despite its name natural gas is not green:


Natural gas is composed of approximately 90% Methane


Methane is responsible for 30% of current global temperature rise to date


Methan accounts for 14% of Canada's annual greenhouse gas emissions


Despite not being aligned with climate goals, Canadian oil and gas companies have worked hard to argue that more natural gas should be considered sustainable. 

'Natural' gas, despite its innocuous nickname, is a fossil fuel and a non-renewable resource that significantly contributes to global warming and climate change. Natural gas is made up of 85-95 per cent methane, a hydrocarbon that is responsible for 30 per cent of global temperature rise to date and 14 per cent of of Canada’s annual greenhouse gas emissions. 

During the transportation of ‘natural’ gas, significant methane leaks often occur. When burned, it creates carbon-dioxide – meaning throughout its production and use, it contributes various forms of harmful greenhouse gasses. Given the potent global warming potential of methane and the frequency of methane leaks during transportation, the full lifecycle emissions from ‘natural’ gas can exceed the emissions from coal.

There are three main commercial stages of natural gas within Canada: the extraction, production and export to market. 

  1. Extraction: The International Energy Agency states that “no new oil and gas fields [can be] approved for development” if they hinder our ability to keep warming below 1.5 degrees. In Canada, extraction of natural gas accounts for the largest source of emissions and is a major reason we have failed to meet emission reduction targets. 
  2. Production: In Canada, natural gas is primarily used for power generation, heating and industrial purposes which significantly contributes to harmful emissions and reduces our ability to meet climate targets. 
  3. Export: The exportation and sale of natural gas is not sustainable. A common argument from interest groups such as the Canadian Association of Petroleum Producers is that exporting liquified ‘natural’ gas (LNG) to Asian countries would displace global use of coal. However, exporting LNG from Canada to Asia is shown to have overall negative impacts on climate action, increasing emissions both in Canada and globally and is more likely to displace new renewables than to displace existing coal.

What is abundantly clear is that LNG is not sustainable, it contributes to climate change and harms Canada’s ability to meet climate goals, while keeping warming below 1.5 degrees. 

canada can get it RIght

Canada frequently positions itself as a global climate leader, including on climate finance, and hopes to attract international investment for a green economy. Delivering a sustainable finance label that is inconsistent with the goals of the Paris Agreement would be a step in the wrong direction. 

Canada has an opportunity to create a credible and sustainable taxonomy that clearly defines what projects and investments are actually climate-aligned. Including fossil fuels like natural gas, would contradict our climate goal and muddy the waters on what can actually be considered sustainable. Decision makers have a responsibility to ensure the label only applies to projects that are truly aligned with climate goals.

Let's take action!


Primary Report Writing and Research: Julie Segal, Senior Program Manager, Climate Finance and Alex Walker, Program Manager, Climate Finance. For a full list of contributors, please download the report.

© Copyright February 2024 by ENVIRONMENTAL DEFENCE CANADA. Permission is granted to the public to reproduce or disseminate this report, in part, or in whole, free of charge, in any format or medium without requiring specific permission. Any errors or omissions are the responsibility of ENVIRONMENTAL DEFENCE CANADA.