{"id":64444,"date":"2024-07-26T09:41:01","date_gmt":"2024-07-26T16:41:01","guid":{"rendered":"https:\/\/energi.media\/?p=64444"},"modified":"2024-07-26T09:41:01","modified_gmt":"2024-07-26T16:41:01","slug":"green-taxonomy-coming-soon-with-tough-rules-for-transition-investments","status":"publish","type":"post","link":"https:\/\/energi.media\/news\/green-taxonomy-coming-soon-with-tough-rules-for-transition-investments\/","title":{"rendered":"Green taxonomy coming soon with tough rules for \u2018transition\u2019 investments"},"content":{"rendered":"<p><em>This article was published by <a href=\"https:\/\/www.theenergymix.com\/breaking-green-taxonomy-coming-soon-with-tough-rules-for-transition-investments\/\" target=\"_blank\" rel=\"noopener\">The Energy Mix<\/a> on July 25, 2024.<\/em><\/p>\n<p><em><strong>By Mitchell Beer<\/strong><\/em><\/p>\n<p>The federal government may be just weeks away from announcing a sustainable finance taxonomy that excludes new fossil fuel investment and sets strict criteria for attaching a green label to \u201ctransition\u201d projects in high-emitting industries,\u00a0<em>The Energy Mix<\/em>\u00a0has learned.<\/p>\n<p>In a July 22 email to members of the Sustainable Finance Advisory Council (SFAC), University Pension Plan President and CEO Barbara Zvan said she has \u201creceived positive indications\u201d that Ottawa may announce the long-awaited taxonomy at a responsible investment conference in Toronto in October.<\/p>\n<p>Proponents have long seen a well-crafted taxonomy as a\u00a0<a href=\"https:\/\/www.theenergymix.com\/canada-needs-fast-action-on-green-finance-taxonomy\/\">critical step<\/a>\u00a0to support clean investment, boost Canada\u2019s economic competitiveness, and help the country meet its net-zero targets. They\u2019ve argued that moving quickly on the taxonomy, with appropriate data and disclosure requirements, is important to support \u201cgreen and transition\u201d capital investments, especially in high-emitting sectors.<\/p>\n<p>With Finance Minister Chrystia Freeland moving toward a final decision on the taxonomy, Investors for Paris Compliance (IFPC)\u00a0<a href=\"https:\/\/www.theenergymix.com\/a-win-or-a-train-wreck-analysts-urge-ottawa-to-exclude-fossil-fuels-or-scrap-green-finance-taxonomy\/\">warned<\/a>\u00a0earlier this month that the taxonomy could be either a win or a \u201ctrain wreck\u201d for the Trudeau government, depending on the guidance it provides for investments in natural gas or carbon capture and storage (CCS) projects.<\/p>\n<p>But now, \u201cthe government appears poised to introduce an approach to the Secretariat that aligns with what was proposed in the Taxonomy Roadmap Report,\u201d wrote Zvan, who chaired SFAC\u2019s taxonomy group. That was a reference to a set of recommendations that made some allowance for \u201ctransition\u201d technologies like carbon capture and storage (CCS), but sought strict enough limits to help finance professionals assess whether specific proposals actually contribute to decarbonization and emission reductions.<\/p>\n<p>\u201cI am encouraged by the feedback and discussions with the various government departments, with consistent messaging emerging from our interactions,\u201d she told a group of SFAC members and partners.<\/p>\n<p>In a statement to\u00a0<em>The Mix<\/em>, Zvan said SFAC was specific about what to include in the \u201ctransition\u201d category in the taxonomy, and what to leave out.<\/p>\n<p>\u201cThe recommendations, as detailed in the\u00a0<a href=\"https:\/\/www.canada.ca\/content\/dam\/fin\/publications\/sfac-camfd\/2022\/09\/2022-09-eng.pdf\">Taxonomy Roadmap Report<\/a><strong>,<\/strong>\u00a0provide only for decarbonization activities for high-carbon industries as they transition to net-zero if they meet clear science-based criteria, as well as alignment with 1.5\u00b0C pathways and do no significant harm\u2014with specific net-zero targets and transition plans as a minimum standard,\u201d she wrote. \u201cNormal course operations, such as production, would not qualify under the transition category.\u201d<\/p>\n<p>She said SFAC also called for a governance structure for the taxonomy that matches up with global best practices, providing \u201cappropriate oversight from a diverse group of stakeholders, properly resourced to ensure strong technical expertise in setting thresholds, and technical committees to provide input and public consultations.\u201d<\/p>\n<p>In a post earlier this month, IFPC Executive Director Matt Price said the transition category would amount to \u201ca form of carbon lock-in as resources are misallocated away from actual transition.\u201d And he warned that Freeland\u2019s office seemed inclined to go farther still \u201cby giving a stamp of approval to investing in new fossil gas, thereby guaranteeing even more carbon lock-in and delaying the transition.\u201d<\/p>\n<p>Zvan told\u00a0<em>The Mix<\/em>\u00a0that\u2019s not the message she\u2019s getting.<\/p>\n<p>\u201cIn all other countries, governments help set up the group. They don\u2019t decide what goes in the taxonomy,\u201d she said in an interview, citing Australia as an example of a jurisdiction that leaves the detailed governance to its four main financial regulators. \u201cThat group decides what goes in the taxonomy.\u201d<\/p>\n<p>If Canada \u201cpre-ordained anything, it wouldn\u2019t be how other taxonomies are built globally, which then goes to the credibility of the taxonomy,\u201d she added. But the more encouraging outcome \u201cis what everyone is hopeful for. We all want to get started, and we want it to be inclusive.\u201d<\/p>\n<p>The more top-down approach that Price is predicting would also fly in the face of\u00a0<a href=\"https:\/\/www.theenergymix.com\/one-ccs-project-cancelled-another-one-failing-as-industry-navigates-very-bad-week\/\">multiple<\/a>\u00a0harsh\u00a0<a href=\"https:\/\/www.theenergymix.com\/emissions-cap-will-prompt-oil-and-gas-companies-to-cut-production-deloitte-projects\/\">analyses<\/a>\u00a0questioning whether CCS is ready for prime time, the global industry\u2019s\u00a0<a href=\"https:\/\/www.theenergymix.com\/10-of-13-flagship-ccs-projects-missed-their-targets-ieefa-analysis-concludes\/\">poor record<\/a>\u00a0of delivering on its targets, and\u00a0<a href=\"https:\/\/www.theenergymix.com\/this-blows-my-mind-critic-says-as-ccus-centre-admits-it-cant-meet-2035-deadline\/\">the Canadian industry\u2019s acknowledgement<\/a>\u00a0that it won\u2019t be able to deliver at scale before 2035 at the earliest. The list of critiques includes analytics shop Wood Mackenzie\u2019s warning in February that CCS deployment would likely be \u201c<a href=\"https:\/\/www.theenergymix.com\/alberta-ccs-project-could-be-scuppered-without-permanent-subsidies-industry-analysts-warn\/\">scuppered<\/a>\u201d without permanent taxpayer subsidies.<\/p>\n<p>In her remarks earlier this year, Zvan said that level of technology assessment would be an important part of the taxonomy. \u201cFor CCS, it\u2019s absolutely pertinent,\u201d she said. \u201cThere\u2019s risk associated with it,\u201d and \u201cthat\u2019s where the taxonomy comes in,\u201d providing thresholds that then trigger a risk assessment to help guide investment decisions.<\/p>\n<p>A commitment to new gas infrastructure, meanwhile, would lead toward the risk of delayed emission reductions and stranded assets that the federally-funded Canadian Climate Institute\u00a0<a href=\"https:\/\/www.theenergymix.com\/breaking-scale-back-gas-networks-or-face-higher-costs-stranded-assets-climate-institute-warns-provinces\/\">detailed<\/a>\u00a0in a recent research report on gas heating.<\/p>\n<p>A spokesperson for Freeland said the taxonomy file is still a work in progress.<\/p>\n<p>\u201cThe government is actively working on the taxonomy, in collaboration with independent experts and relevant stakeholders, to complete the process as quickly as possible,\u201d press secretary Katherine Cuplinskas wrotein an email. \u201cWe will provide an update on the development of a Canadian taxonomy later this year.\u201d<\/p>\n<p>The government did commit to promote \u201ccredible climate investment\u201d and\u00a0<a href=\"https:\/\/www.theenergymix.com\/breaking-oil-sands-lobby-scrubs-website-after-greenwashing-curbs-pass-parliament\/\">combat greenwashing<\/a>\u00a0in the 2024 federal budget.<\/p>\n<p>Last week, Environmental Defence Canada published a mock-up of what government inboxes might have looked like after ministers received more than 50 emails urging them to keep fossil fuels out of the taxonomy.<\/p>\n<p>\u201cThe key message was that it would be better to scrap a taxonomy than to publish one which includes oil or gas,\u201d EDC\u2019s senior program manager for climate finance, Julie Segal, wrote in an email of her own.<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<div class=\"mh-excerpt\"><p>This article was published by The Energy Mix on July 25, 2024. By Mitchell Beer The federal government may be just weeks away from announcing a sustainable finance taxonomy that excludes new fossil fuel investment <a class=\"mh-excerpt-more\" href=\"https:\/\/energi.media\/news\/green-taxonomy-coming-soon-with-tough-rules-for-transition-investments\/\" title=\"Green taxonomy coming soon with tough rules for \u2018transition\u2019 investments\">[Read more]<\/a><\/p>\n<\/div>","protected":false},"author":6,"featured_media":64445,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"give_campaign_id":0,"footnotes":""},"categories":[1],"tags":[13,41,80,14,95,2829,542],"class_list":{"0":"post-64444","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-news","8":"tag-canada","9":"tag-energy","10":"tag-environment","11":"tag-featured","12":"tag-fossil-fuels","13":"tag-freeland","14":"tag-investment"},"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.5 - 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