Green Bonds Framework Excludes Oil And Gas; Industry Reps Weigh In

The federal government is looking to strengthen its chances of reaching its greenhouse gas emission (GHG) targets through a new program that finances emissions-reducing projects.

Advancements in oil and gas, however, will not be among them.

The framework for the inaugural Canadian-dollar-denominated green bond, expected to be issued this week, covers clean transportation, climate change adaption, sustainable water and wastewater management, pollution prevention and control, among other project categories. Its targeted issuance is $5 billion.

Exclusions under this framework include transportation, exploration and production of fossil fuels, and nuclear energy.

Activities selected for inclusion under Canada’s green bond framework are based on best international practices followed by other sovereign green bond issuers in the G7, according to a federal government news release.

“Canada’s oilsands industry is an essential partner in helping Canada achieve its climate plan and no industry in the world is working as collaboratively and aggressively to drive down emissions and meet net zero goals,” Mark Cameron, a spokesperson for the Oil Sands Pathways to Net Zero Alliance, working for MEG Energy Corp., told the DOB.

“While we understand the objective that green bonds not be used to finance increased production of fossil fuels, we believe that projects within the fossil fuel sector that are solely aimed at reducing emissions, not at increasing development or production, should be eligible for this type of financing.”

The Pathways Alliance, which includes Canadian Natural Resources Limited, Cenovus Energy Inc., ConocoPhillips Canada, Imperial Oil Limited, MEG Energy and Suncor Energy Inc., is aimed at achieving a phased reduction in emissions from oilsands operations, including net zero by 2050.

Canada’s energy industry deserves support, says Ben Brunnen, vice-president, oilsands, fiscal and economic policy, at the Canadian Association of Petroleum Producers (CAPP).

“The actions of Russia serve to spotlight the stark contrast between the strong ESG performance of Canada's oil and natural gas industry compared to many other producing nations,” he adds.

“The oil and natural gas sector is by far Canada’s largest spender on clean technology, accounting for 75 per cent of the total annual spending by all sectors. This dedication to clean technology investment is having an impact: Canada’s oilsands producers have not only made exceptional progress in reducing GHG emissions intensity, with even more new technology awaiting deployment, but will also displace global emissions over time from poorer performing sectors and jurisdictions.

“This needs to be recognized in the green and transition finance taxonomies.”

Countries around the world are looking for safe, reliable energy to be provided by trusted partners and Canada as an ESG leader needs to play a heightened role in meeting global energy needs, says Brunnen.

“Stepping up and finding a way to invest more in our oil and natural gas is not an opportunity for Canada, it is an obligation,” he adds.

‘Massive innovation’

When asked about the green bond framework excluding oil and gas, president and chief executive officer of the Petroleum Technology Alliance Canada (PTAC), Soheil Asgarpour, said, "Through the massive innovation and collaboration of connecting ideas, people, projects, and capital, the industry is turning this enormous environmental challenge into tremendous economic opportunity.

“The industry, having built and continuing to developing a world-class innovation ecosystem, has, and will continue to, work in collaboration with federal, provincial, and municipal governments, regulatory bodies, academia, technology providers, First Nations, etc. to lead the way in forming a robust world-class cleantech sector,” he added.

Other exclusions in the framework include arms manufacturing, gambling, manufacturing and production of tobacco products, and manufacturing and production of alcoholic beverages.

The government says it worked with TD Securities and HSBC as structuring advisors to design a green bond framework that will support government programs with “unambiguous” environmental benefits.

“The Government of Canada recognizes that no credible plan to achieve significant emissions reductions by 2030, and net zero emissions by 2050, can ignore the emissions-reduction and innovative potential of heavy industry, including the Canadian energy sector, nor the intersection between ambitious decarbonization and ensuring a just transition and economic opportunity for communities and individuals across Canada,” reads the framework. “The Government of Canada remains committed to supporting decarbonization, nature conservation and environmental quality in all sectors and Canadian regions.”

The federal government did not immediately return requests for comment on its decisions around exclusionary criteria for its green bond program.

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