Canada’s export credit agency’s continuing support for fossil industry business development keeps it far out of compliance with the Paris climate agreement, despite Canada’s COP 26 commitment to phase out international public financing for fossil fuels, according to a scathing new analysis by Freiburg, Germany-based Perspectives Climate Group.
The 41-page study [PDF] assigns EDC’s climate performance a rating of just 0.47 on a three-point scale, based on its policies or lack thereof for excluding fossil fuels, the climate impacts of its activities, its emission reduction targets, the transparency of its financial disclosures, and more.
“Based on the findings in our study, we urge the Canadian government to acknowledge the absolute limits to fossil fuel production in a 1.5° warmer world—with strict implications for the mandate and operations of Export Development Canada,” lead author Philipp Censkowsky said in a release.
Canada’s “milestone steps taken at and after COP 26 went in the right direction,” he added. “Now the phaseout of domestic public support for fossil fuel value chains and the massive scale up of well-defined and high-quality cleantech is needed to align officially-supported Canadian export finance with the Paris Agreement.”
Against the backdrop of Prime Minister Justin Trudeau’s most recent mandate letters to key cabinet ministers, there are “legal grounds to define EDC’s (domestic) financing activities as ‘subsidy,” Perspectives Climate concludes [PDF]. The researchers add that, in line with the latest climate science, all public financial support for fossil fuel value chains—domestic and international—must end this year.
The study team found that:
• Carbon-intensive activities accounted for 26% of EDC’s business portfolio at the end of 2020, for a total value of US$16 billion.
• By comparison, the agency’s support for “cleantech” activities averaged just US$2.33 billion over the last three years—and the category includes technologies like carbon capture and storage that routinely come under fire for prolonging the life of fossil fuel infrastructure, with no real contribution to emission reductions.
• EDC’s fossil fuel exclusion policy applies only to coal, not oil and gas—and only to thermal coal produced for power plants, not metallurgical coal exported for steelmaking.
• EDC has committed to bring the operational (Scope 1 and 2) emissions in its portfolio to net-zero by 2030, but Perspectives Climate still has concerns with the agency’s definition of “net-zero” and its plans for reaching the target. The agency doesn’t plan to disclose the downstream, or Scope 3, emissions that represent the lion’s share of its climate impact until 2024.
“Significant levels of support for the domestic oil and gas industry, as well as other carbon-intensive activities along fossil fuel value chains supported by EDC… stand in the way of the transition towards ‘genuine’ net-zero by 2050 and consistency with limiting global warming to 1.5°C,” the study concludes. “Moreover, as long as the energy sector (both in its clean and fossil-related components) is not reported on comprehensively, it will remain difficult for any observer, including for the Canadian government as the sole shareholder, to judge real progress towards aligning with the objectives of the Paris Agreement.”
Perspectives Climate urges EDC to “try to follow (the few) international best practices to advance its corporate strategy and demonstrate the ability and willingness to truly shift support away from carbon- intensive sectors and towards sustainable activities, without reliance on uncertain negative emission technologies.”