Canada delivers on climate promise, takes significant step towards ending public fossil finance

FOR IMMEDIATE RELEASE

Contact:

Claire O’Manique, Oil Change International, claire@priceofoil.org
Barbara Hayes, Environmental Defence, bhayes@environmentaldefence.ca,
Vicky Coo, Climate Action Network – Réseau action climat Canada, vickycoo@climateactionnetwork.ca
Anthony Côté Leduc, Équiterre, acoteleduc@equiterre.org
Vanessa Corkal, IISD, vcorkal@iisd.ca

Canada delivers on climate promise, takes significant step towards ending public fossil finance

Federal Government releases new policy aimed at ending international public financing for fossil fuels, next step is ending domestic financing.

Today the Government of Canada released a plan to end new public finance for fossil fuels abroad and instead prioritize clean energy projects. The policy, which comes into effect on January 1, 2023, marks a critical first step towards eliminating Canada’s massive levels of support for oil and gas and aligning federal support with a climate-safe future.

The new policy applies across all federal departments, agencies and Crown corporations but will predominantly impact Export Development Canada (EDC), a Crown corporation with a long history of funneling billions in support to the oil and gas industry. This new policy will end a significant portion of EDC’s support for fossil fuels and redirect those funds to support the clean energy transition.

Although the policy contains some exceptions for fossil gas, fossil hydrogen and carbon capture and storage (CCS) technology, the policy lays out a number of robust conditions that projects must meet. Any project receiving support must align with a pathway consistent with limiting global heating to 1.5°C. If applied with integrity, it is unlikely that any fossil fuel project would meet these conditions. 

Unlike most of Canada’s peers, the policy leaves the door open for fossil fuel projects on national security grounds, and further detail is needed on how this will be interpreted. In this year’s World Energy Outlook, the International Energy Agency was clear that investments in energy efficiency and renewable energy are the solution to the current energy crisis, not new investments in oil and gas.

The new restrictions will impact support for international fossil fuel projects. However, the bulk of public financing for fossil fuels currently supports domestic activity. The Government of Canada has already committed to ending inefficient fossil fuel subsidies by the end of 2023 and to ending all domestic public finance for fossil fuels. This new policy reiterates those commitments, though it does not include a timeline or process for the latter. Given that the federal government has already provided up to CAD $18 billion in traceable support to oil and gas companies so far this year, it is critical that Canada make good on these commitments and phase out support for all fossil fuels – domestically and abroad, without loopholes.  

With this new policy, Canada joins a group of first movers who have implemented the pledge signed at last year’s UN climate conference (COP26) to end their direct international public financing for fossil fuels by the end of 2022 and fully prioritize their public finance for the clean energy transition. The landmark agreement, known as the Glasgow Statement, is the first multilateral commitment to address public finance for oil and gas. If all signatories follow through on their pledge with integrity, it will directly shift $38 billion a year from fossil fuels to clean energy and help direct even larger sums of public and private money away from investments in climate-harming fossil fuels. As the end of 2022 deadline approaches, the United States, Germany, and Italy are the only major signatories missing updated policies.

Further detail is needed to ensure these funds are shifted to support renewable energy projects that respect and protect human rights, particularly the rights of Indigenous peoples, and uphold the principle of free, prior and informed consent.

Quotes

Claire O’Manique, Public Finance Analyst, Oil Change International

“Oil and gas is usually the elephant in the room in Canadian climate policy. Today’s guidance is a notable break from this norm, and if applied with integrity — including not misusing the national security loophole — it will make a multi-billion dollar dent in our public support for oil and gas. As Minister Wilkinson signalled, an urgent next step is the federal government keeping their promise to end public support for oil and gas at home as well by the end of 2023. In addition, Canada must start using our public finance to support a worker- and community-led just transition away from oil and gas in Canada.”

Julia Levin, National Climate Program Manager, Environmental Defence Canada

“We applaud the Government of Canada for showing much-needed climate leadership today. This new policy, if applied with integrity, should end Canada’s track record as one of the worst providers of international fossil finance in the G20 and shift billions towards climate solutions. Now the government must quickly take the final step and end all fossil financing – without any loopholes for fossil gas, fossil hydrogen or CCUS. This will free up billions of dollars to support a fair transition for workers and communities, and set Canada up to thrive as the world moves beyond oil and gas.”

Vanessa Corkal, Senior Policy Advisor, International Institute for Sustainable Development

“With this new policy, Canada has taken a vital step forward to align its financial flows with its climate ambition. The government is sending a clear signal: we cannot continue to pour fuel on the fire. Redirecting this support to clean energy will accelerate the global energy transition and support long-term stability and job creation. The next step is to keep this momentum going with the complete phaseout of fossil fuel subsidies and domestic public finance in the coming year.”

Karen Hamilton, Director, Above Ground

“Today Canada took a significant step forward, by ruling out public financing for some types of oil and gas projects abroad. We’re nonetheless concerned to see that Ottawa is exempting projects that use CCUS, a false climate solution promoted by industry at the expense of the millions, if not billions, of vulnerable people suffering most from the climate emergency. We hope the government revisits that decision, and moves forward with a plan to end public financing for domestic oil and gas activity as well.”

Tamara Morgenthau, Senior Attorney at the Center for International Environmental Law

“Canada’s policy is a needed step in the right direction — away from bankrolling destructive fossil fuels and toward financing a renewable energy transition. However, the loopholes it carves out for fossil gas, fossil hydrogen, and carbon capture and storage, threaten to undermine this progress and prolong reliance on fossil fuels. To fulfill its human rights and climate change obligations, Canada must follow the science and phase out all fossil fuels, coal, oil, and gas – no exceptions.”

Ketty Nivyabandi, Secretary General of Amnesty International Canada
“We welcome Canada’s important step today to restrict public support for the international fossil fuel sector. To fully protect human rights, Canada must phase out all fossil fuels and prioritize a rapid, equitable transition to renewable energy alternatives which do not violate human rights and Indigenous communities in particular.”

Eddy Pérez, International Climate Diplomacy Director, Climate Action Network – Réseau action climat Canada
“Civil society has been fighting for more than a decade for Canada to end its suicidal support to the industry that is putting us in conflict with nature and making us sicker and poorer. Today’s announcement represents a major milestone, and a win against the destructive corporate interests that too often dominate Canada’s policy and investment decisions. Ending international support for oil and gas means we can instead invest in solutions, justice, and partnership instead, and increase support for climate action and biodiversity conservation in the Global South.”

Émile Boisseau-Bouvier, Climate Policy Analyst, Équiterre
“From 2019 to 2021, Canada supported fossil fuels 11 times more than renewables. We can’t meet our climate goals and achieve a successful energy transition if Canadians’ money is funding the problem rather than the solutions. This announcement is a welcome one, as it marks the beginning of a break with the status quo and should ultimately move the country out of its dual posture of being both the firefighter and the arsonist: fighting climate change while funding oil and gas. We are now eagerly awaiting details on ending fossil fuel subsidies within our borders, another major hindrance to the energy transition.”

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Background

Backgrounder: Canada under Pressure to End International Public Finance for Fossils Ahead of End of Year Deadline
The text of today’s plan from the Government of Canada, Guidelines for Canada’s International Support for the Clean Energy Transition
Canada ranks among the worst in the G20 for providing fossil fuels public financing. By comparison, Canada’s support for clean energy is relatively meager. From 2019 to 2021, Canada supported an annual average of CAD 11.1 billion in public finance to fossil fuels. This was more than 11 times its support to clean energy ($1 billion), compared to the G20 average of 4:1 fossil finance to clean energy.
39 countries and institutions signed the Glasgow Statement at the UN COP26 Climate Change Conference in Glasgow.
In May 2022, 113 organizations sent a letter to Cabinet Ministers urging the government to demonstrate true leadership by going beyond the commitments made to date and eliminate all subsidies, public financing and other forms of financial support from the Government of Canada and federal crown corporations directed to the oil and gas sector by the end of 2022.
Oil Change International’s implementation tracker has been monitoring signatory progress in fulfilling their Glasgow promise. Of the 16 high-income signatories that provide international public finance for energy, in addition to Canada, seven signatories have policies aligned or nearly aligned with the Glasgow Statement (United Kingdom, Denmark, European Investment Bank, France, Finland, New Zealand and Sweden). The Netherlands and Belgium have new policies that further restrict fossil fuel support but leave major loopholes, including a breach of the end of 2022 deadline.