The majority of stakeholders responding to a consultation into the development of Canada’s Sustainable Finance Taxonomy said that they strongly opposed a proposal to include an “abatement measures” category focused on decarbonizing activities related to fossil fuels, according to the consultation report released by investor initiative Business Future Pathways (BFP).
The consultation results follow the release in July by BFP, mandated by the government of Canada to work on the development of the upcoming taxonomy, of a draft methodology underlying the taxonomy.
Canada announced plans late last year to launch a new sustainable investment taxonomy by the end of 2026. At the time, the government indicated that the new taxonomy will provide a set of criteria for the identification of investments that are eligible for a “green” or “transition” investment label, enabling companies to issue green or transition bonds, and investors to evaluate the credibility of sustainable investment products.
The draft methodology presented in July, however, proposed three categories, including “Green,” which would apply to zero to near-zero emission climate solutions, “Transition,” for emissions-intensive activities that can achieve deep emissions reductions and have the potential to achieve the scale of decarbonization necessary to align with the green definition by mid-century, and “Abatement,” for activities that would drive significant, immediate-term emissions reductions in high-emitting sectors that are likely to experience a decline in demand on the path to net zero, such as upstream oil and gas production.
The proposal would have made Canada the first major economy to include oil and gas-related activities in its categorization system aimed at helping investors to identify sustainable investments.
The new report found that approximately two thirds of respondents opposed the Abatement category, including a majority that strongly disagreed with the inclusion of the category. While around a quarter of respondents were supportive of the category, the report found that support was conditional on strong guardrails, with many emphasizing that investments supporting fossil fuel expansion should be excluded.
Opposition to the category was driven by concerns that the category could support the extension of the life of fossil fuel assets, result in carbon lock-in or stranded-asset risk, and create interoperability challenges with other taxonomies, the report said.
By contrast, the report found that over three quarters of respondents supported the proposal’s overall approach to the green category, and two thirds supported the transition category. Even within the transition category, however, the report found that respondents said that clearer, more specific rules are needed to determine which activities should qualify, and that the most common suggestion was to require taxonomy users to provide credible entity-level transition plans in order to be eligible for the category.
In a post discussing the results of the consultation, Marlene Puffer, Chair of the Taxonomy and Transition Planning Council, acknowledged that the proposed abatement category “is a new, untested idea in its early stages—one that currently has more questions than answers about if and/or how it would work,” adding that “it’s clear we have more work to do to inform a final decision on this category.”
