A flare stack lights the sky along refinery row in Edmonton on Dec. 28, 2018.JASON FRANSON/The Canadian Press
Matt Price is the executive director of Investors for Paris Compliance and Adam Scott is the executive director of Shift Action for Pension Health and Planet Wealth.
Canada’s oil and gas CEOs just drove a stake in the myth that their industry is committed to net zero. Fourteen of them have written a letter to all political parties calling for the unfettered expansion of the fossil fuel industry and the weakening of environmental safeguards and further subsidies.
This runs counter to the story they have been telling investors and the public over the past few years before U.S. President Donald Trump was re-elected – that they care about climate change and are taking the energy transition seriously. As a result, Bay Street has a choice to make.
In recent years, as financial institutions and governments made commitments to net-zero emissions, Canada’s oil and gas companies followed suit. The logic was clear: to keep regulators off their backs and the finance flowing, they needed to reassure investors and lenders that they would join them on their climate journey.
As a result, over the past few years we’ve seen most major Canadian oil and gas companies issue corporate disclosures claiming they would reach net zero, while outlining related targets and plans.
The problem is that those targets and plans were never credible. The math on their emissions targets never made sense. Expensive and ineffective carbon capture technology was touted as a silver bullet, but could only scratch the surface of short-term emissions reductions, even if it works.
And the biggest tell? Capital expenditures never lined up with stated emissions reductions. The industry has continued to invest in expanding production, thereby raising emissions.
All this was taking place in plain sight of investors and regulators who did nothing to challenge the misleading claims. Banks and major investors continually claimed they were “engaging” with oil and gas companies on the transition, but there was in fact no transition, only expansion.
At the same time, Canadian securities regulators were flagging “greenwashing” in general as a potential disclosure violation, yet failed to take specific enforcement action against companies guilty of this, as oil and gas companies clearly were.
The Competition Bureau stepped in to fill this gap with a strengthened anti-greenwashing law, adding serious consequences for violations. Tellingly, Canadian oil and gas companies went berserk, scrubbing their websites of all climate-related claims, and removing any mention of net zero from their disclosures.
In addition to calling for unfettered expansion, the CEOs are now also calling for anti-greenwashing provisions to go away, presumably so they can keep telling investors and the public one thing, while they are busy doing another.
All this brings Bay Street to a decision point. As global oil and gas companies and financiers have exited Canada, Bay Street is assuming the role of lender of last resort. For the last year with available data (2023), Canada’s big banks occupied the top four oil sands financing spots in the banking sector, providing almost $3-billion.
At the same time, most Canadian banks and major investors have net-zero commitments that include accounting for downstream emissions, which rise with every extra barrel of oil produced. They will therefore find it increasingly difficult to meet their commitments while continuing to finance Canadian oil and gas companies intent on expansion.
If financiers also waver on net zero, this will not make climate risks go away. The laws of physics and chemistry don’t care about who holds political office and whether they believe in climate change. The Canadian insurance industry faced $8.5-billion in damage claims last year resulting from climate-related disasters, and has said that parts of Canada are becoming uninsurable. No insurance, no mortgages. No mortgages, no housing market. That’s the reality of the emissions growth the oil and gas industry is pushing for.
Instead, Bay Street needs to impose some discipline on itself and its clients. It needs to immediately stop financing fossil fuel expansion, which is worsening climate-related risk and undermining a stable economy and investment environment. It needs to tell oil and gas companies to get serious about net zero and transitioning to clean energy, or take its financing elsewhere.
And if it cannot find that discipline from within, regulators will need to step in to ensure the safety and soundness of the financial system in the face of a climate crisis.