In Europe and elsewhere, reactions to the long-awaited EU decision are as you would expect: environmental purists denounce it as cowardly greenwashing, writes Jeffrey Jones.Andrea Mantovani/New York Times News Service

The European Union Parliament has declared that nuclear power and natural gas can be labeled as green for investment purposes, alongside wind, solar and other renewable energy sources.

Environmental activists are not happy at all, saying the inclusion of both energy sources in the EU’s green ‘taxonomy’ will only hamper the fight against climate change. Now, the focus is turning to other countries, including Canada, which are hard at work on investment standards that align with their own low-carbon transitions.

Let’s be honest – it was hard to imagine that gas and nuclear weapons weren’t part of Canada’s plans. They both play a major role in the energy mix, and their backers say they can help phase out the use of coal at home and abroad. In addition, Canada’s financial institutions are investing heavily in fossil fuels and are committed to helping companies reduce their carbon emissions.

Yet the controversial EU decision sets a precedent that gives more latitude to include these sources in a Canadian taxonomy – a list of acceptable purchases for investors mandated to oversee portfolios with environmental, social and governance.

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In Europe and elsewhere, the reactions to the long-awaited EU decision are predictably: environmental purists decry it as cowardly greenwashing, a sleight of hand that provides cover investors looking for opportunities to keep investing their money in fossil fuels when a big shift to renewables is what the climate crisis demands.

“This will delay a real sustainable transition that we desperately need and deepen our dependence on Russian fuels,” climate activist Greta Thunberg wrote on Twitter in response to the EU vote. “The hypocrisy is striking, but unfortunately not surprising.”

Indeed, delay is a risk, given the enormous amount of money needed to remake the world’s energy systems, and, at the same time, the immediate need for all forms of energy to deal with a crisis caused by the war in Europe. It is a precarious time for the continent which has led the world in financial and regulatory efforts to align investment with the emissions reduction targets of the Paris Agreement.

The International Energy Agency has estimated that spending on wind, solar and other renewable energy sources will need to triple to US$4 trillion a year over the next seven years if the world reaches net zero emissions by 2050.

But Russia’s invasion of Ukraine and its punitive restrictions on gas shipments in response to global sanctions have raised fears of shortages, skyrocketing prices and put energy security at the top of the agenda. . Coal is even making a comeback. When the crisis finally ends, it could mean that the world will be left with a series of new gas projects that will have to be dealt with in costly phase-out scenarios while the carbon budget is gobbled up.

That’s not how many in industry and the world of finance see it. They are delighted that nuclear power and gas, in particular, are officially recognized as a bridge to dirtier sources as economies gradually drain carbon from their energy systems. They say science and economics support their claim that large-scale transition is impossible without their contributions.

EU Commissioner Mairead McGuinness said the move would help Europe seek alternative sources of gas, including liquefied supplies, from global allies. Canada is a country that hopes to strengthen its capacity to become a key supplier. “It sends a signal that we support investments in gas infrastructure – power plants – during our transition. It does not deepen our dependence on Russian gas,” she said at the start of the debate.

In Canada, the federal government has created the Sustainable Finance Action Council, or SFAC, with representatives from banks, insurers and pension funds to help develop sustainable finance and integrate climate objectives into policy decisions. ‘investment. He works with CSA Group on Canada’s taxonomy efforts.

In June, SFAC President Kathy Bardswick was asked at a conference if natural gas would be included in Canada’s list of eligible green investments. She didn’t say yes or no, but explained that the council was looking at a number of “industry considerations” based on credible science.

A finance ministry official said on Wednesday that the SFAC is closely monitoring developments in other jurisdictions as part of its work.

It’s not yet clear when a proposed taxonomy is expected to be released, but now that Europe has laid the groundwork, don’t expect Canada to be more restrictive.

Jeffrey Jones writes about sustainable finance and the ESG sector for The Globe and Mail. Email him at [email protected].