As one of the world’s top dozen greenhouse gas emitters, Canada is being fiercely criticized for a new draft climate risk reporting rule that allows Canadian businesses extra time to delay disclosing their climate pollution fully and does not require them to reduce it. If Canada’s weakened standards prevail, they will have a meaningful negative impact on global regulatory efforts to meet CO2 targets by 2030.
The Energy Mix’ Mitchell Beer goes deep on the issue:
Sustainability experts are in an uproar over draft climate risk reporting standards recently released by the Canadian Sustainability Standards Board (CSSB). Critics say the Board has developed weaker global emissions standards than those laid out by the International Sustainability Standards Board (ISSB) to placate demands from Canada’s giant fossil fuel industry at the expense of more transparent climate risk reporting.
Climate advocates are angry because the draft rules would give the oil and gas industry and allied businesses more flexibility and time and would not require them to make any immediate emission cuts. The draft’s crucial shortcomings, they say, include the lack of Scope 3 disclosures and the delay in requiring carbon emissions reductions.
The CSSB admits that Canada’s proposed standards would now be less stringent than those of the European Union and California because they seek to be “appropriate for Canada.” but they argue they are more rigorous than those of its American neighbor, the United States, and maintain key carbon measurement metrics like the controversial Scope 3.
The fight over carbon disclosure and regulation also reflects a deepening divide between Canadian fossil fuel producers and those most at risk from its continued use. Specifically, it pits the oil and gas industry against the interests of long-term institutional pension and insurance investors concerned about the effect of climate change on their investment assets.
Adam Scott, executive director of Shift Action for Pension Wealth and Planet Health, does not buy the Board’s argument. He said the “made-in-Canada” standard “is code for protecting our oil industry from the implications of climate change.” He warned that backing off more stringent standards is an effort to “slow down any regulation” by regulators who “are clearly captured” by fossil fuel interests. “There’s no justification for Canada having any different rules from the ISSB at all. It’s an international standard for a reason. Canada is not special. We have to follow the same rules.”
“There’s no justification for Canada having any different rules from the ISSB at all. It’s an international standard for a reason. Canada is not special. We have to follow the same rules.”
Whither Scope 3
Like the U.S., one of the central issues is whether Canadian businesses will have to report controversial Scope 3, or end use, emissions when the new regulation takes effect in 2025. Much to the dismay of critics, the Board agreed to allow Canadian businesses an additional two years to prepare for the rule. “The investors we talk to complain all the time that they don’t have Scope 3 data, and they desperately need it,” says Shift Action’s Scott. “The idea of delaying the reporting standard is ridiculous.”
Missed 2030 emissions targets
Sen. Rosa Galvez (Independent Senators’ Group-Quebec), whose Climate-Aligned Finance Act is currently before a Senate committee, says the drafts’ shortcomings come at a time when “we are experiencing more extreme weather events, wildfires, and extreme temperatures. We need to be more ambitious in our climate action efforts.”
She also warned the delays would make it almost impossible for Canada to meet its 2030 emissions targets. “If Canadian standards for sustainability risk and emissions data disclosures do not start until 2025 and a transition period is drawn out for two years, with the full rules only set to be reached by 2027, how can we expect to meet our 2030 [emissions reduction] targets?”
Finally, further delay is bad for the economy, says Galvez. “To future-proof the Canadian economy, the financial sector must align with our climate commitments and replace investments in emissions-intensive activities with increased investment in energy efficiency, clean energy, and clean technologies.”
Counting leaking holes
However, the rule change that could cause the most damage is the Board’s decision to delay further emissions reductions. “There is a glaring missing piece,” says Julie Segal of Environmental Defence Canada. “The guidance from Canadian and international standards bodies would have businesses only counting their emissions, not reducing them. This is akin to only counting the leaking holes in a sinking boat without plugging them.”
“To future-proof the Canadian economy, the financial sector must align with our climate commitments and replace investments in emissions-intensive activities with increased investment in energy efficiency, clean energy, and clean technologies.”
Business flexibility needed
CSSB chair Charles-Antoine St-Jean defends the CSSB position as giving businesses the flexibility to issue the standards that are “in the best public interest for Canada.” Canadian companies, he says, also need time to implement new systems to collect Scope 3 climate risk data accurately enough for a formal securities disclosure.
“We chose to make sure Canadian businesses can smoothly transition to the new standards,” he recently told The Globe and Mail. He also defended the Board’s decision to delay reporting of Scope 3 emissions. “Our position, which was very clear and unanimous from the board, was that we should be disclosing Scope 3.”
But even the CSSB’s modest proposal went too far for investment regulators. The Canadian Securities Administrators, an umbrella group representing provincial and territorial regulators, many of them in provinces heavily dependent on fossil fuels, only want companies to be required to disclose Scope 1 emissions—that is, carbon emissions from a company’s operations—or even better, no disclosure at all (if the company explains why).
CSA chair Stan Magidson, CEO of the Alberta Securities Commission, said members “will consider the final CSSB standards and may include modifications appropriate for the Canadian capital markets.” He said they would also seek “additional time and guidance for reporting issuers to comply with certain disclosure requirements.”
With the summer wildfire starting early in oil-rich Alberta this year, the CSSB will remain in an increasingly uncomfortable position of satisfying no one.
