Joe Oliver: Will the Liberals adopt an unhinged Senate bill discouraging fossil fuel investment?

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Sir John A. Macdonald called the Senate “a place of sober second thought,” which may have reflected his appreciation for at least occasional sobriety. But Bill S-243, the “Climate-Aligned Finance Act,” is the antithesis of thoughtful reconsideration. Its declared purpose is to regulate investment practices so as to reduce the risks both that financial institutions pose to the climate and that climate change poses to financial institutions. In fact, it would undermine free markets, with potentially debilitating consequences for financial institutions, the energy sector and the Canadian economy in general.

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Independent Senator Rosa Galvez’ private member’s bill could have legs if the government decides the time is right to ratchet up its climate agenda by muscling in on the financial sector. After all, Minister of the Environment and Climate Change Steven Guilbeault has never been a model of restraint. At a minimum, the bill shows how far some parliamentarians are prepared to take us down the road of climate change dogmatism.

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The bill aims to help Canada achieve the goals of the Paris Accord: net-zero emissions by 2050, preventing global temperatures from rising more than 1.5 degrees Celsius over pre-industrial levels and radical suppression of new fossil fuel exploration and infrastructure. The bill encompasses direct and indirect emissions and all upstream and downstream value chain emissions, i.e. pretty well everything. And carbon capture and storage will not absolve emitters: for financial institutions the bill aims for absolute-zero rather than net-zero emissions.

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The bill targets federal financial crown corporations, banks, trust and loan companies, pension funds and credit unions. It covers every type of debt or equity financing of exploration, extraction, production, transportation, storage, exportation, refining or retailing of oil, gas or coal and their combustion for energy generation in a power plant — basically, everything Canada needs to remain an industrial society.

The bill is not merely aspirational. It induces compliance via supervision, including by the Office of the Superintendent of Financial Institutions (OSFI) the bank regulator, which it tasks with developing capital adequacy guidelines. However, the bill itself mandates specific increased capital-risk weights of 1,250 per cent for debt exposure to new fossil fuel resources or infrastructure and 150 per cent or more for any loan to an existing fossil fuel activity. This arbitrarily increases the amount of capital a bank must hold for the credit and market risks of a given loan. Such strict requirements, which far exceed international norms, would make access to capital much more expensive. The bill also empowers OSFI to impose a capital surcharge related to how much a financial institution facilitates emissions and to order compliance with the Act’s objectives.

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The bill would effectively discourage — in some cases probably even block — financing of pipeline operators, natural gas distributors and fuel companies (even those with significant green affiliates who are transitioning to net zero). By including downstream emissions, the onerous risk weightings could extend to: goods and services inputs, waste disposal, business travel, delivery services and even financing of sparkling water companies (since carbonation is a pollutant) and the cattle industry (because of cow flatulence). There is virtually no limit to how expansively Environment Canada officials might interpret their new powers’ reach.

The bill also encroaches on corporate governance. At least one member of certain crown corporation boards must be a “person with climate expertise,” such as someone “who has acute lived experience related to the physical or economic damages of climate change.” After three years, the boards of banks and other financial institutions must exclude anyone who: owns shares in a company “offside the commitments,” has served on its board, or was an employee or lobbyist for it in the past five years. Also, directors have to act in alignment with the bill’s objectives or are disqualified to serve.

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The bill’s unhinged displacement of the market would be a vainglorious gesture in a world where greenhouse gases continue to hit historically high levels, big emitters like China and India put development ahead of climate change and fossil fuels continue to account for 80 per cent of energy.

Some supporters argue the bill is aspirational — asking for the moon in hopes of merely moving the dial. But what could be more irresponsible than proposing dystopian legislation on the grounds its final wording won’t be so bad? And in a fevered pre-election environment, with a strident political base demanding action and the need to assuage a restive NDP partner, anything is possible from a government notorious for prioritizing partisanship over principle. Especially if the rallying cry is, to paraphrase 1964 Republican presidential candidate Barry Goldwater, “Extremism in defence of the climate is no vice. Moderation in pursuit of net zero is no virtue.”

No doubt climate alarmists will find it reassuring that the bill is extreme, with no hint of moderation. Reasonable Canadians should be alarmed.

Joe Oliver was minister of natural resources and then minister of finance in the Harper government.

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