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EDC joins net-zero alliance, but has no plan to end fossil finance

At the UN climate conference in Dubai (COP28), Export Development Canada joined export credit agencies (ECAs) from the United Kingdom, Sweden and Denmark in co-founding the Net-Zero Export Credit Agency (NZECA) Alliance. In joining the alliance, signatories commit to aligning all business activities with “pathways to net-zero by mid-century, or sooner, including CO2 emissions reaching net-zero at the latest by 2050, consistent with a maximum temperature rise of 1.5°C above pre-industrial levels by 2100.”

On the surface, the initiative appears laudable. Yet EDC’s steadfast support for fossil fuels1 raises significant questions as to the seriousness of this commitment by Canada’s export bank. EDC stands alone among alliance signatories in consistently ranking among the world’s top three public funders of fossil fuels, with a staggering $32 billion in loans, guarantees and insurance provided to the sector in the last two years alone.

Oil refinery

Export Development Canada (EDC) ceased providing virtually all new financing for fossil fuel projects abroad earlier this year, after the government implemented a commitment it made at the 2021 UN climate conference (COP26) known as the Glasgow Statement. Yet EDC has no timeline for eliminating the billions of dollars a year that it provides to the domestic fossil fuel industry, which composes the vast bulk of Canada’s support for the sector. The federal government’s plan for phasing out this support, first promised in 2021, is now set to be announced by fall 2024.

The science, however, is unequivocal. The Intergovernmental Panel on Climate Change’s latest report, published in March 2023, estimated with “high confidence” that projected emissions from existing fossil fuel infrastructures alone already “exceed the remaining carbon budget for limiting warming to 1.5°C.”2 And the UN’s latest Production Gap report warns that countries currently plan to produce more than twice the allowable fossil fuels in 2030 than is consistent with holding global warming to this vital limit.

Such a scenario would prove nothing short of catastrophic. The UN’s latest projections place the world on track for nearly 3°C of warming by century’s end, threatening the health, lives and livelihoods of billions of vulnerable people around the world — most often those populations that have contributed the least to the crisis.

In short, respecting Canada’s climate commitments requires not only that we cease expanding production of fossil fuels, but that existing facilities be decommissioned early. Yet Canada continues to move in the opposite direction. A report published in September by Oil Change International singled out Canada as one of the world’s top “planet wreckers,” with the second-largest fossil fuel expansion plans by 2050 of any country in the world.

Export Development Canada is supporting this expansion to the tune of billions of dollars a year, much of it with the express backing of the federal government. This is notably the case with $18 billion in loans and guarantees provided in the last two years to support the Trans Mountain Expansion project, set to expand shipments from one of the world’s most polluting sources of oil.

If Canada wants to play a true leadership role on the world stage regarding climate-aligned public finance, then the government must undertake a sharp course correction. Canada must move urgently to prohibit all public financing for fossil fuels, with no loopholes for dangerous distractions like carbon capture that place the fading goal of 1.5°C ever further out of reach.

1. The July 2022 update of EDC’s Net Zero 2050 strategy states: “[O]ur target does not imply an end to EDC support for Canadian oil and gas producers…. We…see an opportunity to support producers in lowering operational emissions associated with production.” EDC’s position stands in contrast to the federal government’s oft-stated commitment to phase out public financing of the fossil fuel sector, including from Crown corporations such as EDC.

2. IPCC AR6 Synthesis Report, Summary for Policymakers, at B.5.3.