In Rapid Push Toward Net Zero and ESG, Transition Plans Lag for Energy Workers

Feds begin consultation on ‘Just Transition’ legislation
By Rahul Vaidyanath
Rahul Vaidyanath
Rahul Vaidyanath
Journalist
Rahul Vaidyanath is a journalist with The Epoch Times in Canada. His areas of expertise include the economy, financial markets, China, and national defence and security. He has worked for the Bank of Canada, Canada Mortgage and Housing Corp., and investment banks in Toronto, New York, and Los Angeles.
July 28, 2021 Updated: July 28, 2021

News Analysis

Government agencies and companies are accelerating their push toward net zero by 2050 and increasing their emphasis on environmental, social, and governance (ESG) principles in their operations. But even as the way of doing business is undergoing significant upheavals, what’s not keeping pace is progress on ensuring a transition to a lower-carbon future that would minimize negative impacts on workers and communities.

“Pressure on corporates and financial institutions to demonstrate how they plan to achieve stated net-zero targets, and support social justice objectives, is intensifying,” credit rating agency Fitch Ratings said in a July white paper “ESG in Credit.”

“Companies and governments offered a wave of net-zero emissions pledges in 2020, but the policy paths to achieve these pledges are unclear,” Fitch added.

Fitch expects 2021 to be a key year for forthcoming details to gain some insight into potential long-term economic effects.

“The gap between government pledges to cut carbon emissions and policies in place highlights the potential risk of a sharp shift in the policy landscape (governments have tackled only a few to date),” Fitch said.

The International Monetary Fund (IMF) estimates an additional $6–$10 trillion in green investments globally—a cumulative 6–10 percent of annual global GDP—will be needed in the next decade to support the transition to a lower-carbon world.

“On the domestic side, governments need measures to help households already struggling to afford basic necessities to pay for higher energy costs,” the IMF said in a July 22 blog post. “These measures should extend to coal miners and other workers and communities that depend on high-carbon sectors for their livelihoods.”

Government Arms Emphasize ESG

Export Development Canada (EDC), a federal Crown corporation, has created an executive management role tasked with further embedding ESG into the corporation’s values, principles, and processes.

Justine Hendricks was hired for the position in May 2019, as senior VP and chief corporate sustainability officer.

Another federal Crown corporation, Canada Mortgage and Housing Corp., appointed its first “chief climate officer” in June 2020.

On July 22, EDC announced that, as part of its pledge to reach net-zero emissions by 2050, it has set a 2023 target of reducing its financing to the six most carbon-intensive sectors of the economy by 40 percent below 2018 levels. 

Upstream oil and gas is on that list, along with airlines; cement manufacturing; metals smelting and processing; petrochemicals, refining chemicals, and chemicals manufacturing; and thermal power generation. 

At the end of 2018, EDC’s exposure to carbon-intensive sectors was $22.4 billion. EDC’s 2023 year-end target is $13.5 billion. The six sectors represented 26 percent of EDC’s financing business in 2020.

While the International Energy Agency said in its road map to net zero by 2050, released in May, that no more money should be spent on new oil and gas projects, EDC stopped short of that.

“No decision has yet been taken to end new project development,” EDC spokesperson Amy Minsky told The Epoch Times. “EDC’s commitment to net zero by 2050 is focused on enabling Canadian businesses, including those in natural resources and energy sectors, to position themselves for growth by investing in their ESG performance.”

While many investors shun the oil and gas industry due to negative ESG perceptions, an industry analyst with U.S. financial services firm Stephens says oil and gas can be considered ESG-friendly.

“You can’t just paint everything with a negative one-scope, one-dimensional aspect. Oil and gas is still needed in today’s society. We should be embracing the fact that these companies are making strides and efforts to be cleaner and more pro-environmentally friendly,” Gail Nicholson said in a July 22 interview with CNBC.

The Canadian Association of Petroleum Producers says that the efficient use of oil and gas has a key role to play in any pathway to net zero, and that the industry has much expertise to contribute on emissions reduction technology.

Environment and Climate Change Canada’s Net-Zero Advisory Body reported in June that over 120 countries, 708 cities, 2,162 businesses and 127 major institutional investors, among others, have made commitments to net zero.

‘Just Transition’ Still Just in Nascent Stages

Canada signed the Just Transition Declaration in 2018, two years after the Paris Agreement came into effect. The agreement includes a commitment for emissions-cutting policies to take “into account the imperatives of a just transition of the workforce and the creation of decent work and quality jobs.”

But details are few and far between, as the feds are only getting started on designing Just Transition legislation. 

On July 20, they launched consultations to seek input from Canadians. The consultation period will run until Sept. 30.

Minsky said EDC is working with the feds to develop approaches to ensure Canadian businesses “experience a just transition.”

Meanwhile, Alberta Energy Minister Sonya Savage tweeted on July 21: “The federal government’s intention to hastily phase out Canada’s world-class oil & gas industry is extremely harmful to the hundreds of thousands who work in the sector & will be detrimental to our economic recovery.”

Rahul Vaidyanath
Rahul Vaidyanath
Journalist
Rahul Vaidyanath is a journalist with The Epoch Times in Canada. His areas of expertise include the economy, financial markets, China, and national defence and security. He has worked for the Bank of Canada, Canada Mortgage and Housing Corp., and investment banks in Toronto, New York, and Los Angeles.