Opinion: Mark Carney’s climate ambitions still threaten Canada’s economy

Before Mark Carney reinvented himself as a build, baby, builder, he was best known for his plan to hijack the world’s financial infrastructure in the fight against climate change. That was the specific aim of the Glasgow Financial Alliance for Net Zero (GFANZ), which Carney co-founded with billionaire Michael Bloomberg in 2021, and something he habitually promoted as a central banker, Wall Street executive and pundit before becoming prime minister.

The question facing Canadians today is whether this busy new version of Carney has truly replaced the older GFANZ version. Or if it’s just a ruse. For clues, we can look to Europe, where Carney claims Canada’s future lies.

In 2019, European Commission President Ursula von der Leyen unveiled the “European Green Deal,” a sweeping set of rules and restrictions meant to make Europe “the world’s first carbon-neutral continent.” The move has fundamentally transformed Europe’s economy — just not for the better.

Alongside its castles and cathedrals, Europe is today best known for high energy costs driven by: aggressive net-zero policies, intermittent wind and solar power supplies, excessive regulations, debilitating carbon prices, high taxes, weak capital formation and a general anti-business sentiment. Europe’s once-mighty energy-intensive industries have been laid low by competition from other continents that enjoy cheaper power and a lighter regulatory touch.

The key element behind this economic stagnation is something called a green taxonomy. In biology, a taxonomy is a list of all living beings divided into groups based on their characteristics and traits. A green taxonomy is a similar list that sorts potential investments by their alleged environmental impact, with the goal of declaring them either acceptable or unacceptable for investors. Consider it the fine print necessary to align global financing with global climate-change policies.

Projects that cause no emissions can be rated “green.” Still allowed, but less desirable, are “transition” and “abatement” categories, which do entail some emissions. All other investments get a dreaded “excluded” rating, even if they simply improve overall energy supplies or lower costs for consumers. They represent technologies of the past and are to be avoided.

The first state-level green taxonomy ever produced was the Green Bond Endorsed Project Catalogue, published under the auspices of the People’s Bank of China in 2015. Europe followed in 2019. Canada under Carney is charting a similar path.

The Canadian Net-Zero Emissions Accountability Act, our version of the European Green Deal, was introduced when Justin Trudeau was still prime minister and Carney only his economic advisor. It ties our country to the same improbable European-style commitment to reach net zero by 2050 and provides for a similar “framework of accountability and transparency to deliver on it.”

That framework includes creating our own green taxonomy. Canada’s Sustainable Finance Taxonomy, quietly backed by federal funding, has been percolating in the background while Carney jaunts around making announcements about pipelines and LNG facilities. A public comment period on an earlier taxonomy draft closed this summer and we now await the final product.

According to Ottawa, our green taxonomy will be a “tool for investors, lenders, and stakeholders,” to assist them in identifying “green and transition investments.” The intent, as in Europe, is to starve out most traditional industries, especially in the resource and manufacturing sectors. In its submission, the Coalition of Concerned Manufacturers & Businesses Canada called the green taxonomy a “form of central planning applied to the allocation of private capital.”

According to reports, Canada’s taxonomy project is to be voluntary when it first appears. If so, it will differ from Europe’s legally binding version. Still, both will have as their core goal the allocation of investment capital in alignment with net-zero aims. Both will also make it harder for companies in the industrial and natural resource sectors to raise capital — which is the whole point of the process.

There is no sense in creating a green taxonomy if it is not meant to be used. Only in the presence of a political mandate is there any need to categorize and regulate what investors can and cannot do. In a free economy, investors make up their own minds about where they wish to place their capital, and for whatever reasons.

A binding green taxonomy is also a prerequisite to better ties to Europe. It is hard to imagine that the deeper economic and financial integration of Canada and the EU that Carney so eagerly promotes is possible without a merging of taxonomies. Unless both economies can agree on the same baseline for investment requirements and restrictions, they will never find common ground.

The green taxonomy can thus be seen as an indicator of the Carney government’s future plans. If the end goal is still net-zero 2050, then a green taxonomy remains a crucial step in that process. The farther it progresses, the closer we get to Euro-style stagnation and decline.

Canada can either open itself for business or commit to a net-zero future. It can’t do both.

Gina Pappano, former head of market intelligence at the Toronto Stock Exchange and TSX Venture Exchange, is executive director of InvestNow. A longer version of this article appeared in C2C Journal.