Canada to stop directly financing fossil fuel projects abroad, with narrow exceptions

With weeks until an end-of-year deadline it agreed to last year, Canada has announced that it will end new direct subsidies for fossil fuel investments and projects abroad — including those owned by Canadian companies.

With weeks until an end-of-year deadline it agreed to last year, Canada has announced that it will end new direct subsidies for fossil fuel investments and projects abroad — including those owned by Canadian companies.

The policy released Thursday afternoon applies to the extraction, production, transportation, refining and marketing of crude oil, natural gas or thermal coal, as well as power generation projects that do not use technologies such as carbon capture to significantly reduce emissions.

The rules, which take effect Jan. 1, will apply to direct funding from federal departments, agencies and Crown corporations.

Advocates had feared that Canada would opt for a narrower definition of "international" that would nonetheless allow support for Canadian companies abroad, which climate-change organization Environmental Defence estimates makes up about 78 per cent of Canada's international support for such projects.

But the policy defines "international" as "operations outside of Canada's jurisdiction in the fossil fuel energy sector regardless of owner domicile." This means that the federal government is barring itself from funding even fossil fuel projects wholly owned by Canadian companies.

"It's a very strong policy," said Julia Levin, Environmental Defence's national climate program manager. "It's very encouraging that the government has obviously listened to the experts and come up with a broad definition."

Ottawa is making the move weeks shy of a deadline it committed to, along with 38 other countries, in November 2021 at an international climate summit in Glasgow.