The role of fossil fuels in taxonomies: Canada case study

The report examines how international taxonomies and the national policies of the US, China, and Germany handle fossil fuels to inform the development of a Canadian taxonomy. It finds that while most taxonomies exclude new oil and coal capacity, fossil gas is often treated as a transitional fuel with strict emission limits and phase-out dates (typically 2030–2035). The document highlights the critical role of fugitive methane emissions in determining the actual climate impact of natural gas, arguing that lifecycle assessments are necessary to avoid 'carbon lock-in'. It concludes that Canada's main trading partners are using economic incentives and regulations to reduce hydrocarbon consumption, suggesting that a science-based taxonomy is essential for attracting private capital for decarbonization.

• Most global taxonomies exclude activities related to the extraction, utilization, and transportation of fossil fuels, though some 'mixed taxonomies' allow fossil gas power generation under strict emission limits and timeframes.
• Almost all analyzed taxonomies prohibit the creation of new fossil gas-fired generation capacity beyond 2030–2035, with Thailand being a notable exception by stating a limit of 2040.
• The EU Taxonomy's inclusion of fossil gas was driven by industry lobbying rather than science, and the resulting criteria are so restrictive that they are practically meaningless from a technological and economic perspective.
• Fugitive methane emissions significantly increase the climate impact of fossil gas; a leakage rate of just 3% across the supply chain makes fossil gas as impactful on the climate as coal.
• The United States uses the Inflation Reduction Act (IRA) to provide over USD 500bn in climate-related economic stimulus, including tax credits for clean energy and a waste emissions charge for methane.
• China's energy policy focuses on energy security and economic growth, but it has removed 'clean coal' from its taxonomy and aims for non-fossil energy consumption to reach about 25% by 2030 and over 80% by 2060.
• Germany intends to phase out fossil fuels by 2045 and aims for at least 80% of its gross electricity consumption to be generated by renewable sources by 2030.
• The Thailand Taxonomy is the first to fully apply a science-based transition using a 'traffic light' system (green, amber, red) to categorize activities based on their path to net zero by 2050.

APA

Korostikov, M., & Boule, B. (2023). The role of fossil fuels in taxonomies: Canada case study. Climate Bonds Initiative. https://www.climatebonds.net/files/documents/publications/The-role-of-fossil-fuels-in-taxonomies-Canada-case-study.pdf

Chicago

Korostikov, Mikhail, and Bridget Boule. The role of fossil fuels in taxonomies: Canada case study. Climate Bonds Initiative, 2023. https://www.climatebonds.net/files/documents/publications/The-role-of-fossil-fuels-in-taxonomies-Canada-case-study.pdf.

Wikipedia

{{cite report |last1=Korostikov |first1=Mikhail |last2=Boule |first2=Bridget |title=The role of fossil fuels in taxonomies: Canada case study |publisher=Climate Bonds Initiative |date=October 2023 |url=https://www.climatebonds.net/files/documents/publications/The-role-of-fossil-fuels-in-taxonomies-Canada-case-study.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{korostikov2023role, author = {Korostikov, Mikhail and Boule, Bridget}, title = {{The role of fossil fuels in taxonomies: Canada case study}}, institution = {Climate Bonds Initiative}, year = {2023}, month = oct, url = {https://www.climatebonds.net/files/documents/publications/The-role-of-fossil-fuels-in-taxonomies-Canada-case-study.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }