Fueling the Transition: Categorizing emissions-reducing oil and gas projects according to Canada’s climate investment taxonomy

The Canadian Climate Institute outlines criteria to ensure oil and gas projects eligible for a 'transition' label align with 1.5°C pathways. The proposed framework requires projects to be part of existing facilities, demonstrate significant Scope 1 and 2 emissions reductions against sectoral benchmarks, and ensure upstream Scope 3 suppliers are also aligned with 1.5°C pathways. It specifically excludes new oil and gas developments to prevent carbon lock-in and stranded asset risks.

• The report proposes a 50 per cent threshold for downstream Scope 3 emissions (Category 11 'use of sold products') to identify projects where demand-side risk is the dominant transition risk. Projects exceeding this threshold are ineligible for a 'green' label and can only qualify for a 'transition' label.
• To prevent carbon lock-in and align with 1.5°C pathways, the framework excludes new oil and gas facilities. Eligibility is restricted to 'existing' facilities, defined differently for oil sands and conventional oil and gas.
• Existing oil sands facilities are defined as fields where extraction is already occurring, capital funds are committed (based on a final investment decision date), and expansions do not require new major infrastructure like upgraders or processing facilities.
• Existing conventional oil and gas facilities are defined as fields where extraction is already taking place and where new pads or wells do not require new major supporting infrastructure such as gathering lines.
• The framework requires facilities to reduce Scope 1 and 2 emissions to levels that fall below sectoral emissions-intensity curves aligned with 1.5°C scenarios. This dynamic threshold ensures facilities remain compliant as benchmarks become more stringent over time.
• A project's eligibility also depends on its upstream Scope 3 emissions; major upstream suppliers of fossil fuels must demonstrate that their own operations are aligned with 1.5°C pathways.
• The report highlights the risk of 'carbon lock-in,' where investments in new facilities or decarbonization of existing ones create incentives to maintain production for the full lifespan of the asset to maximize returns, potentially hindering global climate goals.
• The framework suggests that carbon capture projects used for enhanced oil recovery (EOR) require further study, as they may increase total oil production and greenhouse gas emissions, potentially conflicting with the taxonomy's goals.

APA

Arnold, J. (n.d.). Fueling the Transition: Categorizing emissions-reducing oil and gas projects according to Canada’s climate investment taxonomy. Canadian Climate Institute. https://climateinstitute.ca/wp-content/uploads/2024/01/Fueling-the-Transition-EN-FINAL.pdf

Chicago

Arnold, Jonathan. Fueling the Transition: Categorizing emissions-reducing oil and gas projects according to Canada’s climate investment taxonomy. Canadian Climate Institute, n.d. https://climateinstitute.ca/wp-content/uploads/2024/01/Fueling-the-Transition-EN-FINAL.pdf.

Wikipedia

{{cite report |last1=Arnold |first1=Jonathan |title=Fueling the Transition: Categorizing emissions-reducing oil and gas projects according to Canada’s climate investment taxonomy |publisher=Canadian Climate Institute |url=https://climateinstitute.ca/wp-content/uploads/2024/01/Fueling-the-Transition-EN-FINAL.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{arnoldndfueling, author = {Arnold, Jonathan}, title = {{Fueling the Transition: Categorizing emissions-reducing oil and gas projects according to Canada’s climate investment taxonomy}}, institution = {Canadian Climate Institute}, url = {https://climateinstitute.ca/wp-content/uploads/2024/01/Fueling-the-Transition-EN-FINAL.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }