The final methodology for Canada's sustainable finance taxonomy, published on Oct. 20, includes no category for oil and gas emission cuts. The Taxonomy and Transition Planning Council said in a backgrounder that it lacked the information to include the proposed abatement category or to rule it out, and that feasibility research on the question will begin in 2027.

Abatement was the most disputed part of the draft released for comment on July 9. The council received close to 200 public submissions. Environmental Defence, an advocacy group, said in a statement that two-thirds of public respondents opposed the category and that none of the more than 40 other taxonomies worldwide includes one.

Green and Transition Categories Carry Over From the July Draft

The final report keeps both categories proposed in July. Green covers activities with zero or near-zero emissions. A green enabling activity now has to meet that bar itself or show a clear and directly attributable link to an eligible green activity.

Transition is reserved for emissions-intensive activities that can make deep cuts and move toward green alignment by mid-century. The tests for what counts as a material reduction, and what makes a pathway a dead end, will be written sector by sector.

An activity is either aligned or not, since the council dropped any partial designation. Safeguards on environmental harm and social standards work on a disclose or explain basis, under which users state whether they meet the criteria or explain why they cannot. The council said a voluntary taxonomy cannot determine compliance with those standards and plans to revisit the approach in three to five years. Minimum social safeguards will include Indigenous rights criteria.

Criteria for Six Sectors Due by End of 2027

Use of the taxonomy will be voluntary. Business Future Pathways, which the council governs, developed it with federal funding, and the Canadian Climate Institute is its research custodian. Climate mitigation is the only objective for now. Investors in the European Union (EU) have worked under the EU's sustainable investment classification rules for years, and labeled debt has faced greenwashing scrutiny in the bond market.

Working groups on electricity, buildings and transportation have started. Mining, manufacturing, and forestry and agriculture follow, and the transition criteria for those sectors will decide how much heavy industry decarbonization spending can carry the label. Criteria for all six sectors are due by the end of 2027, with the first drafts going out for public comment this winter.