The green taxonomy can be seen as an indicator of the Carney government’s future plans. But the farther it progresses, the closer we will get to Euro-style stagnation and decline. Photo by Chesnot/Getty Images

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.”

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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.