PSP and the Canada Growth Fund: An opportunity to accelerate decarbonization, or a slush fund for oil and gas?

The Government of Canada mandated PSP in 2023 to manage the $15-billion Canada Growth Fund (CGF), an innovative public finance tool to leverage private capital for decarbonization and climate-aligned investment in Canada. Unfortunately, the CGF’s scope and strategic objectives have left the door open for the fund to finance dangerous distractions that subsidize fossil fuel companies, like carbon capture, utilization and storage (CCUS) and “low-carbon” hydrogen.

As of December 31, 2023, the CGF had announced its first two investments. The first investment, announced in October, smartly provided a modest $90 million in financing for Eavor Technologies, a Calgary-based geothermal energy company that uses an innovative closed-loop system to generate zero-carbon baseload heat and power. Then in December the CGF announced it would invest up to $1 billion in an oil and gas company’s risky, unnecessary and likely ineffective CCUS schemes. The investment included $200 million in debt financing for Entropy, a subsidiary of Calgary-based oil and gas producer Advantage Energy, to help equip a fossil gas power plant in Alberta with unproven CCUS technology. It also included a “carbon credit offtake agreement,” valued at up to $800 million, that commits the CGF to buy carbon credits from Entropy for any “emissions reductions” the company achieves over the next 15 years from its risky CCUS schemes at a price of $86.50 per tonne of CO2e. 

While the CGF is to be “separate from and managed independently of the pension assets of PSP Investments,” the Entropy investment announcement noted that PSP holds a 1% stake in Entropy through its participation in the Brookfield Global Transition Fund, which provided the company with $300 million in financing in 2022.

Prior to the CGF’s announcement regarding Entropy, Shift had voiced concerns that the CGF could be used to finance dangerous distractions that prolong the use of fossil fuels instead of de-risking, deploying and scaling up well-established climate solutions. This concern was heightened with the government’s 2023 Fall Economic Statement, which announced that the CGF will be the principal federal entity issuing all carbon contracts for difference (CCfDs). The Pathways Alliance of oil sands companies issued a statement in response to the Fall Economic Statement suggesting that its CCUS projects are eligible for CGF investment.

It should be concerning for PSP beneficiaries and stakeholders that the pension fund manager, which has a mandate to invest in their best long-term interests— which include a safe and stable climate in their retirement— is also managing a fund subsidizing CCUS, which will likely prolong the production and combustion of oil and gas and therefore contribute to worsening climate breakdown. CGF officials suggested that the Entropy investment sets a benchmark that could see the CGF invest additional public money in CCUS projects for oil and gas.

Shift will continue to monitor the CGF and advocate for investment in climate solutions such as offshore wind, solar energy, electric vehicle battery production, sustainable agriculture, energy efficiency and conservation, rather than unproven, uneconomical, unscalable, ineffective CCUS and fossil hydrogen fantasies that subsidize oil and gas companies.