Green guru Carney’s first week as Canadian PM exposes messy politics of fossil fuel phase-out

Before this week’s visit as Canada’s new prime minister, Mark Carney was perhaps best known in the UK as the only foreign governor of the Bank of England, a UN champion for climate finance or the man once dubbed the “George Clooney of banking”.

Carney’s allure helped boost awareness around the financial risks of climate change. He called for fossil fuels to be kept in the ground lest they become worthless in a low-carbon world; he rallied international banks to make green pledges and avoid investments that could become “stranded assets” with little value.

But as he takes office as leader of the world’s fourth largest oil producer, much of that progress is unravelling. Banks are rolling back their green commitments and continuing to do business with fossil fuel giants – all at grave risk to the planet.

Carney’s appointment to the world leadership stage does offer some hope for the reinvigoration of green finance. But if he remains in his position beyond an impending general election, he’ll face major political obstacles in any drive for a greener economy – both at home and abroad.

Green finance guru

As governor of the Bank of England, Carney warned of another economic crisis triggered by climate change, which he said affected the value of “virtually every financial asset”. Climate risks, he said, would materialise over decades – much further into the future than bankers usually account for. So in 2019 he proposed to stress-test banks’ long-term resilience to them.

In 2021, Carney went on to launch the Glasgow Financial Alliance for Net Zero (GFANZ), a UN-backed initiative aimed at phasing out fossil fuel finance and mobilising the trillions of dollars needed to fund the green economy.

But progress has not been straightforward. Many US banks have since quit that group following legal challenges from Republican states, and a number of Canada’s top banks have followed suit. In response, GFANZ softened its membership criteria and says it is “restructuring”.

Carney’s views on leaving fossil fuels in the ground are, as one climate journalist recently put it, “commendably grounded in science but carry radical political implications” – not least for the country he now leads.

This hasn’t escaped the attention of his new political opponents. Danielle Smith, Conservative premier of Alberta – Canada’s top oil-producing province – described Carney as having been “on a warpath against the energy industry for his entire career”.

Canada’s Conservatives have often railed against tougher environmental rules introduced by Carney predecessor Justin Trudeau, including emissions caps for high-polluting sectors. And Carney has already shown an appetite for compromise, scrapping a Trudeau-era consumer carbon tax in a move announced on a televised broadcast of his first cabinet meeting.

At the same time, he has been forced to defend corporate and national interests from Donald Trump, who has threatened to slap tariffs on imported goods from Canada.

For now, those tariffs don’t extend to oil, a key pillar of US-Canada trade. But that could change next month, with the US warning of a 10% tax on Canadian oil. This could cost Canada up to $10bn per year, according to investment bank Goldman Sachs.

International climate diplomacy

With US tensions high, Carney chose the UK and Europe as the destinations for his first overseas trip. But while he received shows of solidarity from King Charles and Emmanuel Macron, there’s been scant mention of international climate cooperation.

Perhaps Canada and its European allies are keeping quiet about their green credentials for fear of stoking tensions with climate-denier Trump – as some financial institutions have. And with the G7 notoriously bad at acting on its 15-year commitment to phasing out “inefficient” fossil fuel subsidies, Carney will struggle to rally member nations on that issue when his country hosts the annual summit this June.

On the face of it, no one country seems capable of filling the leadership gap created by the US withdrawal from the Paris climate agreement, parts of which will be negotiated this year in Belém, Brazil. And finance remains the talks’ major sticking point.

But the hosts are among the world’s top climate diplomats and are already laying the groundwork for boosting global action, including by “mainstreaming climate into investments and finance” – an effort that Carney helped pioneer. If he’s still in office, the hosts will surely welcome his presence.

Climate extremes could wipe trillions from the global economy every year by the middle of this century, researchers warn. And recent estimates of the losses are much higher than previously thought.

Carney may have shown smart foresight on climate finance, warning years ago about the looming risks. But his first week on the job has shown how the day-to-day politics of climate change present a very different challenge.