Natural Resources Canada is trying to get the rules on green bonds changed so the federal government can use them to fund nuclear energy.

Last March, the federal Finance Department issued a framework for green bonds, which are intended to appeal to investors who want to make profits from environmentally friendly investments. It specifically excluded nuclear power from the projects eligible for funding with green-bond money, alongside causes like producing fossil fuels, gambling and weapons manufacturing.

But now that could change, according to a document The Logic obtained through an access-to-information request.

The briefing note was prepared for Natural Resources Minister Jonathan Wilkinson ahead of a meeting with CIBC chief executive Victor Dodig on June 6, and readied him for what to say if Dodig pressed him on excluding nuclear projects from the framework.

The rules were meant to align with other countries’ and investor expectations, it said. For now.

“Natural Resources Canada continues to work closely with Finance Canada and Environment and Climate Change Canada to ensure that nuclear is placed on a level playing field with other non-emitting energy sources and to facilitate a transition from exclusion-based to science-based approaches to climate finance.”

The Logic asked all three departments what form that close work takes. None would confirm what Natural Resources Canada told its minister in the briefing note.

Natural Resources itself punted. “Thank you for your request. Upon reviewing it, we are deferring our response entirely to our media relations colleagues at the Department of Finance,” spokesperson Anthony Ertl wrote in an email.

Finance spokesperson Benoit Mayrand did not answer directly. He wrote that in 2021, the federal government created a Sustainable Finance Action Council and the green-bond framework “informs” what the council does.

But the council does not set the rules for federal green bonds. Made up of government departments, large banks, insurance companies and pension funds, it is focused on incorporating climate-related factors into financial reporting. According to publicly posted accounts of its first three meetings, the council has not discussed green bonds or nuclear energy, and Natural Resources Canada has not participated in any of them.

Environment and Climate Change Canada had a different take. Spokesperson Gabrielle Lamontagne wrote that her department and Finance are the leaders of an interdepartmental committee on green bonds, as is spelled out in the framework. That’s a different body from the council Mayrand cited, and Lamontagne only wrote that the committee exists, not that it’s contemplating any change to nuclear power’s status as an unacceptable destination for green-bond funds.

Steven Guilbeault, the federal environment minister, opposed nuclear power as an environmental activist before he entered politics. As a minister, he’s been circumspect on its potential role in reducing emissions.

Officially, Canada sees nuclear power as a growth industry where the country can lead—especially in small modular reactors (SMRs). Those are manufactured rather than built to order, and could be used in power-intensive industries instead of fossil-fuel plants and in remote communities instead of diesel generators.

Wilkinson’s predecessor Seamus O’Regan signed a glowing preface to a new national plan to advance SMR technology here.

“In the face of the existential threat of climate change, Canada is investing in the full suite of the energy technologies we will need to achieve net-zero emissions by 2050,” O’Regan wrote. “Nuclear energy is part of achieving these objectives. We also see tremendous potential to expand safe nuclear technologies—in Canada and around the world.”

Canada is a major producer of uranium, a nuclear fuel, and four provinces are working on SMR experiments.

Whether atomic energy is a green technology is a fraught question; nuclear reactors don’t emit greenhouse gases, but they do produce waste that can stay toxic for hundreds of thousands of years. The mining for fuel can be an environmental threat. Accidents can have extreme consequences, such as at Chornobyl, Ukraine, in 1986 and Fukushima, Japan, in 2011. 

Organizations such as Greenpeace Canada say nuclear power, including from small modular reactors, is wasteful, dangerous and a distraction from fully non-polluting energy sources like solar panels and wind turbines.

The Green Party has accused the Liberals of wasting public money on SMRs. “Small nuclear reactors (SMRs) have no place in any plan to mitigate climate change when cleaner and cheaper alternatives exist,” Green MP Elizabeth May said in 2020, when O’Regan was boosting them.

“It’s extremely risky,” said Ryan Riordan, a finance professor at the Smith School of Business at Queen’s University and part of the school’s Institute for Sustainable Finance. Still, despite the physical and financial losses that could occur from a nuclear-plant malfunction, he believes climate change is a bigger threat, likening global warming to slowly boiling a frog, which—desensitized to its gradual demise—fails to hop out of the pot. “It’s not like people aren’t already suffering from it,” he said. “They’re just suffering at a smaller scale and slower than if we had a meltdown.”

From that perspective, he said, it’s worth making nuclear projects eligible for green-bond financing. “If you want to fund things that are non-emitting, this is one of them,” he said. “Nothing is free. And I think we have to decide from a political or social perspective: which costs are we willing to bear, and which ones are we not?”

Canada isn’t the only country shifting its thinking on how nuclear fits into its climate and green-financing strategies. In July, European Union lawmakers voted to classify the energy source as a green asset. Since then, Électricité de France, a majority state-owned electric utility, has updated its policies to make certain nuclear projects eligible for green financing. In the U.S., the Biden administration recently launched a US$6-billion credit program for nuclear power plants, after the president’s climate adviser Gina McCarthy called the energy “absolutely essential” for getting off fossil fuels. 

Dave Sawyer, principal economist at the Canadian Climate Institute, said Canada is now playing catch-up. “Financing in the U.S. is suddenly going to take off in a huge way,” he said. “There’s going to be a big sucking sound of technology and know-how and supply chains down to the U.S. to deploy this stuff because of the size of the incentives.”

Some Canadian organizations, meanwhile, have bucked Ottawa’s current stance on nuclear power. Last November, BMO facilitated a $500-million green bond for Bruce Power, a private nuclear energy generator near Tiverton, Ont., that’s partly owned by TC Energy and the OMERS pension fund. The company touted the financing as the first green bond for nuclear energy in the world. Ontario Power Generation followed in July with a $300-million green bond to help refurbish the Darlington Nuclear Generating Station in Clarington, Ont.  

Sawyer said the changing calculus on nuclear energy isn’t just about social and political acceptance; it’s also a response to new financial opportunities. Until recently, SMRs were a long-term, “wildcard” technology, he said—something with potential but not quite ready for market. 

But Ontario and Saskatchewan in particular are moving fast on their SMR projects, with plans to have large units ready around 2030. “Certainty in financing becomes a bigger imperative to signal to the private sector that ‘we can defer some of your costs,’” he said. “What’s happened is the market shifted really fast.”