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Canada leads G7 in oil and gas subsidies: new report

New research shows vast majority of Canadians support phaseout of government support for fossil fuel companies

Canada provides more government support for oil and gas companies than any other G7 nation and is among the least transparent about fossil fuel subsidies, a new report reveals.

“Fossil fuel subsidies undermine carbon pricing, work against the achievement of Canada’s climate targets, encourage more fossil fuel exploration and production, and allocate scarce public resources away from other priorities like health care, education and renewable energy,” says the report, which ranks the progress of G7 countries in meeting their pledge to phase out fossil fuel subsidies by 2025.

The report comes as Canada prepares to host this week’s G7 summit in Charlevoix, Quebec, only days after Prime Minister Justin Trudeau announced federal government plans to purchase the Kinder Morgan pipeline, which will ship diluted bitumen from Alberta’s oilsands to B.C.’s coast for export.

The study was co-authored by the International Institute for Sustainable Development, Natural Resources Defense Council, the Overseas Development Institute (a London, U.K.-based independent think tank) and Oil Change International, a Washington-based research and advocacy organization focused on the transition to clean energy.

Canadians support phase out of fossil fuel subsidies

Accompanied by a new Ekos poll, the research found a large majority of Canadians are strongly opposed to using public money to support oil and gas companies and want to see billions of dollars a year in subsidies phased out.

The exception was Alberta — the heart of Canada’s oil and gas industry — where people polled were concerned about the economic impacts of removing government support for oil and gas corporations.

Even so, 48 per cent of Albertans polled disagreed with public subsidies for oil and gas companies.

“We need to be attentive to these perspectives and concerns of the workers and the communities that are most impacted by efforts to reduce carbon pollution,” said Patrick DeRochie, climate change and energy program manager for Environmental Defence, one of the groups that sponsored the new poll.

DeRochie said targeted programs should be put into place to ensure workers who depend on the oil and gas industry are front and centre in the transition to “clean jobs in a low-carbon future.”

He said the positive economic impacts of using public money for initiatives that combat climate change must also be better communicated.

“That means building up the green economy, clean air and water, improved public health outcomes and new economic opportunities,” DeRochie told The Narwhal.

“A strong argument can be made even to oil and gas producing regions that public money can be better spent than subsidizing this sunset industry, especially when you consider the costs that are growing every year in terms of the climate damages, health costs and growing liabilities for the mess left behind by the oil and gas industry.”

DeRochie defined a subsidy as “any tax provision, or benefit from the government that has the effect of giving one sector an advantage over another in the economy.”

Fossil fuel subsidies are provided by the federal and provincial governments.

According to the report, federal subsidies include the Canadian Development Expense, the Canadian Exploration Expense and the Accelerated Capital Cost Allowance for Liquefied Natural Gas assets.

Export Development Canada, a crown corporation, provides financing to fossil fuel companies, including more than $10 billion in 2017, according to the report. The fossil fuel industry also has access to additional federal tax provisions and policies.

Provincial programs include Crown Royalty Reductions in Alberta and the Deep Drilling Credit in British Columbia.

The report says most of these subsidies were put into place decades ago and fail to take into account the costs of climate change to human health, communities and the economy.

On the good news front, Canada has ended public finance for coal-fired power and restricted subsidies to fossil fuel-based electricity, helping it achieve an overall ranking of third place among G7 nations.

Canada’s oil and gas subsidies lack transparency

But Canada remains the largest G7 provider of support for oil and gas production per unit of GDP, according to the report, which also highlights serious concerns over Canada’s lack of transparency on spending.

“Canada has refused to open up its books to the Auditor General himself,” DeRochie pointed out.

Auditor General Michael Ferguson noted in his May 2017 annual report that he was unable to obtain key documents and budget analyses from Finance Canada to determine what progress had been made toward Canada’s commitment to eliminate subsidies to fossil fuel companies.

“Canadians should be able to know what the government is using their money for, especially when it goes to something like oil and gas companies that are polluting, that are causing climate change and that are becoming a real liability in terms of tar sands cleanup in the future,” DeRochie said.

Germany and the U.S. scored the highest on transparency out of the G7 nations, while Canada is the least transparent nation after Italy.

The study found that G7 governments provide at least US$100 billion a year to support the production and consumption of oil, gas and coal, despite repeated pledges to end fossil fuel subsidies by 2025.

According to the Ekos poll 96 per cent of Canadians believe the federal government should disclose how much oil and gas companies receive in subsidies.

The poll also found that six out of 10 Canadians agree that oil and gas companies should not receive government assistance — on the basis that the subsidies exacerbate pollution and contribute to climate change — and a majority of Canadians would be more likely to support a political party advocating to phase out the subsidies.

Books closed on subsidy details

Canada, along with the other G20 nations, pledged in 2009 to phase out subsidies. The federal Liberals also made the same commitment in the party’s 2015 election platform, and re-affirmed it several times since then, including as recently as April.

Yanick Touchette, policy advisor with report co-author, the International Institute for Sustainable Development, an independent think tank based in Switzerland, the U.S. and Canada, said Canada and other G7 countries must develop a “road map” for phasing out subsidies by 2025.

Canada has not yet participated in a fossil fuel subsidy peer review process as part of the G7 and G20 countries’ commitments to phase out subsidies, Touchette noted.

In a peer review, countries open their books to the scrutiny of another country and international organizations such as the OECD (the Organization for Economic Cooperation and Development) to learn about action they can take to reduce fossil fuel subsidies, he said.

Germany, the U.S., China and Mexico have already undergone peer reviews, while reviews are underway in Italy and Indonesia, Touchette told The Narwhal.

“Generally countries will pair and then the scope is up to the countries who are doing it. Ideally in Canada you would have a broad scope. Basically you list all of your policies that are not only subsidies but any type of policies that are available to the industries and then you review them with your peers.”

 The report’s polling was commissioned by Environmental Defense, Oil Change International, Canada’s Climate Action Network, the International Institute for Sustainable Development, and Équiterre, Quebec’s largest environmental organization.

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