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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Stephen Harper’s participation in the G7 leader’s declaration to decarbonize the global economy by 2100 was a massive headline generator in Canada, and not surprisingly so.

For a Prime Minister who has openly mocked the idea of carbon pricing, mercilessly driven an expensive (both financially and politically) energy superpower agenda and earned a reputation for pulling out of or stalling climate negotiations, the very idea of an ‘end’ to fossil fuels would seem … counterintuitive.

Although the shock of seeing Harper even touch something called ‘decarbonization’ is still reverberating, experts were quick to point out a long-term goal that shoves off concrete climate policy is likely just what Canada was hoping for.

Long-term Goals Are Easy

Michael Levi, senior energy and environment fellow writing for the Council on Foreign Relations, said the G7 agreement merely rearticulates what diplomats and policymakers have basically agreed to for several years now: dramatic emission cuts are required by mid century if we are to avoid surpassing the two-degree target.

“If the-two degree target didn’t motivate deep enough emissions cuts to actually meet it, recasting it in terms of global emissions won’t change that,” Levi wrote. “And the idea that an 85-year goal will have much impact on present policy or investment is a bit ridiculous. (Had you told a physicist in 1905 that a fifth of U.S. electricity would be generated by nuclear fission within 85 years, they would have said, ‘What’s a nucleus or fission?’)”

Levi said the bottom line is this: “Fiddling with distant targets is a great way to generate headlines, but doesn’t do much to affect policy and emissions themselves; at best it’s marginally irrelevant, at worst it lets people feel good without doing anything.”

Mark Jaccard, energy and climate economist from Simon Fraser University, agreed, saying the goal to end fossil fuels by 2100 makes it easy for politicians like Harper to detract from the short-term.

“Harper has gotten good at shifting timeframes, helped by a forgetful opposition, media and public,” Jaccard told DeSmog Canada. “His 2006 promise for reduced emissions in 2020 slides into a 2015 promise for reduced emissions in 2030. His 2007 promise for reduced emissions in 2050 slides into a 2015 promise for reduced emissions in 2100.

“It would be funny — like Lucy lying to Charlie Brown that she would hold the football — if it weren’t so tragic." 

Keith Stewart, climate and energy campaigner with Greenpeace Canada, said the G7 agreement does have the upside of legitimizing discussions around decarbonizing.

"The important thing here is that for the first time we have world leaders acknowledging that we have to ditch fossil fuels; not just reduce emissions at the margins, but go cold turkey on our fossil fuel addiction,” he said.

“Of course we'd be crazy to wait 85 years to do it. But it's now a question of when, not if, we go to a 100 per cent renewable energy system."

David Keith, professor of applied physics and public policy at Harvard University, who lives in Calgary, said the agreement does nothing more than score cheap political points.

“It’s not groundbreaking,” he told the CBC. “It is politically cheap to pledge a non-binding commitment that falls way behind someone’s time in office.”

“What we really need is specifics in the next few years or decades.”

Keith was one of more than 100 natural and social scientists who recently called for a moratorium on new projects in the Alberta oilsands, Canada’s fastest growing source of greenhouse gas emissions.

Canada’s Climate Target Weakest in G7

Environmental Defence recently gave Stephen Harper’s conservative party a ‘C’ on a climate scorecard, saying Canada currently has the weakest post-2020 climate target of all G7 nations (although Japan has yet to submit its plan).

Canada’s target to reduce emissions by 30 per cent from 2005 levels by 2030 was recently assessed as “inadequate” by the Climate Action Tracker, a coalition of four research institutions including Climate Analytics, Ecofys, NewClimate Institute and the Potsdam Institue. The groups determined Canada’s reductions targets will not be sufficient for Canada to do its fair share for the world to avoid dangerous climate change. 

In its report, Environmental Defence said Canada has shifted its climate targets over time as a way of appearing to do more than it actually is:

“The U.N. Framework Convention on Climate Change (1992) and the Kyoto Protocol (1997) both used 1990 as the reference or base year. Most countries still use 1990 as the base year but some have started using more recent base years. Since the Copenhagen summit in 2009, Canada has been using 2005 as a base year. This makes comparison between targets more difficult. It also makes targets look stronger than they are since Canada’s carbon pollution increased significantly between 1990 and 2005. For example, the Canadian government’s pledge to reduce emissions by 30 per cent below 2005 by 2030 is actually less than half as strong (-14.4 per cent) when expressed using 1990 as the base year.”

Environmental Defence adds Canada has consistently refused to address the Alberta oilsands when discussing climate targets, a subject of some controversy during last year’s UN climate talks in Lima, Peru.

Canada has pledged to regulate emissions from four sectors: natural gas-fired electricity, the chemical industry, methane emissions from the oil and gas sector and sources of hydrofluorocarbons.

For years the federal government has failed to deliver on its promise to regulate carbon from the oil and gas industry. Last year Harper said it would be “crazy economic policy” to regulate the oil and gas sector and indicated (incorrectly) that no other country was doing so.

Last year, Canada's environment commissioner Julie Gelfand said the country has "no overall vision" when it comes to oil and gas regulations and as a result will not even meet its 2020 international greenhouse gas reductions targets agreed to in Copenhagen.

Ed Whittingham from the Pembina Institute said he thinks industry will begin to pick up the slack, now that definitive dates for decarbonization are being discussed.

"We are all clear, we are still going to need fossil fuels for some time to come. Now we have, at the global level, the latest day for when we need to be off fossil fuels," he told the CBC. "CEOs in Calgary are smart; they will do the planning that needs to be done." 

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Prime Minister Stephen Harper has signed on to a G7 commitment to eliminate the use of fossil fuels by 2100 and make significant cuts to greenhouse gas emissions by 2050.

The move will “require a transformation in our energy sectors,” Harper said at a news conference in Garmisch, Germany.

“Nobody’s going to start to shut down their industries or turn off the lights,” he said. “We’ve simply got to find a way to create lower-carbon emitting sources of energy — and that work is ongoing.”

According to federal Green Party leader Elizabeth May, an earlier draft of the G7 committment sought full decarbonization by 2050, but both Canada and Japan fought to weaken the declaration. 

The final version of the G7 leader’s declaration states: “We emphasize that deep cuts in global greenhouse gas emissions are required with a decarbonization of the global economy over the course of this century.”

"We commit to doing our part to achieve a low-carbon global economy in the long-term including developing and deploying innovative technologies striving for a transformation of the energy sectors by 2050 and invite all countries to join us in this endeavour."

One anonymous source, speaking to the CBC on the G7 discussions said “Canada and Japan are the most concerned about this one.”

“The two of those countries have been the most difficult on every issue on climate.”

Canada’s Poor Climate Record

In the lead up to UN climate talks in Paris this fall, where nations hope to produce a global treaty to reduce carbon emissions, Canada’s targets have been called “inadequate” for their “lack of ambition.”

Canada committed to reducing its greenhouse gas emissions by 30 per cent from 2005 levels by 2030.

But according to the New Climate Institute, Canada’s commitment relies heavily on the use of credits that help the country “avoid reducing emissions from other sources such as fossil fuels.”

Other experts pointed to growing emission from the Alberta oilsands. Since 2005, emissions from the oilsands have increased 79 per cent and are expected to continue growing for decades.

“It’s clear Canada is not serious about climate action,” Bill Hare from Climate Analytics said. “Without any new policies in place, its emissions are expected to balloon through to 2030, with the tar sands taking up a significant proportion.“

It is unclear what Harper’s participation in the G7 leader’s declaration will mean for growth rates of the oil and gas sector.

Claire Martin, Green Party climate change critic, said she "challenge[s] Stephen Harper to tell Canadians his plan, so that we can put timely and measurable plans in place to make these targets realistic and meaningful.”

Martin added, “I welcome Mr. Harper’s commitment to agree with the G7 statement on climate — however, as a scientist, I must question the lack of hard numbers assigned by Canada as to how we as a country, will transition off fossil fuels, defend our economy, and follow the agreement. There are still no binding greenhouse gas reduction targets from Canada." 

World Leaders Playing Climate Catch Up

A poll recently commissioned by the International Trade Union Confederation (ITUC) shows 90 per cent of people from across the globe want to see elected leaders act on climate change.

“Politicians who are not prepared to commit to decarbonize our world and save us from the horrors of climate change don’t deserve to be elected,” ITUC general secretary Sharan Burrow said.

“This survey proves any pressure for world leaders to continue to sit on their hands is coming from the corporate world and not their people.”

"The G7 leaders today declared that the global economy must be decarbonized this century if we are to avoid the worst impacts of climate change. This is yet another signal that the end of the fossil fuel era is inevitable, and the dawning of the age of renewables is unstoppable,” Alden Meyer, director of strategy and policy with the Union of Concerned Scientists, said in a statement.

“Now G7 countries must increase the ambition of their domestic climate plans, so as to do their fair share of meeting this global goal.”

Image Credit: G7 Germany

With files from Heather Libby.

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