Subsidizing the oil and gas industry is “the very definition of insanity”, said US climate envoy John Kerry.
In this regard, Canada is the chief fool of the G20. Figures vary by source, but the country sustains its fossil fuel industry with billions each year (C$15 billion annually, according to Oil Change International).1
The federal government is thus encouraging, through our taxes, the most important problem of our time. And he shows an incredible contradiction. On the one hand, Ottawa taxes (rightly!) pollution. On the other, it subsidizes it. Don’t look for logic, there is none.
The good news is that Canada is (a little) less crazy since Monday. The federal government has in fact just abolished direct subsidies to industry deemed “inefficient”.
No, the measurement is not perfect. And yes, it remains quite limited. Before responding to journalists who insisted on figures on the dollars that will be saved by Ottawa, federal officials dithered for a long time. No subsidy already granted will be withdrawn, they replied, and it is a question of preventing future excesses.
But how much are today the subsidies deemed “inefficient” according to the new framework? A source in the office of Environment Minister Steven Guilbeault ended up advancing the figure of 1 billion per year. Considering the magnitude of the subsidies paid by Ottawa, this is not much.
We would also like to see the federal government show more transparency on the extent of its support for the oil and gas industry and on the quantified impacts of the measures it announces.
There is also unease at seeing the oil industry being able to continue to receive certain so-called “effective” subsidies. Those offered to all industrial sectors, for example, may continue to be used by black gold producers.
Subsidies for carbon capture and storage are also considered “effective”… even if these technologies have never been demonstrated to be effective on a large scale. It is, to say the least, paradoxical.
We obviously understand the idea of involving the major oil companies in the energy transition. However, expert Yvan Cliche recently showed that companies are abandoning this transition, despite the record profits made in 2022.2.
Let’s just say you have to be optimistic to think that so-called “effective” federal subsidies will succeed in turning this big ship around.
Despite these caveats, there are a few reasons to applaud. The first is that under its international commitments, Canada had until 2025 to abolish “inefficient” subsidies to the oil industry. However, it has advanced the announcement by two years and thus becomes the first country in the world to do so. In a field where we are used to seeing elected officials dragging their feet, such proactivity is gratifying.
This puts Canada in an excellent position to demand action from other countries. It’s called leadership.
Knowing how energy issues divide Canada and set oil-producing provinces against others, we must also speak of a certain political courage on the part of the Trudeau government.
The other reason for optimism is to take Monday’s announcement as part of Ottawa’s oil industry subsidy action plan.
Before that, the federal government had already abolished or “rationalized” nine tax support measures intended for the oil industry. Last year, it also ceased its support for international initiatives aimed at this industry.
The big piece is expected next year. It is a question of going beyond direct subsidies and withdrawing all public aid (such as loans or loan guarantees) intended for the oil industry. This is where Canada is most generous, notably through Export Development Canada (EDC).
It is encouraging to know that Ottawa is working on this third stage, even if we would like to see it unfold more quickly.
Faced with the climate emergency which does not wait to make its effects felt, the political responses never appear to be fast or decisive enough. At least Canada has recognized its problem supporting the oil industry and is working to wean it off our public purse. If we want to see the glass half full, this is an encouraging first step.