Do the federal and provincial governments subsidize oil companies in Canada?
John Perreault
You can answer yes and no to this question, depending on your point of view and, above all, on your definition of a subsidy. Most environmental organizations claim that Canada subsidizes the fossil fuel sector, and the oil industry in particular, if we consider not only direct aid, but also loans, loan guarantees and credits tax on investment and on research and development can be assimilated to subsidies.
“It’s public money that goes to the oil industry,” summarizes Patrick Bonin, spokesperson for Greenpeace Canada, who gives the example of the TransMountain pipeline which has become the property of the federal government.
According to Oil Change International, a non-profit organization that tracks government support for the fossil fuel sector, Canada is one of the most generous G20 countries to the oil and gas industry. Public assistance in various forms totaled $8.5 billion between 2019 and 2021, according to the organization, or more than $2 billion per year.
The industry, one suspects, sees things differently. “Canadian oil and gas producers receive no subsidies from governments and do not expect to receive any such assistance,” says their group, the Canadian Association of Petroleum Producers (CAPP).
The tax measures from which the oil industry benefits are those which apply to all other sectors of activity, argue the companies. The capital cost deduction, which reduces the taxable income of oil and gas producers, is a measure common to all businesses. Like other companies, those in the oil sector benefit from tax incentives for research and development, in the form of deductions or tax credits.
“To say that the oil and natural gas industry is subsidized would therefore be to say that all sectors of activity are subsidized”, concludes the industry in a clarification published on its website.
In reality, the oil and gas industry does receive subsidies, since the federal government is committed to ending them. Before the last federal election, the Liberal government pledged to eliminate fossil fuel subsidies by 2023.
Some of these commitments have already been fulfilled. For example, Ottawa has ended the aid granted to oil exports.
In addition to the federal government, the resource provinces also support the oil and gas industry. This is the case of Alberta, British Columbia, Newfoundland and even Ontario, which financially supports its gas sector.
With the energy transition, another form of public aid or subsidy has appeared. All businesses can benefit from various measures put in place by the federal and provincial governments to reduce their greenhouse gas emissions. Also, the federal government announced a new and generous tax credit for carbon capture, use and storage (CUSC), which allows oil companies to reduce their carbon footprint. Between 2022 and 2030, this measure is expected to cost Ottawa $8.6 billion.
Is it support for the decarbonization of the economy or a subsidy for oil companies? The question still remains.
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