(Montreal) What is an inefficient subsidy?
Under this new analysis grid, any fossil fuel subsidy is considered an inefficient subsidy, unless it meets at least one of the six criteria decreed by Ottawa. Assistance could be given to “provide essential energy services to remote communities” or to provide “short-term support for emergency response”. Ottawa will also continue to subsidize activities that would reduce GHGs in the country, support clean technologies or “projects that have a credible plan to achieve net zero emissions by 2030”. The only exception, in an effort to reconcile with Indigenous peoples, grants will be available to support “Indigenous economic participation in fossil fuel-related activities.”
Could we, for example, subsidize devices for capturing and storing CO2 set up by an oil company?
The short answer is yes. However, this controversial technology has not yet been fully proven and, above all, does not reduce emissions at the most important moment: when the oil is consumed and not when it is extracted. “These are exit doors on which the industry relies heavily to maintain the status quo in the production of hydrocarbons. Taxpayers’ money should not be used to keep them open,” says Marc-André Viau, director of government relations at Équiterre.
What happens with the “ineffective” subsidies already granted?
These grants will not be reviewed by Ottawa. But these new rules apply immediately to any request for subsidies for fossil fuels in the country.
Subsidies that would now be deemed ineffective under these new rules, are there many?
According to the Environmental Defense group, Ottawa gave over $20 billion in subsidies to the oil and gas industry in 2022. How many of those would now be deemed ineffective? Despite several questions from journalists, it was impossible to obtain an answer from federal officials during a technical briefing session on Monday morning. At a press conference, the Minister of Environment and Climate Change, Steven Guilbeault, spoke of “substantial savings”, but did not give any figures. A source within his cabinet told The Press that these ineffective subsidies total $1 billion. A sum deemed low by Julia Levin, associate director at Environmental Defense. Mme Levin points out, however, that most federal aid comes through loans and loan guarantees, which are not counted as grants. But the federal government’s lack of transparency on this subject is “a big problem”, judge Julia Levin.
PHOTO JUSTIN TANG, THE CANADIAN PRESS ARCHIVES
Environment and Climate Change Minister Steven Guilbeault
So the industry will continue to receive assistance from Ottawa?
Steven Guilbeault explained Monday that the federal government’s strategy has three phases. The first step was to suspend Canada’s international aid to support the fossil fuel industry, already announced in 2022. Ending inefficient subsidies is the second part. The Minister has pledged to unveil, by the fall of 2024, his plan “to phase out public funding to the fossil fuel sector in Canada.” However, this issue is also eminently political since Canada is the fourth oil producing country with 6% of world production. In Western Canada, particularly in Alberta, the oil industry is a major economic player.
How is this announcement from Ottawa good news, then?
Despite the criticism, several environmental groups on Monday welcomed an end to inefficient fossil fuel subsidies. According to Caroline Brouillette, Executive Director of the Climate Action Network, “the new framework announced today finally allows the federal government to accelerate the energy transition rather than slow it down”. “The real test will be the implementation of the framework across all ministries and across all forms of government financial support, including urgent next steps in public funding,” she adds.
What are the reviews?
The New Democratic Party, among others, considers that this plan does not respond to “the urgency of the moment” and, above all, that it will allow Ottawa to finance carbon capture and storage projects for the industry when it has made record profits over the past year. For his part, Steven Guilbeault recalls that Canada is the first G20 country to end inefficient subsidies for the industry, an announcement which was initially scheduled for 2025.