The Government of Canada on Monday announced its plan to move away from “inefficient” fossil fuel subsidies, which includes so many exceptions that it would not change much of the government support the oil sector currently receives.
“You should be happy with this announcement, it’s the elimination of fossil fuel subsidies in Canada!” “Launched the Minister of Environment and Climate Change, Steven Guilbault, to demonstrators who tried to disrupt his speech at the Maison du développement durable in Montreal.
His government unveiled, Monday morning, its strategy to limit the sending of public funds to the sector which sits on the list of the most polluting, entitled “Evaluation framework for self-examination”. It prides itself on making Canada the first G20 country to establish such a plan, in accordance with its international commitments.
Savings Promise
“Collectively, today’s announcement represents significant savings in terms of tax and non-tax expenditures,” continued Steven Guilbeault in his speech. He then said that the important thing was to “look to the future” rather than take stock of past grants.
His office told the Duty that these hypothetical savings are estimated at $1 billion, based on an estimate of grants offered over the past five years.
Officials made available to journalists to answer their questions on Monday morning, however, were unable to say whether a single dollar from Canada’s budget would have been allocated differently if this framework had been in force last year. They had no example in mind of a Canadian grant that could not be renewed.
Above all, Monday’s announcement is limited to a narrow definition of the word “subsidy” which ensures that the bulk of the sums currently sent to this sector are not taken into account, in particular through Export Development Canada (EDC), whose “aid” to this sector reached $8.7 billion in 2022. Direct aid, in the form of a loan, was up compared to 2022.
A definition, with exceptions
The new measure also only applies to subsidies that support activities related to fossil fuels, or that would provide a “disproportionate” benefit to this sector. Oil and gas companies could therefore have access to subsidies that are not specific to them.
In addition, the government is drawing up a list of exceptions to allow these polluting companies to continue to receive public funds.
These subsidies would be considered “effective” if they fall into one of six categories: allow emissions to be reduced; supporting clean technologies; provide power to remote areas; make emergency interventions; assisting Indigenous participation in fossil fuels; invent “low-emission manufacturing processes”, such as carbon capture.
The Government of Canada has adopted the definition of the word “subsidy” established by the World Trade Organization (WTO). It is a “financial contribution from public authorities” which specifically includes loans and loan guarantees, which EDC provides to the petroleum sector.
The state-owned company claims not to distribute “any subsidy”, since it provides this aid on “commercial terms”, an interpretation disputed by environmental groups.
Minister Guilbeault promises a new phase of oil investment restrictions for 2024, which this time should affect those made by state-owned companies like EDC. International fossil fuel subsidies had already been eliminated last year.
In June, the Liberal Party of Canada supported a Bloc Québécois motion asking “that the federal government stop investing in fossil fuels”. His agreement with the New Democratic Party (NDP) to stay in power also provides for “phasing out public funding of the fossil fuel sector, including that of crown corporations”.
More details will follow.