Ottawa took a step toward ending “inefficient” subsidies for fossil fuels on July 24 by making Canada the first country to publish an assessment framework and guidelines on how it will be done. But critics say Ottawa is misguided and just blustering, and the industry is requesting a predictable policy environment.
Ottawa’s move is a follow-up to Canada’s commitment to the 2021 United Nations “Glasgow statement,” which requires signatories to “end new direct public support for the international unabated fossil fuel energy sector,” among other promises.
The framework aims to ensure that any support from Ottawa won’t delay the transition to green energy and will comply with the Paris Agreement to limit the increase in global average temperature to 1.5 C above pre-industrial levels.
“Healthy competition” among G20 nations to make a mark in environmental policy emerged as motivation for Minister of Environment and Climate Change Canada (ECCC) Steven Guilbeault.
“So I think Canada’s showing up to the G20 and saying, ‘Hey, folks, you know, remember in 2009, we made that collective agreement that we were going to phase out fossil fuel subsidies? Well, here’s what we did in Canada,’” the minister said on July 25.
But University of Calgary economics professor Trevor Tombe told The Epoch Times that he views Ottawa’s announcement as “empty political rhetoric” and that not enough details are available to know what it means for any sector.
Ottawa has been moving to end what are deemed as inefficient subsidies for fossil fuels, but only just now defined “inefficient,” nearly 15 years after G20 leaders initially pledged, in 2009, to phase out these subsidies.
What matters, Mr. Tombe says, is whether specific future programs are eliminated or changed.
Pinning Down a Definition
The difficulty in pinning down what “inefficient” means regarding fossil fuel subsidies is reminiscent of a similar situation with the term “sustainable” as it pertains to jobs.
“Inefficient fossil fuel subsidies encourage wasteful consumption, reduce our energy security, impede investment in clean energy sources, and undermine efforts to deal with the threat of climate change,” ECCC spokesperson Samantha Bayard told The Epoch Times in an email.
Ottawa’s new “definition“ of “inefficient” is met unless a subsidy meets one or more of six criteria—specifically, enable significant reductions in greenhouse gas emissions, support clean technology or renewable energy, provide essential service to a remote community, providing short-term support for an emergency response, support indigenous economic participation in fossil fuel activities, or support abated production processes or projects with credible plans to achieve net-zero emissions by 2030.
“The country doesn’t need tinkering from people who can’t pinpoint a problem and who use a dishonest characterization to advance an economically and politically damaging solution to a non-existent problem produced from their woke imagination,” Dan McTeague, president of Canadians for Affordable Energy, told The Epoch Times.
“There’s a reason no other G20 nation would attempt such an obtuse policy,” he said.
What Constitutes a Subsidy?
One topic of debate is just how much Canada’s fossil fuel sector gets in subsidies from the feds and how this should be considered given that oil and gas companies are heavily taxed.
ECCC’s Ms. Bayard said that estimates of the values of subsidies can vary based on the definitions and methodologies used. The July 24 news release says Canada’s framework uses the World Trade Organization’s definition as reference.
When asked what Ottawa believes are the annual subsidies to the fossil fuel industry, neither ECCC nor Finance Canada provided a figure to The Epoch Times.
ECCC said some third-party estimates often consider all fossil fuel subsidies to be inefficient.
According to the Organisation for Economic Cooperation and Development’s fossil fuel subsidy tracker, Canada gave out $3.19 billion in 2021.
“The oil and gas industry in Canada is the opposite of a subsidized industry. In fact, the production and consumption of oil and gas is heavily taxed in Canada,” Kendall Dilling, president of Pathways Alliance, said in an emailed statement, reported BNN Bloomberg on July 24.
Need for Capital
The Canadian Association of Petroleum Producers (CAPP) is “generally aligned” with the framework on inefficient fossil fuel subsidies, according to a July 24 statement from president and CEO Lisa Baiton.
Ms. Baiton told The Epoch Times that CAPP is pleased that the government will continue to fund decarbonization efforts.
“We urge the federal government to move swiftly to provide Canadian oil and natural gas producers with policy and regulatory certainty to expand the deployment of emissions-reductions technologies,” Ms. Baiton said.
Canada’s energy sector is already dealing with the carbon tax, clean fuel standard, banning of gasoline-powered vehicles, emissions caps, and environmental, social, and governance (ESG) factors.
Ms. Baiton emphasized that the global demand for energy is rising and oil and natural gas will still be highly relevant well beyond 2050.
“Our oil and natural gas producers are in a global competition for capital and industry needs certainty at all levels of government,” she said.
Investors have long lamented the current government’s policies, which deter companies from investing sufficiently in their businesses to produce more oil and gas.
Ottawa also included a commitment to phase out public financing of the fossil fuel sector. This refers to financing beyond subsidies and would involve Crown corporations like Export Development Canada.
Phasing out oil and gas production has significant economic ramifications for Canada given that these jobs pay well and are very productive.
According to a June 10 op-ed in The Hub co-authored by professors Christopher Ragan and Mark Jaccard and former deputy finance minister Paul Rochon, “Workers would be leaving a sector with very high labour productivity (oil and gas production) and be reabsorbed into sectors that, on average, have much lower labour productivity.
“Thus, while overall employment in the economy would not be largely affected, total income accruing to workers and overall national income (GDP) would fall, and possibly very significantly.”
Mr. McTeague says his international colleagues tell him they sense “Canada has lost its way.”
