Canada Subsidies

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Canada—46.4 billion per annum

Canada paid $3.314 billion (on oil and gas subsidies) to its fossil fuel industry last year, and $2.9 billion in 2013. The amount changes yearly, $3.314 billion is an average based on 2013-2015 data. Subsidies are usually associated with production, field development, extraction, and exploration.

However, the International Monetary Fund estimated Canada’s energy subsidies in 2011 as $26 billion, 2013 as $34 billion and 2015 as $46.4 billion to producers and as uncollected tax on externalized costs not accounted for such as air pollution, carbon emissions, transport fuels, and traffic congestion. Some agree with these unrecognized figures but others argue the large start-up capital, high degree of risk, and many years between initial investments and profits justify that companies can reduce taxes paid in the short term deferring them until later in the production cycle, that they are not subsidies but tax treatments common to the natural resources sector.

Coal production in recent years, largely through exports, is decreasing in demand. Canada’s own coal consumption has decreased dramatically over the past decade. Coal-fired power generation was reduced by half between 2000 and 2014. In November 2016, Canada announced a phase out of coal-fired electricity by 2030 which most impacts Alberta, Saskatchewan and Nova Scotia.

The amount of fossil fuels burned for energy use has been relatively flat since 2000 as increases from Alberta oil sands were offset by reductions in Ontario and the Maritimes in the phase-out of coal-fired electricity generation. But a rise in carbon emissions is evident. Fossil fuels extracted and used domestically or exported and combusted elsewhere increased 26% from 2000 to 2014. In 2015, Canada’s extracted carbon equaled almost 1.2 billion tonnes of CO2. Infrastructure projects still underway such as Liquefied Natural Gas plants and bitumen pipelines have created a high-emissions course for several decades to come has a major impact on reaching emission targets.

Export Development Canada, Canada’s main public finance institution, mostly funds projects for oil and gas production including overseas exploration. A number of subsidies to our oil, gas and mining companies are in the process of being phased out, including special help for the oil sands that ended in January 2015. Also, the Atlantic Investment Tax Credit of $127 million for past subsidies is scheduled to phase out of oil and gas in 2017. Some subsidies involve the provinces.

The Liberal federal government promised to stop subsidizing fossil fuels as part of their election platform in 2014. A national carbon tax proposed to start in 2018 at $10 is increasingly emerging as a central policy to reduce greenhouse gas emissions (GGE). This price will rise by $10 each year per metric ton of emissions to a maximum of $50 per tonne in 2022 toward Canada’s Paris commitments of reducing GGE by 30% from 2005 levels by 2030.

This also means moving from emissions of 742 megatonnes (Mt) of CO2e (December 2016) to a target of 523 Mt by 2030. While a consistent carbon price across Canada is eventually needed, it is not critical to start with it given our provinces and territories’ history of contrasting policies across the country.

Fossil fuel subsidies work against Canada’s noteworthy progress in putting a price on carbon. Many tax protocols and accelerated deductions date back to the 1970s and have since outlived their original objectives historically premised on factors such as exploration risk, spillover benefits of exploration to third parties, large capital requirements, price volatility, and a desire to be competitive. Today, however, it is not clear that these factors are unique to the sector or merit preferential treatment. Pembina indicates today the oil sector is not operating in such a market. More importantly, tax preferences are now contrary to our global GGE commitment as well as Canada’s domestic policy on carbon pricing and investment in clean technology.

Learn More

about Canadian fossil fuel subsidies and where they are headed –
https://beta.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/canadas-oil-industry-frets-as-pressure-mounts-to-cut-fossil-fuel-tax-incentives/article27240254/ November 2015
http://business.financialpost.com/opinion/imfs-imagined-34-billion-silly-stats-are-behind-claims-that-canada-subsidizes-oil-industry May 21 2014
https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-412-investment-tax-credit/atlantic-investment-tax-credit.html December 2016
http://www.cbc.ca/news/business/canadian-coal-by-the-numbers-1.3408568 February 2015
http://www.cbc.ca/news/politics/canada-coal-electricity-phase-out-1.3860131 November 2016
http://www.cbc.ca/news/politics/g20-fossil-fuel-subsidies-450b-1.3314291 November 2015
https://www.e3g.org/docs/Accelerating_Coal_Phase_Out_-_the_OECD_context_18_09_17.pdf
http://ecofiscal.ca/wp-content/uploads/2015/04/Ecofiscal-Commission-Report-The-Way-Forward-April-2015.pdf
http://greenbudget.ca/wp-content/uploads/2016/01/GBC-Subsidies.pdf
http://www.iea.org/media/weowebsite/energysubsidies/second_joint_report.pdf November 2010
http://www.iisd.org/faq/unpacking-canadas-fossil-fuel-subsidies/ January 2017
https://www.iisd.org/sites/default/files/publications/canada-ffs-submission-july-2016.pdf
http://www.imf.org/en/Publications/Policy-Papers/Issues/2016/12/31/Energy-Subsidy-Reform-Lessons-and-Implications-PP4741 January 2013
http://www.oag-bvg.gc.ca/internet/English/parl_cesd_201212_04_e_37713.html
https://www.odi.org/sites/odi.org.uk/files/odi-assets/publications-opinion-files/9988.pdf November 2014
http://www.pembina.org/reports/fossil-fuel-subsidies.pdf July 2014
http://www.pembina.org/reports/submission-pan-canadian-climate-change-working-groups.pdf June 2016
https://www.policyalternatives.ca/sites/default/files/uploads/publications/National%20Office%2C%20BC%20Office/2017/01/ccpa_extracted_carbon_web.pdf
http://www.policynote.ca/canada-cannot-have-it-both-ways-on-climate-and-fossil-fuel-expansion/ January 25, 2017
https://www.statista.com/statistics/265453/coal-production-in-canada-in-oil-equivalent/ 1998-2016
https://www.theguardian.com/world/2016/nov/21/canada-coal-electricity-phase-out-2030
https://thetyee.ca/Opinion/2014/05/15/Canadas-34-Billion-Fossil-Fuel-Subsidies/