The IISD Reported that Canada gave out $8.6 billion in Subsidies in 2021

Federal greenhouse gas emissions (GGEs) data by economic sector in Canada has been relatively unchanged between 2005 and 2019 as emissions from oil and gas extraction, gas-powered trucks, and heavy-duty diesel vehicles continued to climb and be offset by decreases in other sectors. For example, a 66 Mt or 8.9% reduction in 2020 from 2019 to 672 Mt CO2 eq (influenced by COVID-19) was largely a result of temporarily less commuting and air traffic and decreased coal consumption. Meanwhile, Canada’s GGEs rose 2.8% in 2021 (691 Mt), and fossil fuels accounted for more than half of the total (including fugitive methane leaks), according to an “early estimate” released recently by the Canadian Climate Institute.

Canada’s Net-Zero Emissions Accountability Act (2021) and the Emissions Reduction Plan (ERP) (2022) look to assure us that the right map for accountable long-term emissions reduction planning now exists as governments step up actions and work to provide enough fossil fuel subsidy information for transparency. However, to date, data analyses have been based on diverse policy sources, making comparison and generalization difficult. Federal tax deductions data has also been unavailable, and there has been no comprehensive inventory of direct government spending and reporting to reduce subsidies.

As the Canada Climate Law Initiative states, there are knowledge gaps on fossil fuel subsidies, making it difficult to track progress toward net zero. In addition, Canada still needs to adopt a uniform definition or classification of subsidies.

However, the IISD (a respected source) reported that Canada gave out $8.6 billion in subsidies in 2021, as researched and confirmed by Environmental Defence data. The IISD also estimated that B.C., Alberta, Saskatchewan, Newfoundland and Labrador provided at least another $2.5 billion in provincial subsidies over 2020-2021, such as targeted royalty concessions and R&D.

Policy-wise, in 2009 (a G20 commitment), Canada promised to end “inefficient” fossil fuel subsidies, finally stating in 2022 that some subsidies are being phased out or rationalized. As well at COP26, Canada agreed to end all new support for projects overseas by the end of 2022 and joined the ambition to phase out “inefficient subsidies “(with approximately $2.5 billion remaining on Canadian books in existing overseas commitments). These will not be renewed once obligations are fulfilled. Canada is also phasing out coal-fired electricity generation by 2030 and commits to a net-zero Clean Electricity Standard by 2035.

However, given increased energy prices, new subsidies arrived in 2020-2021, yet Canada’s ERP commits to achieving net zero by 2050. The “Just Transition” policy is now finally tabled in 2023 to mitigate the impacts of industry transition on workers and communities dependent on fossil fuels. Many provincial and territorial governments give consumption subsidies, including tax exemptions, although Alberta and B.C. also have significant production subsidies.

Upcoming regulatory frameworks with financial incentives will help get methane emissions to 75% by 2030 from 2012. Existing policies include carbon pricing on pollution, Clean Fuel Regulations, $48.6 billion in CCUS investment tax credits, a pandemic Emissions Reduction Fund, Clean Growth Program, Energy Innovation Program (new technology), and guidance on new oil and gas projects subject to federal reviews. These need careful monitoring to reflect Canada’s climate imperatives.

The federal 2023 budget released on March 28, 2023, offered a groundbreaking $80 billion in incentives over the next decade for clean energy technologies to match the USA Inflation Reduction Act. However, the budget failed to identify a date for the end of fossil fuels subsidies or emission limits

This Post was submitted by Climate Scorecard Canada Country Manager Diane Szoller


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