Funding for fossil fuels could derail Canada’s new plan to reduce emissions

Canadian climate news has been a bit of a rollercoaster. Just over a month ago, the federal government released the 2030 Emissions Reduction Plan, the most comprehensive Canadian climate plan to date, and the 2022 budget, scarcely a week apart. That same week, the urgent call of the world’s top scientists reached a fever pitch with the latest Intergovernmental Panel on Climate Change report charting the narrow pathways available for action to avoid irreversible climate change impacts. Meanwhile, on the eve of the budget release came the federal approval of Bay du Nord, Norwegian oil company Equinor’s deep water drilling project off the coast of Newfoundland and Labrador, which has the potential to produce up to 300 million barrels of fossil fuel resources. The government aims to use its recent climate plan and budget as the basis to tackle climate change over the next few critical years. However, subsidies to the fossil fuel industry and new production projects threaten to undermine progress towards climate goals. The climate plan lays out a roadmap to achieve federal emissions reductions targets and move toward a net-zero society, including recommitting to Canada’s long-standing pledge to phase out fossil fuel subsidies. However, the budget contains ongoing and new fossil fuel subsidies. This includes an investment tax credit for carbon capture and storage technologies to help oil and gas producers reduce emissions that will cost up to $1.5-billion annually until 2030. Of course, valid social and environmental goals are the impetus for many fossil fuel subsidies—such as the desire to create new jobs, lower energy costs for consumers in need, or reduce emissions where possible from oil and gas extraction. The social impacts of rising energy prices on Canadians, exacerbated by the war in Ukraine in particular, are not to be underestimated or ignored. With that said, there are other ways to achieve these goals that support workers and communities while also moving us closer to—rather than further away from—our emissions reductions targets and the path to net zero. We cannot sacrifice social protection for the environment or the economy, but neither can we sacrifice a climate-safe future for short-term social or economic gains. Rather than providing subsidies that give an economic advantage to the fossil fuel industry, we should dedicate public funds directly to consumers and workers most in need of relief. We can also institute programs and regulations to ensure that polluting corporations foot the bill for their environmental harm rather than taxpayers. Avoiding subsidies will free up public funds to instead support long-term job creation in clean energy sectors, strengthening grids and electrifying infrastructure, and investing in energy efficiency. Fossil fuel subsidies are not compatible with the government’s own climate plan nor our net-zero ambitions. For example, the federal carbon price rose on April 1, discouraging carbon pollution by making it more expensive (though the economic impact on individuals is mitigated by quarterly rebate payments). Carbon pricing is a key tool in the global fight against climate change—but fossil fuel subsidies work against it by lowering the cost of the same pollution a carbon price discourages. This is like raising taxes on cigarettes to discourage smoking while also giving tobacco companies tax breaks so they can increase production of cigarettes. Canada’s federal fossil fuel subsidies, which totalled at least $1.9-billion in 2020, are undermining the impact of federal climate action. Following through on Canada’s commitment—first made more than 13 years ago—to end these subsidies is vital to prioritizing a safe and prosperous future for Canadians environmentally, socially, and economically. Accelerating the timeline and approach taken to phasing out fossil fuel subsidies is a live discussion in the House of Commons. Many policy-makers are calling for much-needed greater ambition, a binding commitment to not introduce new subsidies, and for all public funding programs to align with Canada’s international climate change commitments. On May 3, MPs from across most of the political parties came together for a National Day of Action to End Fossil Fuel Subsidies. The government should seize this opportunity to enhance climate leadership by making fossil fuel subsidies history. Laura Cameron is a policy analyst at the International Institute for Sustainable Development (IISD), working in the areas of fossil fuel subsidies, just transition, and oil and gas policy in Canada. Philip Gass is lead, transitions in IISD's Energy program. His recent work has focused on just transition as well as fiscal policy approaches that facilitate climate change mitigation, including carbon pricing and subsidy reform. The Hill Times