The clean energy picture got a little bit brighter in Canada last week, after the 2017 budget started chipping away at the $1.6 billion in federal subsidies to oil and gas companies each year.
For the past year, Oil Change International and a handful of Canadian allies have called on the Trudeau government to end fossil fuel subsidies. While the government failed to act in its first budget, this year, people power propelled the campaign to victory. Concerned Canadians logged tens of thousands of petition signatures, letters, emails, and phone calls to the Trudeau government, and the government responded by cutting fossil fuel handouts in the budget.
Crucially, the 2017 budget begins to tackle the worst, most dangerous types of subsidies: exploration subsidies. These promote high-risk exploration for new fossil fuel resources, when oil producers have already discovered far more resources than can be safely burned under the objectives of the Paris Agreement on climate change. The budget also took another important step, and explicitly recognized that subsidies to oil and gas companies fall under the umbrella of “inefficient” fossil fuel subsidies – subsidies which the Trudeau government has promised to end by no later than 2025 under the G7 and North American Leaders’ Summit statements.
Canada’s move may have a knock-on effect in international fora. Germany, the host of this year’s G20 Leaders’ Summit in July, has put securing a deadline to phase out fossil fuel subsidies on the agenda. The G7 Leaders’ Summit in May could also see the issue of fossil fuel subsidy reform advanced after G7 leaders agreed last year on a deadline for subsidies. Canada can use its first modest moves to scale back subsidies as leverage to exert pressure on other governments to do the same, saving scarce public dollars and helping to speed the transition away from fossil fuels.
While Canada’s nod toward subsidy elimination is an important victory for people power, it is only a first step: according to the government’s own estimates, the reform of subsidies in the 2017 budget will save the public roughly $50 million a year beginning in 2018/2019 (or approximately $150 million through 2022). Other significant subsidies that privilege the oil and gas industry over other industries still remain. Because the government uses a conservative method of calculating the subsidy value in the first place, their figures should be considered a very low estimate of savings, and should not be compared on an apples-to-apples basis with the $1.6 billion in total federal oil and gas subsidies estimated by Canadian civil society groups. Indeed, Canada’s oil lobby has loudly decried the subsidy cuts,
On the negative side, the budget also included $30 million that may be used to help clean up a handful of Alberta’s orphan oil and gas wells, which now number over 2,600. Cleaning up abandoned, polluting, and unsafe wells is a positive, but not when taxpayers cover the cost. It should be the polluters who pay to clean up their own mess. Alberta will need to address the shortcomings of this system quickly, as an additional 80,000 wells are currently listed as inactive and may become orphaned, resulting in liabilities as high as $30 billion.
Last year, Oil Change International released an analysis with Environmental Defence Canada, Équiterre, and Climate Action Network Canada that showed how Canada’s fossil fuel subsidies threaten to undermine the new national carbon pricing policy. All told, federal and provincial subsidies to oil, gas and coal companies amount to paying polluters $19/tonne of CO? to pollute. To get a sense of the problem this creates, the Trudeau government is in the process of implementing a Canada-wide carbon price starting at just $10 in 2018, rising to $50 in 2022. This shows that Trudeau government must do much more on fossil fuel subsidies to achieve a coherent climate policy, and to fulfill its promises to phase out subsidies.
To demonstrate global leadership, and boost Canadian climate action, key next steps the Trudeau government must:
- Develop a clear, ambitious, and time-bound plan to phase out the rest of Canada’s fossil fuel subsidies;
- Engage in peer review of Canada’s fossil fuel subsidies with other governments under the G20 framework, steps already taken by the US, China and a process currently being undertaken by Mexico and Germany;
- Take steps to shift Canada’s international public finance away from fossil fuels, focusing on Export Development Canada, which currently provides up to $6 billion per year in oil and gas finance on average, to companies including TransCanada and Enbridge.
2016 was the third successive year to set a record for global average surface temperature. As the impacts of climate change accelerate, it feels more and more like our home is burning. Continuing to hand out public money to fossil fuel companies is like spraying jet fuel on the fire. Governments can no longer afford to throw public money into activities that further exacerbate the climate challenge.