October 3, 2016

Alex Doukas, alex [at] priceofoil [dot] org

Canada’s fossil fuel subsidies threaten to cancel out proposed national carbon price

In response to Prime Minister Trudeau’s announcement of a national carbon pricing proposal, Alex Doukas, Senior Campaigner at Oil Change International, released the following statement:

“Setting a strong national carbon price is potentially a very important step forward for Canadian climate action, but there’s a multi-billion-dollar elephant in the room: Canada still gives $3.3 billion in subsidies to oil and gas companies each year.

The International Energy Agency estimates that existing North American fossil fuel subsidies are currently more than four times as strong as the $10 per tonne carbon price proposed by Prime Minister Trudeau for 2018.

We tax cigarettes because they’re harmful to society, and Canada plans to price carbon for the same reason. But putting a price on carbon while ignoring the fact that we still subsidize fossil fuel production doesn’t make any sense. That’s like taxing cigarettes while at the same giving handouts to tobacco companies to make more of them. If we’re all going to have to pay for our carbon pollution, shouldn’t we also stop subsidizing the companies that pull it out of the ground?

Many institutions, including the OECD, the World Bank, and the International Energy Agency, have described fossil fuel subsidies as an incentive to pollute.

Canada should establish a clear, ambitious timeline to stop funding fossils by 2020 at the latest. Otherwise, the Trudeau government’s incentives to polluters risk canceling out the newly-announced carbon price.”


Additional background:

  • The latest data on Canada’s subsidies to oil and gas producers show that provincial and federal subsidies totaled around $3.3 billion in 2015.
  • The International Energy Agency has estimated that subsidies to fossil fuel consumers amount to a USD 36 per tonne of CO2 incentive to pollute in North America (in CAD, more than 4 times as strong as the $10 per tonne carbon price proposed by Prime Minister Trudeau for 2018), and a USD 115 per tonne incentive to pollute globally.
  • Numerous international organizations have come out strongly against fossil fuel subsidies, characterizing them as an incentive to pollute:
    • “It’s no secret that fossil fuel subsidies act as a negative price on carbon.”

OECD Secretary General Angel Gurria

    • “If you dirty up the world, I will reward you. This is the message” sent by the mismatch between fossil fuel subsidies and current carbon prices

Fatih Birol, Executive Director of the International Energy Agency

    • “Fossil fuel subsidies send out a terrible signal: burn more carbon.”

-Jim Yong Kim, President of the World Bank