Canada’s new fossil fuel subsidy framework contradicts own international policy

FOR IMMEDIATE RELEASE

Contact:

Valentina Stackl, Oil Change International – valentina@priceofoil.org (ET)

Nicole Rodel, Oil Change International – nicole@priceofoil.org (CET)

 

Canada’s new fossil fuel subsidy framework contradicts own international policy

24 July, Montreal – Today, the Canadian Federal government published its fossil fuel subsidy assessment framework, which will be used to identify and phase out inefficient fossil fuel subsidies. This will end many key federal tax and non-tax measures propping up the oil and gas industry. However, the contradicting framework omits both the largest form of federal fossil fuel support, domestic public finance, as well as the sub-sector that has been targeted by most recent measures, fossil-based hydrogen and carbon capture and storage (CCS). 

Notably, Canada provides more public finance for fossil fuels than nearly any other country in the G20, with more than CAD $50 billion in support for oil and gas through its public export credit bank Export Development Canada (EDC) since 2019. 

Canada took a step to address this issue by ending international public finance for fossil fuels in December 2022, setting a relatively strong example for peers who pledged to do the same at COP26. However, about 85% of federal public finance for fossil fuels is exempt because it concerns domestic projects or companies. Rather than match the international policy, today’s announcement leaves the door open indefinitely to domestic public finance for oil and gas, only committing to “announce by fall 2024 the implementation plan” to phase out these flows.

In response, Claire O’Manique, Public Finance Analyst at Oil Change International said: 

“Any step to stop funding fossils is welcome and urgently needed. But Canada cannot claim to be the first G20 country to phase out inefficient fossil fuel subsidies without also ending support for domestic public finance, CCS, and fossil hydrogen. 

“It is disappointing to only  mention  drafting a plan to end public domestic fossil fuel finance by the end of 2024, rather than taking concrete steps now to end domestic public finance for fossil fuels. This will leave over CAD 13 billion a year in government support flowing to climate-wrecking oil and gas projects. These loans and loan guarantees are a form of subsidy that Canada’s little-known, and seemingly forgotten, public export bank, Export Development Canada uses to prop up domestic fossil fuel companies with public money every year, which could instead flow to urgently needed renewable energy solutions. Today’s Assessment Framework also leaves an explicit loophole for the fast-growing subsidies for problematic and expensive technologies that extend the fossil fuel era like CCS and hydrogen, which are heavily promoted by the fossil fuel industry. 

“It is not too late to close these gaps. Canada must demonstrate global leadership  and rectify its policy contradictions by committing to end its domestic fossil fuel finance by 2024 at the latest.”

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Notes:

• In December 2022, the Government of Canada released a policy to end new public finance for fossil fuels abroad to meet the Glasgow Statement (now called the Clean Energy Transition Partnership (CETP)) made at the UN COP26 climate summit in November 2021. 39 other countries and institutions signed on to CETP with Canada to end their direct international public financing for fossil fuels by the end of 2022, except in exceptional circumstances, and fully prioritize their public finance for the clean energy transition. 
• Oil Change International research shows that the CETP commitment is already shifting USD 5.7 billion a year from fossil fuels to clean energy. If all signatories meet their commitments, they can increase their clean energy finance to USD 37 billion per year, a sum large enough to close the energy access finance gap. This implementation tracker outlines country-level progress on implementation of the Glasgow Statement and will be updated in the lead up to COP28.
• Canada’s 2022 policy applies across all federal departments, agencies and Crown corporations but predominantly impacts Export Development Canada (EDC), a Crown corporation with a long history of funnelling billions in support to the oil and gas industry. However, Parliamentary Budget Office and OCI research shows that about 85% of EDC’s recent fossil fuel support flowed domestically rather than internationally, leaving the bulk of these handouts untouched. 
• From 2019 to 2021, Oil Change International’s Public Finance for Energy Database showed that Canada supported an annual average of CAD 11.1 billion in public finance for fossil fuels. This was more than 11 times its support to clean energy ($1 billion), compared to the G20 average of 4:1 fossil finance to clean energy.
• A recent op-ed in the Hill Times from Thomas Gunton, Kyla Tienhaara, and David Wheeler highlighted the need for today’s announcement to extend to domestic public finance at EDC as well as public support for expensive and unproven fossil-based technologies like carbon capture and storage and fossil-based hydrogen. In May, over 100 organisations also outlined expectations for this new policy in a letter to the federal Cabinet.
• In its 2022 Assessment Report, the IPCC highlighted public finance for fossil fuels as ‘severely misaligned’ with reaching the Paris goals, but that, if shifted, it could play a critical role in closing the mitigation finance gap, enabling emission reductions and a just transition.