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Canada restricts subsidies, but delays plan to end billions more in fossil fuel finance

Ottawa has taken a major step forward towards ending another significant component of its fossil fuel support. It announced last week a policy that makes Canada the first G20 country to publish a plan for delivering on the group’s 2009 commitment to phase out so-called “inefficient” subsidies to the fossil fuel sector.

Under the new policy, federal support identified as a fossil fuel subsidy can no longer be provided unless it fulfills one of six criteria. Unfortunately, these criteria provide for significant exemptions that may allow fossil fuel companies peddling false climate solutions to benefit from billions of dollars a year in tax breaks and public spending. For example, Ottawa will still provide subsidies that facilitate “abated production processes” – language often used by oil companies to describe their use of carbon capture technology to reduce emissions from their own operations. This ignores the much larger quantity released when the fuels they produce are burned.

To allay concerns over these loopholes, it’s imperative that Ottawa publicly release all details of its implementation of the policy, including a list of the subsidies it retains and its justification for doing so. It must demonstrate to Canadians that, as it has promised, “any government supports for the sector will not delay the transition to renewables, are in compliance with the goals of the Paris Agreement to limit warming to 1.5 °C, and account for the availability of credible alternative energy sources.”

Perhaps most significantly, the new policy leaves intact public financing from Export Development Canada (EDC), which Ottawa – contentiously – doesn’t consider a subsidy. Last year alone, EDC provided roughly $20 billion in financing to oil and gas companies, mostly in the form of loans, guarantees and insurance. This represents the overwhelming bulk of Canada’s financial support for the sector. 

Ottawa has pledged to “develop a plan” to phase out this financing as well. As of January the government has, under its Glasgow policy, barred EDC from providing new, direct financing for most oil and gas activities abroad. Yet this doesn’t touch the majority of EDC’s fossil fuel finance, which supports the industry’s operations in Canada. 

As of late 2021, Ottawa was expected to announce the timeline of its full fossil fuel finance phaseout, including domestic support, within months. But last week’s announcement indicated that Canadians will now need to wait another year – until the fall of 2024 – to find out when the government plans to finally stop financing oil and gas companies in Canada. 

In the meantime, it continues to back the industry’s expansion by putting billions of taxpayer dollars on the line. Since January of this year, the federal cabinet has directly approved no fewer than three additional loan guarantees for the Trans Mountain Expansion (TMX) project, whose skyrocketing costs are currently projected at $30.9 billion. The fresh guarantees bring the total amount of public financing provided to TMX to over $26 billion, of which over $11 billion are loans.

Canada must stop pouring fuel on the fire of the climate emergency that’s claiming lives and peoples’ health, livelihoods and homes. The government must urgently release a plan to eliminate all fossil fuel financing, building on the strong foundations of its Glasgow policy and expanding it to stop propping up the oil and gas industry, both in Canada and abroad.