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Activists with Greenpeace

Activists with Greenpeace staged a protest of Canadian Prime Minister Justin Trudeau's fossil fuel pipeline policies to coincide with his visit to London in April of 2018. (Photo: Greenpeace)

'Dumbest Policy in the World': Report Details How Canada's Massive Fossil Fuel Subsidies Undermine Climate Action

Working to curb emissions while using public funds to subsidize oil and gas industry "is like trying to bail water out of a leaky boat"

Jessica Corbett

"What's the dumbest policy in the world? Public cash for oil and gas!"

That's according to Patrick DeRochie, Climate & Energy program manager for the Canadian group Environmental Defence, who wrote Monday about a new report that aims to shed light on the Canadian government's hundreds of millions dollars in subsidies to the fossil fuel industry.

"Actually, the final figure is likely much higher, but a lack of transparency from the federal government makes many subsidies to climate polluters difficult to quantify," DeRochie added, calling on the Canadian government to disclose just how much it's doling out to polluters.

Public Cash for Oil and Gas (pdf), produced by the #StopFundingFossils coalitionwhich includes the International Institute for Sustainable Development (IISD), Environmental Defence, Climate Action Network, Équiterre, and Oil Change International—emphasizes that Canada's "handouts" of taxpayer money to oil and gas producers "undermine" actions that aim to address the human-caused global climate criss.

Pointing to "strong evidence that the federal government's plan to meet Canada's 2030 climate target is 'highly inefficient' (Climate Action Tracker, 2018), necessitating greater efforts in the oil and gas sector," the report explains:

On the supply side, fossil fuel companies are most likely to react to international market price signals, such as the current upward trend in the value of WCS, and to the option to claim deductions of several of their current and past expenses now and in the future as long as their activities are profitable. Subsidies serve to promote the production of fuels at the same time that carbon pricing and climate action programs and policies are designed to reduce demand. To put it another way, combining carbon pricing and fossil fuel subsidies is like trying to bail water out of a leaky boat. If you don't fix the leak (the subsidies) you are never going to fix the problem (growing GHG emissions from the oil and gas sector.

"Our findings illustrate the need to reform the tax system so that the impact of fossil fuel subsidies on climate change and the environment is taken into account, and that public funds are managed in ways that are most beneficial to Canadians," report co-author Yanick Touchette of the IISD said in a statement.

While the report details hundreds of millions of dollars in tax breaks, fiscals supports, and direct grants for oil and gas production, it does not include the government's recent—and widely ridiculed—purchase of Kinder Morgan's Trans Mountain Pipeline.

And although there is "strong potential that there will end up being a large subsidy involved in this purchase," the report points out that "the scale of the subsidy will not be known at least until (and if) a private sector buyer is identified and the terms of sale are released." This likely subsidy, it declares, "is inconsistent with Canada's commitment to phase out fossil fuel subsidies by 2025."

The report—which notes that "despite some reforms in recent years, Canada is still the largest provider of subsidies to oil and gas production in the G7 per unit of GDP"—was released just ahead of the G7 environmental ministers' meeting the Canadian government is scheduled to host Wednesday through Friday in Halifax, Nova Scotia.

Catherine Abreu of Climate Action Network welcomed the Canadian government's move in June to enter a peer review process of its fossil fuel subsidies with Argentina, but called for bolder leadership.

"As 2018 G7 President, Canada needs to lead," she concluded, "in getting nations to develop a detailed roadmap on how G7 members intend to phase out these subsidies by 2025."


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