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

(Above Ground, Ottawa, 4 August 2023) 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. 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.