Big Oil Still Gets the Cash: How the Canadian Government Subsidizes Greenhouse Gas Emitters

Despite its green promises, Ottawa continues giving big tax breaks to tar sands companies

Ottawa will spend $1.5 billion dollars in additional subsidies to tar sands companies as a result of its delay in phasing out tax breaks for one of Canada’s largest greenhouse gas emitting (GHG) industries.

The federal government confirmed the tax break figures in its responses to a formal petition filed with the Auditor General of Canada by KAIROS: Canadian Ecumenical Justice Initiatives, a church-based social justice organization.

The petition was filed last November and the government was legally required to respond within 120 days. While the government provided answers to some questions, it failed to respond to the key question at the heart of the petition.

A new KAIROS study, Pumped Up: How Canada subsidizes fossil fuels at the expense of green alternatives, concludes that by 2015 emissions from the tar sands alone will equal or exceed the annual reductions from all the federal government GHG reduction programs announced to date.

In letters from the ministers of finance, environment, foreign affairs, international trade, natural resources and international cooperation, the government gives no indication that it plans to shift in spending away from tax breaks for big oil towards spending on green, renewable energy sources.

“The government seems to be taking a business as usual approach in terms of its energy policy,” says Ian Thomson a co-author of Pumped Up. “What’s revealing about these responses is how much the government was unable or unwilling to tell us. For instance, it failed to quantify the total size of subsidies in dollar amounts going to the oil and gas sector, as requested.”

Ecojustice, the environmental law group, also filed a formal petition on the subsidies issue last November. It isn’t satisfied with the government’s responses either.

“The Harper government gives almost $1 million of taxpayer money to the tar sands industry every day with this single subsidy. Leaving aside the absurdity of this spending, imagine the great opportunities the federal government is squandering by not dedicating this money to renewable energy, mass transit, and energy conservation,” says Albert Koehl, an Ecojustice staff lawyer.

Between 1996 and 2002 the federal government spent approximately $8 billion on tax subsidies for Canada’s oil and gas industries. KAIROS and Ecojustice wanted the government to provide current figures, given the huge increase in tar sands developments. However, the government did not provide enough information to allow an assessment of the impact of subsidies on GHG emissions.

In addition to the government’s questionable support for oil and gas activities domestically, it also finances fossil fuel production internationally through Export Development Canada (EDC), the Canadian International Development Agency (CIDA) and multilateral agencies such as the World Bank.

Kairos and EcoJustice say they will continue to press government to redirect subsidies from the hugely profitable oil and gas companies into green alternatives.

Pumped Up proposes four “areas for action” —

1) Redirect subsidies from fossil fuels to energy efficiency, conservation and renewable alternatives. In general, programs that promote public transportation, improved vehicle technology, more efficient freight transport, and the retrofitting of housing are among the most effective options.

2) Cap GHG Emissions and Put a Tax on Carbon. Carbon taxes promote energy efficiency, conservation and markets for low-carbon alternatives. Measures must also be taken to protect low-income Canadians and those living in remote communities without alternatives to fossil fuels so they are not penalized financially.

3) Promote exports and foreign direct investment in renewable energy, not fossil fuel production. The government should refocus the priorities of Export Development Canada (EDC), enabling it to help Canadian companies ensure their products and services support a greener, less fossil-fuel dependent energy future. Moreover, EDC should develop policies that support human rights, GHG emissions reporting and reductions, and improved disclosure.

4) Promote changes to policies of the International Financial Institutions. Four key changes are needed: end public subsidies for fossil fuels; step up efforts to meet the basic energy needs of the poor; refrain from imposing any policy conditions that would prevent subsidizing electricity connections and tariffs for the poor; and redirect existing energy financing for fossil fuels to renewable technologies and energy efficient projects.

“The serious energy questions we are facing are, at their heart, spiritual in nature for the churches,” says Dorothy McDougall, KAIROS Ecological Justice Program Coordinator. “We need to understand our deep interconnections with the rest of creation.”

For more information, see KAIROS, EcoJustice, and Pumped Up: How Canada subsidizes fossil fuels at the expense of green alternatives.

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