Canada Continues Massive Financial Support For Fossil Fuels

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Environmental Defence, a non-profit based in Canada, has released a report that takes the Canadian government to task for its continued financial support of fossil fuels. In the introduction to the report, the group claims that in 2023, the government of Canada provided at least $18.553 billion in financial support to fossil fuel and petrochemical companies. This includes $8 billion in loan guarantees for the Trans Mountain expansion pipeline, $7.339 billion in public financing through Export Development Canada, and over $1.3 billion for carbon capture and storage projects. Subsidies for carbon capture are likely to increase significantly in 2024, the group adds.

“As people across Canada faced a fossil fuel affordability crisis, and climate disasters continued to ravage the country and the world, the government of Canada continued providing financial support to an industry that we need to be winding down in order to avoid catastrophic levels of warming,” Julia Levin, associate director of National Climate at Environmental Defence, told DeSmog. “Taxpayer handouts to Canada’s wealthiest companies means that less money is available for the types of investments that could actually help people across the country who are deciding between food and energy bills,” she said.

$65 Billion & Counting

The report estimates that the Canadian government’s accumulated subsidies to the oil and gas sector over the last four years was at least $65 billion. “That level of support could have fully funded every major wind and solar project in Canada from 2019 to 2021 twelve times over,” said Levin. “It is ten times what the government has invested in climate change adaptation since 2015. Around half of that, $35 billion, is enough to double transit ridership across the country over the next 12 years.”

The Canadian government decided to bail out the owners of the Trans Mountain pipeline project after the costs of completing it skyrocketed. Initially it was estimated to cost $5.4 billion to complete, but the most recent cost estimates are $34 billion, and the Canadian taxpayers are on the hook for all it. The project remains a substantial financial risk, which is one of the reasons Kinder Morgan abandoned it in the first place. It is expected to transport some of the dirtiest oil in the world, causing it to be called “a global warming machine” by its detractors.

Environmental Defence has been tracking the Canadian government’s subsidies to the oil and gas sector for several years, and as Levin explained in an interview with DeSmog, the organization has noticed certain trends. “With the exception of 2020 as a COVID year, federal support to the oil and gas industry has been consistently around $18 to $20 billion in recent years,” she said. “We are seeing an increase in subsidies for carbon capture, and we know these are set to rise as the Carbon Capture, Utilization, and Storage investment tax credit gets finalized.”

The Carbon Capture Caper

Carbon capture and storage is the oil and gas industry’s preferred solution to addressing climate change, and the Canadian and American federal governments have heavily subsidized the technology. Critics warn, however, that carbon capture is emissions-intensive and will be used to increase oil production through a technique called “enhanced oil recovery,” which basically pressurizes captured carbon dioxide and injects into depleted wells to force out any remaining oil and gas that remains buried underground. Federal and provincial governments in Canada are preparing to spend billions in carbon capture subsidies.

Another boondoggle supported by the Canadian government is so-called blue hydrogen, which is derived from natural gas using carbon capture. Environment Defence calls it “a costly carbon and resource intensive false solution promoted by industry and government alike.” Levin refers to both carbon capture and blue hydrogen as “dangerous distractions.”

“The government of Canada is finalizing a carbon capture investment tax credit as well as a hydrogen investment tax credit,” Levin pointed out. “Recent budget analysis from the Parliamentary Budget Office estimates that these two tax credits will collectively provide over $11 billion to carbon capture and hydrogen projects by 2028.

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Delaying The Transition Away From Fossil Fuels

“Despite 50 years of investment, carbon capture has never worked as promised,” said Levin. “Most projects never make it off the ground; the few that do fail to deliver the promised emissions reductions. Oil and gas companies know this is a dead-end technology that won’t make a dent in emissions but they are promoting it to delay the clean energy transition and wring out even more subsidies.”

The government’s misuse of public money isn’t limited to unproven technologies masquerading as climate change solutions, Levin says. The Environmental Defence report reveals that the same funds could have been used for new green energy projects and the development of public transit infrastructure, and could also have taken a bite out of Canada’s affordability crisis.

“At a time when Canadians are dealing with a cost of living crisis, that level of funding could have retrofitted millions of homes to make them more energy efficient, therefore reducing energy bills,” Levin said. “It could have been used to reduce Canadians’ dependence on fossil fuels by switching our cars, furnaces, and stoves to electric options, which shields households from the inflationary pressures caused by fluctuating oil prices.”

She noted that there are other types of subsidies that Environmental Defence did not include in its inventory. “The climate pollution created by oil and gas companies has massive costs, including health costs, property damage from extreme weather events, and decreased agricultural productivity due to changing weather patterns,” she said.

Not only do Canada’s continued subsidies to the fossil fuel sector defy explanation in light of the gathering climate crisis, they also contradict the government’s official messaging on fighting global heating and the Canadian public’s expectations of their government. “Ending fossil fuel subsidies should be the low hanging fruit of climate policy,” said Levin. “It’s painfully obvious that when you’re in a hole, the first thing you do is stop digging. Rather than subsidizing fossils we should be taxing their massive profits — and investing the revenues into clean energy measures that will benefit Canadians.”

The Takeaway

The Environmental Defence report could apply to many other nations which are uttering pious mouthings about addressing the climate crisis while continuing to subsidize fossil fuels. The US is certainly not immune from a similar critique, nor is the UK. Most world leaders are content to pay lip service to climate goals while continuing their support for extracting and burning fossil fuels. Nigeria has kicked its dependence on fossil fuels to concentrate on renewable energy. If it can do it, why can’t others?

By the time those nations come to appreciate the error of their ways, it may well be much too late for anything but the “Hail Mary” — geoengineering. And there is no guarantee that even that will be successful. Levin is correct. We urgently need to stop making the hole we are in deeper. With fossil fuel companies making record profits, it is unfair that taxpayers should be expected to subsidize their operations in any way, shape, or form.

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