OTTAWA — Thirteen years ago, as part of a commitment by all G20 countries, Canada began pledging to remove all inefficient fossil fuel subsidies from government books.
The pledge has been made in every G20 communiqué since, found its way into the 2015 Liberal election platform, and in 2016 the Liberals set a deadline to do so by 2025.
As a campaign promise last fall, Prime Minister Justin Trudeau moved that to 2023.
But what is an “inefficient fossil fuel subsidy”?
The government still does not know.
“Work to define parameters around the definition of ineffective is ongoing,” Hilary Geller, assistant deputy minister for strategic policy at Environment and Climate Change Canada, said Thursday.
Geller was among several environment and finance officials appearing on the House of Commons environment committee, which is in the midst of a study into fossil fuel subsidies.
She said the work is supposed to be done “in time to have the subsidies phased out” by the end of 2023. But when exactly the definition will be ready is “unclear at this time”.
Tory MP Colin Carrie was intrigued by the admission.
“How can you eliminate a subsidy if you can’t define it? he wondered.
Geller said it’s not like the government is working blind.
“I think the government can be clear about what an inefficient fossil fuel subsidy is not,” she told Carrie.
She said the G20 commitments made clear that the subsidies did not include programs to reduce greenhouse gas emissions or develop and install renewable and clean energy sources.
Environmental advocates want the government to view any federal aid given to fossil fuel companies as an ineffective subsidy. Natural Resources Minister Jonathan Wilkinson made it clear last fall that aid to help businesses reduce greenhouse gas emissions would not be considered “inefficient.”
But landing on the definition to show exactly where the line is drawn proved tricky.
New Democrat MP Laurel Collins, for example, asked whether the new carbon capture and storage tax credit — which she opposes — would only be granted if companies do not increase production after got the equipment.
The tax credit, introduced in the spring budget, has no such restrictions. Collins pointed out that even though emissions from oil production are captured, emissions still occur when the products are used.
Last fall, Environment Commissioner Jerry DeMarco criticized an aid package aimed at helping oil and gas companies reduce their methane emissions to comply with new federal regulations. He said the program allowed more than half of the companies to increase production, but it did not take into account the increase in emissions when that extra fuel was burned.
Canada has been consulting for years to determine which subsidies to eliminate. In 2018, it launched a G20-endorsed peer review with Argentina to examine each other’s programs to identify which subsidies should be removed.
Similar reviews by China and the United States, Germany and Mexico, and Indonesia and Italy were completed in less than two years.
On Thursday, Miodrag Jovanovic, assistant deputy minister for tax policy at the finance ministry, told the committee that Canada and Argentina are unlikely to complete theirs until late 2023.
Julia Levin, national climate program manager at Environmental Defence, said the timeline means the subsidies identified by the review are unlikely to be phased out by the end of next year.
“It’s quite shocking,” she said.
In 2019, the auditor general criticized the federal government for refusing to provide documents to examine Canada’s progress in eliminating subsidies.
Jovanovic said Thursday that Canada had canceled nine tax-related subsidies for fossil fuels since 2009, the last he said was on the way out after this year’s federal budget.
This is a tax program that allows oil, gas and coal companies to use flow-through shares to pass certain tax deductions to investors.
Jovanovic said there is no ambiguity in Finance Canada’s definition of a fossil fuel subsidy: it is any tax measure that supports the consumption or production of fossil fuels.
This is the “ineffective” part where there is disagreement, he said.
This report from The Canadian Press was first published on May 6, 2022.
Mia Rabson, The Canadian Press
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