Because the emission of greenhouse gases hurts people around the world and in future generations, many people argue that anyone who emits them should be made to pay a fee for doing so. One way to do this is with a carbon tax, which is a specific example of a Pigovian tax applied when someone undertakes an activity that causes harm to others.
Rather than imposing such a fee on users of fossil fuels, Canada actually provides them with large subsidies. An assessment by the Climate Action Network found that oil and gas companies are receiving billions of dollars a year in subsidies, from various levels of government. This view conforms with that of the International Institute for Sustainable Development (IISD), which found that the Canadian oil and gas industry “received $2.84 billion in tax incentives from the different levels of government across Canada in 2008 through 63 different subsidy programs”. They estimate that $1.38 billion of this comes from the federal government. Alberta is the province that provides the most subsidy: $1.05 billion, followed by Saskatchewan at $327 million and Newfoundland and Labrador at $83 million.
The IISD estimates that emissions from the oil sands would be 12% lower without these subsidies. These subsidies continue despite a pledge made to the G20 that they be eliminated.
Another way governments subsidize oil and gas producers is by protecting them from legal liability in the event of accidents. This is what the Government of Alberta is planning to do, in relation to carbon capture and storage (CCS) projects. Such liability limits would be similar to those in the nuclear industry, where operators of nuclear power plants cannot be held financially responsible for the full cost of accidents they cause. Rather, taxpayers will be on the hook to pay for many of the cleanup costs.
Call to stop fossil fuel subsidy
By Roger Harrabin
Environment analyst
A global energy think tank has urged nations to stop subsidising fossil fuels as soon as possible.
It says that last year governments, mainly in the developing world, spent $312bn subsidising coal oil, gas and coal.
This was even though they agree these fuels cause climate change.
The International Energy Agency says removing the subsidies would be the quickest way to control the soaring demand for energy.
It would also cut CO2 emissions by 5.8%
But the IEA report admits that vested interests and political inertia will be major barriers to making progress on the issue.
Cutting out fossil fuel subsidies by 2020 would allow fuel prices to rise and reduce overall energy consumption 5% – this equates to all the fossil fuel used by Japan, South Korea and New Zealand.
Government subsidies to tar sands companies larger than Environment Canada’s entire budget
Blogpost by Keith Stewart – November 8, 2010 at 10:25 AM
Oil companies in Canada are getting a particularly sweet deal, as the subsidies that they were able to put a dollar figure to totalled over $2.8 billion in 2008 (and there were more subsidies that they couldn’t quantify). Most of that came from the federal ($1.38 billion) and Alberta ($1.05 billion) governments, with the tar sands taking in the lion’s share ($1.59 billion) of this money.
To put this in perspective, more of our money is going to subsidize oil companies’ destruction in the tar sands than there is in the combined 2008 budgets of Environment Canada ($1.12 billion) and Alberta Environment ($403 million).
Open Letter to Prime Minister Harper and Minister Flaherty
November 10, 2010
An appeal to end special tax breaks to oil, coal and gas companies
As organizations concerned about the worsening impacts of climate change at home and around the world, as well as the need to seriously reduce our greenhouse gas emissions in Canada, we are calling on the Government of Canada to eliminate tax breaks to the companies that produce oil, gas and coal in the federal 2011 budget.
The Government of Canada provides around a billion dollars in tax breaks every year to companies producing fossil fuels, who are among the richest in the country. As the world moves towards a clean energy economy, Canada’s ongoing tax breaks and subsidies to the fossil fuel sector are taking us in the wrong direction.
In an era of fiscal constraint, hundreds of millions of dollars in savings could go a long way towards meeting pressing social and environmental needs in Canada. By ending fossil fuel tax breaks, Canada would also be meeting the commitment our government made in Pittsburgh in 2009, along with other G20 leaders, to phase out subsidies and tax breaks to companies producing oil, gas and coal.
By subsidizing the companies that produce fossil fuels, the Government of Canada is encouraging greater production and facilitating the rapid expansion of the tar sands, Canada’s fastest-growing source of greenhouse gas pollution. Globally, artificially low costs of fossil fuels have been shown to encourage wasteful consumption, distort energy markets, and allow for increased greenhouse gas pollution, thereby fueling the climate crisis. Subsidizing oil extraction also makes investments in oil more attractive compared to cleaner alternatives like wind and solar power, thereby further tying our economies to fossil fuels.
We would like to take this opportunity to urge the Minister of Finance and the Prime Minister to use the 2011 budget as an opportunity to end tax breaks for oil coal and gas companies.
Thank you for your time and attention