Canada's oilpatch subsidies said to total $2.8B
Published Wednesday, November 3, 2010 7:20AM EDT
OTTAWA - An independent analysis says Canadian governments are subsidizing the oil patch to the tune of about $2.8 billion a year, despite a G20 agreement to pare back such support.
The Winnipeg-based International Institute for Sustainable Development has been adding up the fossil-fuel subsidies of major countries around the world.
In its in-depth study of Canadian supports for oil production, the institute concludes the federal government was responsible for handing over production subsidies worth $1.4 billion in 2008 -- about half the total value of government relief.
The Alberta government's production subsidies were worth $1.1 billion, while Saskatchewan helped with $327 million, and Newfoundland and Labrador gave $83 million worth of relief.
The report says the fiscal cost of the subsidies is expected to double by 2020, causing a two per cent increase in Canada's greenhouse-gas emissions.
At the same time, Canada has committed at the G20 to getting rid of fossil-fuel subsidies, since they distort markets and cause wasteful consumption of energy. It's one of the few commitments the G20 has made to tackle climate change.
The topic will surface again next week when Prime Minister Stephen Harper attends the G20 summit in Seoul.
Last spring, the Finance Department recommended that Harper take a strong stand, as host of the Toronto G20 summit, and unilaterally eliminate federal fossil-fuel subsidies.
Officials argued that the government would save money, be true to its principles of not interfering in the free market, and also show a dedication to fighting climate change.
Harper rejected the advice, and instead has highlighted the fact that his government is phasing out accelerated capital-cost allowances for the oilsands.
The development institute finds 63 remaining subsidy programs in Canada -- mainly a mix of tax breaks and royalty reductions meant to increase exploration and development.
"The Harper government promised to phase out fossil-fuel subsidies at the 2009 G20 meeting, and this study shows that these subsidies are not only still there, but getting bigger," said Keith Stewart, climate campaigner for Greenpeace Canada.
He argued that elimination of tax breaks for the oil patch would level the playing field for green energy, while helping to reduce deficits and pollution.
Finance Department officials said they were still reviewing the report.
"It's important to note, unlike other countries, Canada does not subsidize the price of fossil fuels to consumers," one departmental official said.
"Also, the exact same federal tax rate applies to all industries, including oil and gas."
The institute report does not compare Canada to other countries. The G20 initially discussed focusing on subsidies that encouraged consumption of fossil fuels -- an area where Canada is not really implicated. But the countries agreed a year ago to include production subsidies in their agreement.
The institute is funded in part by the federal government and other governments. In the report, researchers say they expect some disagreement from oil producers and governments, mainly focusing on the definition of the word "subsidy."
The researchers used a World Trade Organization definition, which they note Canada has supported.