Pandemic increased direct aid to fossil fuel producers

Photo: The Canadian Press

A new report suggests the economic impact of the pandemic led to a massive increase in federal aid to Canada's oilpatch.

But the annual inventory of fossil fuel subsidies published by the International Institute for Sustainable Development also highlights that almost all of the direct aid was paid out in two programs to protect jobs and cut greenhouse gas emissions.

It raises further questions about how to define fossil fuel subsidies, an issue Canada has not solved despite promising to eliminate "inefficient" ones for more than a decade now.

"The problematic aspect is how do we make sure they're not supporting for future fossil fuel production," said Vanessa Corkal, a policy analyst at the IISD and author of the report.

Her report notes that it makes no sense for Canada to both provide direct funding to help fossil fuel producers and charge a price on the pollution fossil fuels create, likening it to "trying to bail water out of a leaky boat."

Canada first promised to eliminate the subsidies as part of a G20 commitment in 2009, and Prime Minister Justin Trudeau more recently set a target date of 2025 to do it.

But a peer-review of fossil fuel subsidies being done with Argentina is still not done, and a full list of what subsidies even exist has yet to materialize. That peer review began in June 2018 and was expected to be done by June 2020 at the latest.

Corkal said it's impossible to phase out anything until there's a full picture of what exists.

Finance Canada has not yet provided an update on the status of that review.

The IISD report shows Canada spent at least $1.9 billion in direct aid to the traditional energy sector last year, up from $600 million in 2019.

More than three-quarters of that — $1.5 billion — was to help companies restore abandoned oil wells in Alberta, Saskatchewan and British Columbia.

Abandoned wells are a significant source of methane emissions. Canada's most recent emissions inventory suggests in 2018 270,000 tonnes of greenhouse gas emissions came from them. However several studies suggest there are more abandoned wells than we think, and they emit more methane than we count.

Another $320 million was aid to Newfoundland and Labrador's offshore oil industry, which was hit hard last year by the pandemic and the oil price collapse in the spring.

Corkal said initially the oil recovery fund for the province was pitched in a way that would require it to show an environmental impact, but it's not clear that's happening. Most of that funding has yet to be committed.