International agencies are urging federal and provincial governments to stop bankrolling Canada’s fossil fuel sector through US$3.7-billion of direct and indirect annual subsidies, but Alberta Premier Jason Kenney insists the industry receives no such help, calling subsidies a “myth.”
According to analysis released by the International Energy Agency (IEA) and the Organization for Economic Co-operation and Development (OECD) Friday, 44 OECD and G20 governments around the world spend half a trillion U.S. dollars each year to support the fossil fuel industry. The agencies said that money should instead go to sustainable investment, including low-carbon energy.
Anthony Cox, deputy environment director with the OECD, told The Globe and Mail from Paris Friday that fiscal support for the fossil fuel sector globally increased by 10 per cent from 2018 to 2019. That support included budgetary transfers, tax breaks and spending programs linked to production.
The bump ends a five-year downward trend, which Mr. Cox called “surprising,” given how many countries have vowed to cut emissions to reach climate change targets. “It’s quite a concern to us, because these are supports that go straight to the industry,” he said.
The report from the IEA and OECD comes after the Canadian Association of Petroleum Producers (CAPP) called on Ottawa to implement an immediate 100-per-cent tax deduction for capital investments in the fossil fuel sector, including those in clean technology and to reduce emissions.
The beleaguered industry has struggled for months with low oil prices and weak demand as the COVID-19 pandemic has kept people at home and throttled the global economy. On Friday, a report released by Houston-based Baker Hughes put the average Canadian rig count for May, 2020, at just 23, down 47 rigs from the same month a year earlier.
CAPP says the tax-break proposal would not amount to a subsidy, but Mr. Cox disagreed.
“You have straight-out subsidies, which are grants and reductions in the costs of things, but there’s also these tax breaks, reduced-interest loans, bank forgiveness of loans and things like that which reduce the cost of doing business,” he said.
“As you can see in Alberta, the industry is starting to lobby for an increase in support as part of [post-COVID-19] stimulus packages. Our plea is that the lobbying efforts should be resisted.”
The OECD and IEA analysis noted that “several measures supporting the production and consumption of fossil fuels remain in place in Canada,” although total support has generally declined since 2008.
Specifically, it said accelerated investment incentives here totalled US$3.7-billion in 2019, and flow-through share deductions tallied US$20-million.
Asked about the report, Mr. Kenney dismissed the notion that there are any subsidies for Canadian energy. He said such programs are applicable only in nations such as Saudi Arabia, Venezuela and OPEC states, which have state-owned oil companies.
“In the past there were policies designed to incentivize economic activity in oil and gas, but that’s true of many industries. There simply is no subsidy program here,” he told media Friday.
That’s despite the fact the Alberta’s government-funded Canadian Energy Centre in Calgary, often referred to as its “energy war room," said subsidies for the sector averaged $271-million annually from 2010 to 2016.
Since then, the Alberta government has loaned the Orphan Well Association $335-million at zero per cent interest, cut corporate taxes by 2 per cent and invested US$1.1-billion in the Keystone XL pipeline project, and pledged billions of dollars more in project loan guarantees.
The federal government has also bought the $12.6-billion Trans Mountain pipeline expansion project, and this year launched several liquidity support programs for companies hit hard by the pandemic.
Mr. Kenney said Friday his government is working with the federal government to ensure the programs are accessible to the fossil fuel sector. He said it’s also developing a credit facility for large employers – including oil and gas – in financial distress due to the “coronavirus recession.”
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Emma Graney