New analysis from Environmental Defence reveals that despite federal government promises, funding to the fossil fuel and petrochemical industries remains high

Ottawa | Traditional, unceded territory of the Algonquin Anishinaabeg People –New analysis released today by Environmental Defence reveals Canada’s federal government provided at least $18.6 billion to the fossil fuel and petrochemical industries in 2023 alone – a substantial amount of taxpayer money that went towards making it cheaper to find, extract, process, transport, and export fossil fuels and their derivatives.

“In 2023, as people across Canada faced a fossil fueled affordability crisis and climate disasters continued to ravage the country and the world, the Government of Canada continued providing financial support to an industry that we need to be winding down in order to avoid catastrophic levels of warming,” said Julia Levin, Associate Director, National Climate, at Environmental Defence. “Taxpayer handouts to Canada’s wealthiest companies means that less money is available for the types of investments that could actually help people across the country who are deciding between food and energy bills.”

Key points from the analysis:

• The 2023 total includes $8 billion in loan guarantees for the TransMountain expansion pipeline, $7.3 billion in public financing through crown corporation Export Development Canada, and over $1.3 billion for carbon capture and storage projects.
• Over the last four years, the federal government’s total financial support to the oil and gas industry was at least $65 billion. That level of support could have fully funded every major wind and solar project in Canada from 2019-2021 twelve times over. It is ten times what the government has invested in climate change adaptation since 2015. Around half of that, $35 billion, is enough to double transit ridership across the country over the next 12 years.
• The climate pollution created by oil and gas companies has massive costs, including health costs, property damage from extreme weather events, and decreased agricultural productivity due to changing weather patterns. In 2023, the cost to society of the pollution from oil and gas companies operating in Canada was an estimated $52 billion.
• The uptake of EVs and renewable energy is set to decrease the consumption of fossil fuels this decade. Oil and gas companies are increasingly looking to petrochemicals (chemicals made from oil and gas, which are then used to make other derivatives such as plastics) to preserve their business and profits. As a result, there are more and more petrochemical projects in Canada seeking subsidies. For example, NOVA Chemicals Corporation, a Canadian petrochemical company, secured a $300 million loan from Export Development Canada, one of the crown corporation’s largest single transactions.
• Rather than subsidizing the oil and gas industry, the Government of Canada should be taxing their excessive profits. Oil and gas extraction companies in Canada made $270 billion in total revenue and $63 billion in profits in 2022 (the most recent year available). Putting in place a tax on the massive profits of oil and gas companies could bring in billions of dollars.

Although the Government of Canada has taken some important steps towards eliminating fossil fuel financing – including new rules ending international public financing as well as inefficient fossil fuel subsidies – this has not translated into lower levels of financial support. This is because most of Canada’s financial support is provided by Export Development Canada (EDC) for domestic oil, gas and petrochemical companies, and therefore has not been addressed by new policies.

Rising subsidies for dangerous distractions

Furthermore, the new rules contain loopholes that allow significant subsidies for the false solutions being promoted by oil and gas companies, especially carbon capture and storage.

In fact, subsidies for carbon capture are likely to increase significantly in 2024. The Government of Canada is finalizing a carbon capture investment tax credit as well as a hydrogen investment tax credit. Recent analysis from the Parliamentary Budget Analysis estimates that these two tax credits will collectively provide over $11 billion to carbon capture and hydrogen projects by 2028.

“Carbon capture is unnecessary, ineffective, and exceptionally risky,” said Levin. “Carbon capture has never worked as promised over the last 50 years; the carbon is dangerous to transport and is extremely expensive, especially compared to the plummeting costs of renewable energy. Oil and gas companies know this is a dead-end technology that won’t make a dent in emissions but are promoting it to delay the clean energy transition and wring out even more subsidies. It’s a greenwashing strategy to justify continued, and even expanded, fossil fuel production.”

Expectations for Budget 2024

The Government of Canada should use Budget 2024 as an opportunity to communicate the government’s approach to phasing out public financing of the fossil fuel and petrochemical industries, including the scope of activities and sources of financing that will be covered.

Furthermore, Budget 2024 should also deliver a new tax on the windfall profits of oil and gas companies and invest the revenues into clean energy measures that will benefit Canadians impacted by the cost of living crisis, such as grants for energy efficiency retrofits, including heat pumps, to drive down home energy bills.

“Fossil fuels are causing the climate crisis. We can’t solve the climate crisis while continuing to subsidize its very cause,” said Levin.

Read the full analysis here

ABOUT ENVIRONMENTAL DEFENCE (environmentaldefence.ca): Environmental Defence is a leading Canadian environmental advocacy organization that works with government, industry and individuals to defend clean water, a safe climate and healthy communities.

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For more information or to request an interview, please contact:

Midhat Moini, Environmental Defence, media@environmentaldefence.ca