Ottawa reveals conditions for allowing future fossil fuel subsidies

Ottawa is restricting the conditions under which it will allow subsidies to the fossil fuel industry, but is leaving untouched — for now — the industry’s largest source of public financing.

On Monday, Environment Minister Steven Guilbeault released six rules that are now to shape how Canada supports the industry.

“What we’re eliminating are federal supports that are directed to the oil and gas sector, and gives the oil and gas sector an economic advantage,” Guilbeault said in Montreal.

Subsidies will be allowed if they support clean energy. Companies that reduce their greenhouse-gas emissions or have a credible plan to achieve net zero by 2030 could also be supported.

Subsidies aiding Indigenous involvement in the industry will continue, as will those that support service to a remote community or form part of an emergency response.

The federal Liberals will also permit subsidies that align with Article 6 of the Paris Agreement, which allows countries to claim carbon credits for providing fuels capable of lowering the carbon footprint of another country.

Guilbeault said 129 tax and non-tax measures were examined as the guidelines were set up. He couldn’t provide a figure for how much financing would be affected, saying it’s impossible to predict how many applications the government would have had from industry.

A government official, speaking on background, said government programs that could be affected by the guidelines control about $1 billion in public money.

Monday’s announcement does not affect public money that flows through Crown corporations such as Export Development Canada — the source of the majority of government subsidies to the sector.

Julia Levin of Environmental Defence said her group calculated that about $19 billion in financing for fossil fuels flowed through Export Development Canada in 2022. That’s compared to about $2 billion that came from other sources.

Guilbeault promised rules restricting Crown investments in fossil fuel development will come next year.

Still, Levin and other environmentalists praised Monday’s announcement.

“There’s a lot to be praised and there are problematic bits as well.”

She wanted to see more information on how the guidelines will be implemented and enforced across government departments.

Laura Cameron of the International Institute for Sustainable Development said, “We see this as a big moment to celebrate.”

However, she was concerned about the space left open for public finance of carbon capture and storage projects.

Cameron said such projects are too expensive and take too long to build to contribute much to the fight against climate change.

As well, she noted that carbon capture and storage only addresses oil and gas emissions from production — not the 80 per cent of the carbon from a barrel of oil that’s released when it’s burned.

“Carbon capture and storage is not net zero,” she said.