Canada Ends Fossil Fuel Subsidies

Johnny Wentzel
Canadian Minister of Environment and Climate Change Steven Guilbeault, courtesy The Hill Times

In 2009, Canada and the other G20 countries committed to the eventual phase out of “inefficient” fossil fuel subsidies. That commitment is finally taking shape and it only took as long as it took James Cameron to make Avatar 2 (coincidence?).

What happened: This week, the Canadian federal government revealed a framework for the phase out of inefficient fossil fuel subsidies, the first of the G20 countries to make such a move. In typical bureaucratic fashion, the easiest way to define an inefficient subsidy is to explain what it isn’t.

In the new framework, all fossil fuel subsidies—transfers of public funds or incentives to fossil fuel projects—will be considered “inefficient” unless they meet specific decarbonization criteria.

  • To qualify for subsidies, energy projects must include emissions reduction, clean tech or renewable energy development, services to remote communities, short-term emergency response support, support of indigenous economic participation, or have a credible plan to reach net-zero emissions by 2030.

CCS reigns supreme

Carbon sequestration and storage (CCS), a technology that reduces emissions by injecting them underground, qualifies for subsidies under the new framework. It sounds straightforward, but the people are divided.

Critics of the framework are calling it too gentle, claiming it allows fossil fuel operators to use CCS subsidies as a loophole to fund further oil and gas developments. Meanwhile, The Pathways Alliance—a partnership of the six largest oil sands companies—is pleased with the announcement.

  • The Pathways Alliance is planning a $16.5 billion CCS project in Alberta, with phase 1 scheduled for completion by the end of the decade.

Zoom out: How this subsidy phase out will ultimately unfold is a little unknown for now, like the release date for Avatar 3 (this is getting spooky). But it’s clear that Canada plans to lead the global charge in decarbonizing the sector with incentivized clean tech.