Two leading international agencies, the Organization for Economic Cooperation and Development (OECD) and the International Energy Agency, are urging the federal and provincial governments to do away with fossil subsidies worth US$3.7 billion last year, just as the fossil lobby accelerates its demands for exactly that kind of largesse from taxpayers.
“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,” OECD Deputy Environment Director Anthony Cox told the Globe and Mail. “As you can see in Alberta, the industry is starting to lobby for an increase in support as part of [post-pandemic] stimulus packages. Our plea is that the lobbying efforts should be resisted.”
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At the Bank of Canada’s average exchange rate for 2019, the subsidy total in the OECD-IEA study equates to C$4.9 billion.
The two agencies’ joint analysis released Friday shows fossil subsidies in 44 OECD and G20 countries totalling US$178 billion per year. “The agencies said that money should instead go to sustainable investment, including low-carbon energy,” the Globe says, yet the numbers show “that fiscal support for the fossil fuel sector globally increased by 10% from 2018 to 2019. That support included budgetary transfers, tax breaks, and spending programs linked to production.”
Last year’s increase marks the end of a five-year downward trend, which Cox called “surprising” given countries’ promises to cut carbon emissions. “It’s quite a concern to us, because these are supports that go straight to the industry,” he said.
“I am saddened to see some backsliding on efforts to phase out fossil fuel support,” but “this rise in production subsidies seems set to continue in 2020 with some countries targeting state aid to fossil fuel and related industries,” said OECD Secretary-General Angel Gurría. “Subsidizing fossil fuels is an inefficient use of public money and serves to worsen greenhouse emissions and air pollution. While our foremost concern today must be to support economies and societies through the COVID-19 crisis, we should seize this opportunity to reform subsidies and use public funds in a way that best benefits people and the planet.”
“Fossil fuel subsidies are a roadblock to achieving a sustainable recovery from the Covid-19 crisis,” agreed IEA Executive Director Fatih Birol. “Today’s low fossil fuel prices offer countries a golden opportunity to phase out consumption subsidies. As governments look to boost jobs and plan for a better and more resilient future, it is essential to avoid market distortions that favour polluting and inefficient technologies.”
“By inducing increased greenhouse gas and air pollutant emissions, such policies go against domestic efforts to curb climate change and improve air quality,” the two agencies state. “They maintain economies locked up in energy- and pollution-intensive technologies; they jeopardize efforts to modernize economies and strengthen the competitiveness of clean, low-carbon sectors; and they may be socially inequitable. By encouraging combustion of fossil fuels, such government support contributes to exposing people to air pollution, which can exacerbate vulnerability to pandemics like the COVID-19.”
The Canadian Association of Petroleum Producers and, coincidentally, Alberta Premier Jason Kenney claim there are no fossil fuel subsidies in Canada, but the Globe and Mail coverage includes a partial list.