In the long run, subsidies distort the market, pushing investment toward sectors that might not otherwise be viable. ![]() When fossil fuels are artificially cheap, investing in renewable energy becomes less attractive. To make matters worse, fossil fuel subsidies disadvantage clean energy because they make it cheaper to produce or burn fossil energy. This is like raising taxes on cigarettes to discourage smoking while also giving tobacco companies tax breaks so they can make more cigarettes and profits. But through money and tax breaks, fossil fuel subsidies increase the same pollution that we’re trying to lower. Rather than making pollution expensive, they make it cheaper. Just like Canada’s past success in stopping acid rain, putting a price on carbon pollution is a key part of the global fight against climate change. By making carbon pollution more expensive, carbon pricing encourages us to pollute less. For example, the federal government recently introduced carbon pricing across Canada. Fossil fuel subsidies also undermine the other climate change actions that Canada is taking. Canada is one of the largest international fossil fuel financers in the world, averaging CAD 11 billion per year from 2018 to 2020. In addition to the more narrowly defined subsidies, governments also provide public finance to fossil fuels through loans, guarantees, equity, and grants. Examples of federal subsidies include research and development support programs and tax breaks like flow-through shares, which incentivize oil, gas, and mining exploration.Įxamples of provincial subsidies include crown royalty reductions in Alberta valued at an average of CAD 1.16 billion and deep drilling and infrastructure credits in British Columbia valued at CAD 350 million in 2019. You can find a list of some of the largest subsidies below. ![]() That includes measures like special tax deductions and direct cash transfers that governments provide to fossil fuel companies. From what we do know, it’s at least CAD 4.8 billion per year. It’s difficult to know, because federal and provincial governments haven’t transparently reported how much they really provide in fossil fuel subsidies. How much does Canada give out in fossil fuel subsidies? Fossil fuel subsidies go to fossil fuel producers or consumers-whether it’s for extracting oil, shipping gas through a pipeline, or burning fossil fuels for energy. Either way, it’s more money in the pocket of whoever receives the subsidy. (It’s also roughly how the World Trade Organization defines the term-and their definition is globally accepted.) This financial benefit most commonly comes as a direct handout of cash or a tax break. There are debates about the difference between “subsidy” and the broader term “support,” but that’s a pretty good plain English definition. What are fossil fuel subsidies?Ī subsidy is a financial benefit that the government gives, usually to a specific business, group, or industry. We’ll cut through the jargon, so you can understand what’s really happening, debate it, and propose solutions for Canadians and Canada’s economy. ![]() Taxes and subsidies are a complicated topic, so we created this web page to explain federal and provincial subsidies in Canada. With COVID-19 stimulus spending, fossil fuel subsidies went up in 2020 compared to previous years. Canada committed to phasing out inefficient fossil fuel subsidies 11 years ago-but even after over a decade, there are still large subsidies to fossil fuel production. Fossil fuel subsidies also work against other climate change actions, incentivizing the very pollution we’re trying to stop. In a world that’s shifting to clean energy, Canada could get left behind if these subsidies don’t change. Oil, gas, and coal are multi-billion-dollar industries, yet every year fossil fuel companies get billions in tax breaks and handouts that increase their profits even further. What are common misconceptions on subsidies?Ĭan you tell me more about these subsidies? Is the government doing anything about this? So subsidies are expensive, and they cost me money.
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