Fossil Fuel Subsidies

Fossil Fuel Subsidies

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Fossil fuels are a non-renewable source of energy and include coal, oil, and natural gas. While playing an important role in Canada’s economy, they have a negative impact on the environment, because when burned, they produce carbon dioxide, a significant greenhouse gas that contributes to climate change.

As a member of the Group of 20G20, Canada has officially recognized that efforts to deal with climate change, wasteful energy consumption, market distortions, and barriers to clean energy investment are undermined by inefficient fossil fuel subsidies.

The Office of the Auditor General of Canada has done work on fossil fuel subsidies since 2000. It recently produced a study in 2012 and audits in 2017 and 2019.

2019 Audits of Subsidies for Fossil Fuels

Canada’s efforts to phase out inefficient fossil fuel subsidies would benefit
from clearly defining what inefficient means.

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The Office’s audit work on subsidies for fossil fuels produced two reports, the first focusing on Finance Canada and the second on Environment and Climate Change Canada.

The audits examined whether the departments provided advice based on analysis of all relevant and reliable information to support decision making on inefficient tax subsidies for fossil fuels in the first case and on inefficient non-tax subsidies for fossil fuels in the second.

2017 Audit of Fossil Fuel Subsidies

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This audit could not conclude whether Finance Canada supported Canada’s 2009 G20 commitment to phase out and rationalize inefficient fossil fuel subsidies while providing targeted support for the poorest. This was because the Department refused to provide the Auditor General with all documents that may have contained analyses to support the government’s decision making about these subsidies. The audit also found that Environment and Climate Change Canada developed a plan to support Canada’s 2009 G20 commitment but had not yet implemented it.

The report provides detailed findings, auditors’ recommendations, and the Department’s responses.

2012 Study of Federal Support to the Fossil Fuel Sector

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This study meant to provide a listing of government programs and activities by which the government supports the fossil fuel sector in Canada—including but not limited to subsidies—along with the cost of that support. The study did not assess the effectiveness or efficiency of the programs and activities identified or their impacts.