Fossil Fuel Subsidies; Tax Subsidies for Fossil Fuels; Non-Tax Subsidies for Fossil Fuels; Emissions Reduction Fund

Opening Statement to the Standing Committee on Environment and Sustainable Development

Fossil Fuel Subsidies

(Report 7—2017 Spring Reports of the Auditor General of Canada)

Tax Subsidies for Fossil Fuels—Department of Finance Canada

(Report 3—2019 Spring Reports of the Commissioner of the Environment and Sustainable Development)

Non-Tax Subsidies for Fossil Fuels—Environment and Climate Change Canada

(Report 4—2019 Spring Reports of the Commissioner of the Environment and Sustainable Development)

Emissions Reduction Fund—Natural Resources Canada

(Report 4—2021 Reports of the Commissioner of the Environment and Sustainable Development)

5 April 2022

Jerry V. DeMarco
Commissioner of the Environment and Sustainable Development

Mr. Chair, we are happy to appear before your committee today to contribute to your study of fossil fuel subsidies. I would like to acknowledge that this hearing is taking place on the traditional unceded territory of the Algonquin Anishnaabeg People. Joining me today are Heather Miller and Sylvie Marchand, who were responsible for a number of reports on this subject.

In 2017 and 2019 we examined whether Finance Canada and Environment and Climate Change Canada supported decision-making in order to meet Canada’s commitment to phase out inefficient fossil fuel subsidies by 2025.

In these audits, we asked the departments to explain how they defined “inefficient fossil fuel subsidies” and whether they had identified inefficient tax and non-tax subsidies. Without a clear definition, the departments could not identify which fossil fuel subsidies were inefficient and should be phased out.

In 2017, we found that Finance Canada had not defined what an inefficient fossil fuel tax subsidy was, nor could the department tell us how many there were.

In 2019, we found that Finance Canada still did not have a clear and meaningful definition of inefficient. It focused on fiscal and economic considerations but did not consider economic, social, and environmental factors, which are components of sustainable development, in decision making on fossil fuel subsidies over the short, medium, and long terms.

In 2017 Environment and Climate Change Canada did not know the extent of federal non‑tax measures that could be inefficient fossil fuel subsidies. In 2019, the department’s work to identify inefficient non‑tax subsidies for fossil fuels was still incomplete and not rigorous.

As you are aware, in November 2021, we presented an audit report on Natural Resources Canada’s Emissions Reduction Fund for the oil and gas sector. The program’s interest‑free and non-repayable loans for oil and gas companies are examples of subsidies. We found that the program was poorly designed because it did not link funding to net emission reductions from oil and gas operations.

Canada needs to assess all of its supports for the fossil fuel industry against how they will foster or hinder Canada’s transition to net‑zero emissions.

Despite repeated government commitments and plans to decrease greenhouse gas emissions, they have increased by more than 20% from 1990 to 2019. Urgent actions are needed to reverse this trend.

Mr. Chair, this concludes my opening remarks. We would be pleased to answer any questions the committee may have. Thank you.