IISD Report Reveals Subsidies to Canada’s Oil Industry

Winnipeg – Canadian federal and provincial governments provided $2.84-billion to support oil production in 2008, according to study released today by the International Institute for Sustainable Development.

The report, Fossil Fuels: At What Cost? Government support for upstream oil activities in three Canadian provinces: Alberta, Saskatchewan, and Newfoundland and Labrador, is part of a series of sector-specific studies that survey government subsidies by IISD’s Global Subsidies
Initiative, a Geneva-based program.

The comprehensive report uses an internationally agreed definition of subsidy adopted by the World Trade Organization to determine the value of oil production subsidies in Alberta, Saskatchewan and Newfoundland & Labrador. This detailed analysis is the first of its kind in Canada and allows appropriate comparisons of subsidies with other countries.

“The data in this study will help Canadian and provincial governments as they develop an energy strategy for Canada over the next year,” said IISD president and CEO Franz Tattenbach. “It sets out the financial, economic and environmental trade-offs implied by these subsidies at the federal and provincial level. This is invaluable to decision-makers as they seek to integrate economic development with options to improve public finances and lower greenhouse gas emissions.”

The report estimates the impact of existing subsidies over the next 10 years, and forecasts the cost of subsidies to governments would double by 2020. The report estimates a 2 per cent rise in Canada’s greenhouse gas emissions by 2020 and a projected rate of growth for the oil production industry.

As a member of the G20, Canada has 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 and has pledged to phase out its inefficient fossil-fuel subsidies over the medium term.

The federal and provincial governments have already made progress in reducing the level of subsidies and incentives to the oil production industry, though a number of significant subsidies remain and new ones have emerged.

According to the study, the federal government’s share of subsidies in 2008 was $1.38-billion. Within the provincial governments, Alberta was estimated at $1.05-billion, Saskatchewan at $327-million and Newfoundland & Labrador at $83-million. A total of 63 subsidy programs were identified.

In most cases, the subsidies were intended to increase exploration and development through a mix of tax breaks and royalty reductions.

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