Canada will restrict future federal funding and tax allowances for fossil fuel projects under the first framework of a member of the G20 group of major economies to define impermissible subsidies, the nation's top environmental official said today.
The newly defined criteria for "inefficient fossil fuel subsidies" applies to future federal direct spending or tax allowances, leaving any existing programs in place. The policy does not yet address separate public financing through Canada's public-private crown corporations.
But Environment and Climate Change Canada minister Steven Guilbeault called the measure a meaningful step toward low- or zero-carbon energy and a challenge to other governments to meet commitments.
"This is a fundamental shift from what we've done in this country for decades," Guilbeault said.
Canada included direct grants, tariff and duty relief and allowances for tax expenditures — including tax credits and capital cost allowances — in its definition of a subsidy. Existing tax measures and 129 non-tax measures could be affected by the criteria, but regulators did not specify a dollar value for support that would be barred from renewal or new application under the program.
Projects that enable "significant net GHG emissions reductions in Canada or internationally," support renewable energy technologies or involve production processes either abated or with a "credible plan to achieve net-zero emission by 2030" may still receive support under the framework. Projects for supplying a remote community, emergency response or enabling indigenous economic participation in fossil fuel activity may also receive exemptions.
A review of crown corporation financing would take place next year.
"We are eliminating subsidies to produce fossil fuels in Canada, whether it is oil, gas or coal, unless those subsidies are aimed at decarbonizing the emissions of this sector," Guilbeault said. "We are not making a dent — we are putting an end to it."
The Canadian Association of Petroleum Producers (CAPP) lobbied to define inefficient subsidies as those focused on reducing consumption costs, rather than production. The trade group could not be immediately reached for comment on the language.
Guilbeault's announcement in Ottawa was briefly interrupted by protesters seeking deeper cuts.
"You should be happy with this announcement!" Guilbeault said. "This is something you have called for for many years."
Nations reiterated a pledged end to undefined inefficient subsidies for fossil fuel consumption during the 2021 UN Cop 26 climate conference. The G20 countries gave open-ended commitments to end such spending in 2009, with the G7 major economies committing to phase the subsidies out by 2025. Canadian prime minister Justin Trudeau committed to completing today's action this year.
Energy ministers at the G20 Energy Transitions Ministerial Meeting late last week failed to produce a joint statement on emissions commitments.
