This article was published by The Energy Mix on March 26, 2024.
By Christopher Bonasia
The Canadian government’s enabling relationship with the oil and gas industry is holding back action to end financing for fossil fuels, say advocates, raising concerns about meeting climate goals as fossil fuel companies continue to grow.
The reality that the oil sector is growing amid a climate crisis is “the tip of the iceberg” indicating the relationship between the government and the industry, said Green Party leader Elizabeth May, who recently co-hosted a panel of experts in Ottawa to discuss steps toward ending public finance for fossil fuels.
Though Canada has plans to phase out its “inefficient” oil and gas subsidies, making it the first among wealthy G20 countries to take such a step, its fossil fuel sector continues to thrive and is on track to keep expanding. While emissions intensity is falling, Canada’s overall emissions continue to climb, in step with its increasing oil and gas production.
This trend will continue unless the federal government breaks off its support for the fossil fuel industry, panelists said, and that goes beyond financing—through implicit policy alignments and support beyond financial subsidies.
The manner in which resource extraction intersects with Indigenous rights is one gauge of how the government backs industry, said panelist Eriel Tchekwie Deranger, executive director and co-founder of Indigenous Climate Action.
Deranger said Canada has failed “massively” to uphold commitments made in treaties and legislation to consult with and get approval from First Nations. Instead, the government uses “economic coercion.” Indigenous communities are cornered as partners in fossil fuel projects as the government emphasizes that the projects must go forward. A community is left with only two choices: be part of it, or not. Meanwhile, essential community systems remain underfunded as investments continue to flow to oil and gas.
And instead of listening and hearing warnings to stop pipelines, the government and industry are “inviting” First Nations to be partners in developing fossil fuels, Deranger added.
In effect, the government gives “social licence” to oil and gas companies to continue, a different form of subsidy than plain money, she added.
Similarly, oil and gas companies benefit from a “culture of enablement” arising from “a world view that the industry can continue in its present form,” said panelist David Wheeler, an expert in sustainable business practice.
He said the fossil fuel industry has adopted a mindset where a 2°C to 3°C rise in average global temperatures a foregone conclusion, and oil companies will be able to continue producing and delivering profits to shareholders.
So far, he told participants, Canada’s actions to phase out fossil fuels have been poor, despite the “good intentions” of many government leaders. Continual investments in fossil fuel infrastructure through Export Development Canada (EDC) are proof of this, said Wheeler, who was a member of EDC’s corporate social responsibility advisory council between 2015 and 2021.
Wheeler said EDC is being used to channel funding to domestic fossil fuel projects like the Trans Mountain pipeline expansion (TMX), which is costing taxpayers billions of dollars. The project’s price tag ballooned to $34 billion earlier this month, and the Crown-owned Trans Mountain Corporation predicts it will “generate about 400,000 tonnes of greenhouse gas emissions annually.”
Continuing to use EDC to fund domestic fossil fuel projects leaves open a “a gaping hole” in the government’s climate action that is at best a “systematic drag on national climate policy commitments”, or at worst enables “wholly unaccountable political decision-making by the Government of Canada,” Wheeler said.
And this “gaping hole” is having real world, domestic impacts, he added. No fewer than 18 new transactions were processed in this way between June 2018 and February 2024, 11 of them for TMX.
Economist Renaud Gignac, senior advisor at Investors for Paris Compliance, elaborated on how federal support for fossil fuels is entrenched in spending policies. In many ways, the cost of supporting fossil fuels is indirectly placed on communities, through “imposed externalities” like clean-up costs and public health impacts. Gignac said there is also substantial funding from public subsidies, but data gaps make it hard to track the full amount.
Gignac said the federal government’s guidelines on ending “inefficient” fossil fuel subsidies do not apply to provinces and territories, leaving room for those governments to resist reining in the sector. The industry also benefits from sub-national politicians pushing back against the federal carbon pricing scheme, which already has favourable terms and exemptions for large emitters [pdf].
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