Canada, green light for phasing out fossil subsidies. But how much does it really impact?

The phase out of fossil subsidies by 2025 is a G20 promise made in 2009

Canada is the first G20 country to live up to a promise made in 2009 by the world’s largest economies: the phasing out of fossil subsidies inefficient . This point is reiterated in every international forum, but has not been translated into concrete measures on a large scale.

Canada’s policy of phasing out inefficient fossil subsidies is based on two pillars: a shared framework for case-by-case assessment and guidelines. The Shared Framework (Framework) contains instructions on which subsidies should be considered inefficient and which should be retained.

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What does the phasing out of fossil subsidies in Canada entail?

Grants will be considered inefficient unless they meet one or more of the following six criteria:

  • Allow significant net reductions in greenhouse gas emissions in Canada or internationally in line with Article 6 of the Paris Agreement.
  • Support clean energy, clean technology or renewable energy.
  • Provide essential energy services to a remote community.
  • Provide short-term emergency response support.
  • Support indigenous economic participation in fossil fuel activities.
  • Support reduced production processes, such as carbon capture, use and storage (CCUS) or projects that have a credible plan to achieve zero net emissions by 2030.

The Trojan Horse, for the oil & gas industry, is precisely this last point. Just pair a CCUS project to the plant for which you want to continue receiving subsidies and the government will not be able to oppose. In other words, the new Canadian policy does not go at all in the direction of decreasing the use of fossils and does not close the door to an expansion of the oil and gas sector. All things that are necessary to have some chance to center Paris, according to the IPCC and the IEA.

How effective (or counterproductive) this measure will be for the climate, therefore, is challenging to say. Also because the government has not provided any estimates of what percentage of fossil fuels will be affected by the new rules and what its value is. Nor does it address the “implicit” subsidies, that is, the negative externalities for which the company pays instead of the oil and gas industry.

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