Why oil-loving Ottawa should end fossil fuel financing

Fossil fuel subsidies are likely to feature prominently in climate policy debates when Parliament meets again later this month, with a particular focus on how Ottawa will deliver on its recent pledge to stop fossil fuel subsidies by 2023, two years earlier than originally promised.

Equally deserving of public attention is that of the government effort phase out government financing of fossil fuels. This aid, which the government does not take into account a grant, has led to Canada being named one of the leading fossil fuel drivers on the global stage. At the last count, this aid amounted to a total of $13.6 billion average per year, based on figures from 2018 to 2020.

At the UN Climate Change Conference in November, Canada, along with more than 30 countries, pledged to end some of this funding: “direct” support for “undiminished” fossil energy abroad – by the end of 2022. How much of Canada’s total fossil financing this will yield will depend on how Ottawa ultimately defines key terms, such as “reduced”, which are often used to describe projects involving capture and storage of emissions. It has also yet to define the “limited” circumstances under which exceptions can be made.

But wherever it lands on these definitions, it’s clear that the pledge will only cover a small fraction of the total: about $1 billion, according to a preliminary government estimate. It leaves unaddressed the billions in additional federal aid being given to oil and gas companies in Canada. Ottawa has acknowledged this support must also be phased out, but has no deadline.

Secretary of Natural Resources Jonathan Wilkinson said in November that a timeline for the full phase-out would be announced “in the next few months”. As the government works on this timeline, three facts should be kept in mind.

First, supporting the growth of the oil and gas industry is fundamentally contrary to the goal of limiting global warming to 1.5°C – a level above which deadly climate impacts will get much bigger, affecting hundreds of millions more people. Experts say to stay within this limit that: no new oil and gas fields are being developed and that the vast majority of oil-sand reserves remain unused. Global oil production should fall to about half its current level. Industry’s insidious climate impacts wouldn’t abate even if they were captured and stored all of them the emissions released during the production process, because these are more than offset by the larger volume released when its product – oil – is eventually burned.

Second, Canada supports this industry with more government funding than any other G20 country. Only Japan, South Korea and China come closer to provide as much support as possible to fossil fuel companies. Most of Canada’s fossil fuel funding comes from Export Development Canada (EDC), which provides loans, insurance and other support to businesses in Canada and abroad. EDC has recently made billions in loans for controversial projects such as the trans mountain and Coastal GasLink pipelines.

Third, EDC has no plans to end its support for fossil fuels. It has sworn to reduce some of its support for oil and gas exploration and production. But it remains free to maintain or even increase its support for other forms of fossil fuel development — new pipelines or refineries, for example, which could play a vital role in enabling expanded oil and gas production.

The reality that we have to phase out the oil and gas industry simply has to be faced. Credible climate leadership would at the very least cut off the flow of public money that helps it thrive.

Ottawa must commit to ending all public financial support for fossil fuel development of any kind, whether in Canada or abroad, and to do so appropriately. Anything less would not fit the urgency of the climate crisis.

Karen Hamilton is the director of Above ground, a MakeWay Charitable Society project that ensures companies based in Canada or supported by the Canadian state respect human rights and the environment wherever they operate.

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