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On Monday, Canada’s federal government proposed a framework policy to phase out certain “inefficient” fossil fuel industry subsidies.

Environment minister Steven Guilbeault announced the impending guidelines during an interview with Bloomberg News earlier this month. The proposed measures represent fulfillment of a G20 commitment to "phase out over the medium term inefficient fossil fuel subsidies", made back in 2009.

While no deadline for the phase out was set then, Canada’s most recent pledge was to fulfill this commitment by 2023 – with Minister Guilbeault promising in December 2022 to tackle “domestic subsidies” in the first half of 2023.

Canada is currently one of the “largest international fossil fuel financers in the world,” according to the International Institute for Sustainable Development (IISD). Its federal and provincial subsidies to the oil and gas industry include:

• federal tax breaks and research and development support programs;

• provincial incentives such as deep drilling and infrastructure credits; and

• indirect financial benefits such as “loans, guarantees, equity and grants.”

As for what qualifies as an “inefficient” subsidy under the new framework, the government regards this as anything that doesn’t fall into one of the following categories:

• Subsidies that enable significant net GHG emission reductions in Canada or internationally In Alignment with Article 6 of the Paris Agreement;

• Subsidies that support Clean Energy, Clean Technology or Renewable Energy;

• Subsidies that provide an Essential Energy Service to a Remote Community;

• Subsidies that provide short-term support for Emergency Response;

• Subsidies that support Indigenous Economic Participation in Fossil Fuel Activities; or

• Subsidies that support Abated production processes, or projects that have a credible plan to achieve net-zero emissions by 2030.

While the IISD says that the total value of Canada’s current oil and gas subsidies is “difficult to know,” by its own estimate it’s at least $4.8 billion per year, and over twice that if indirect financing is included.

Other estimates run significantly higher: Environmental Defence’s list of Canadian fossil fuel subsidies comes in at over $20 billion for 2022.

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