Good morning. My name is Bronwen Tucker. I co-lead the public finance program at Oil Change International, a research and advocacy organization focused on securing a just energy transition in line with a livable future. My work is focused on public finance and subsidies for fossil fuels across G20 countries.
First, I think it's important that this conversation is rooted in the context of the pace and the kind of energy transition that we need, so on this, last fall, the International Energy Agency published its first scenario aligned with net-zero emissions by 2050. It found, like many other previous studies, that there is no room for new oil and gas fields to be developed after 2021 and that oil and gas production must decline by about 3% to 4% per year after this.
This can be considered a minimum guideline for private finance. In terms of how governments are structuring their policies and subsidies, they should go far beyond this. It's also a global estimate, so Canada should be going much more quickly if it's doing its fair share. I think the bottom line is that the cost of not having a just and orderly transition away from fossil fuels is much more expensive in terms of dollars, in terms of good jobs and in terms of human lives and suffering. Not acting is much more expensive.
In this context it's clear that the definition of an inefficient fossil fuel subsidy is any fossil fuel subsidy, so this does not include support directly to fossil fuel workers and communities to transition, which is desperately needed. The most egregious subsidies are production-based, so these are ones that promote carbon lock-in, meaning that they commit us to infrastructure that is legally and financially designed to operate for decades to come. Subsidies are production subsidies even if they're given to a company to encourage marginally cleaner production, because they still ultimately free up fiscal space elsewhere.
We've seen this play out with the federal government's orphan well support as well as the 45Q CCS tax credits in the U.S., among a ton of other examples.
These kinds of emission reductions through CCS are incredibly expensive and not aligned with net zero by 2050 goals, because even perfectly functioning CCS, which does not yet exist, leaves behind 70% to 80% of life-cycle emissions of Canadian oil and gas.
The most egregious federal production subsidy in Canada is Export Development Canada's $13.6 billion a year, on average, in government-backed and often preferential support for oil and gas. EDC's activities mean that Canada gives the most trade and development finance to fossil fuels of any country in the G20. This EDC money also contributes heavily to Canada's worst ranking score among OECD G20 countries for all oil and gas production subsidies. Ultimately, it means that more oil and gas projects go forward than would otherwise be possible.