Good afternoon and thank you for inviting me to speak to you today about this important topic. My name is Keith Brooks and I'm the programs director at Environmental Defence.
I just want to acknowledge that I'm sitting in today for my colleague Julia Levin, who is our resident expert on what this committee is referring to as federal assistance for the oil and gas industry and what we generally refer to as fossil fuel subsidies.
As I'm sure committee members are all aware, Environmental Defence tracks fossil fuel subsidies closely. In 2020, we pegged federal subsidies at $18 billion, and in 2021, the figure was $8.6 billion. Federal subsidies in 2022 so far amount to over $18 billion. That's not including the subsidies around Trans Mountain that Mr. Gunton referred to. These are direct transfers to the fossil fuel industry and fossil fuel companies. That's just the subsidies that we can track, because many are not available to the public.
These subsidies include monies allocated to support R and D for carbon capture and storage, money from the net-zero accelerator earmarked to reduce the emissions of oil and gas companies and other funds. Our running tally can be found on our website at environmentaldefence.ca. The full link can be shared afterwards.
Of the $18.4 billion, Export Development Canada has given out $5.96 billion in subsidies in 2022 according to its own figures, and a subsidy of about $12 million has been allocated directly to the Trans Mountain pipeline expansion, $10 billion of which is in the form of a loan guarantee. Canada is very generous in this regard. To put it in context, a report from Bloomberg New Energy Finance found that from 2015 to 2019, the Government of Canada provided $100 million to the fossil fuel sector and raised its level of support for fossil fuels by 40% over those years, which is the second-largest increase among G20 countries. Globally, Canada provides more public financing to oil and gas than any of the other G20 OECD countries.
I know that some of this debate about subsidies gets hung up on differences of opinion concerning what counts as a subsidy and, in some cases, what counts as an inefficient subsidy. It's our opinion that all support given to the oil and gas sector should be considered as fossil fuel subsidies and that fossil fuel subsidies are inherently inefficient.
When it comes to the definition of “subsidy”, we suggest that Canada harmonize with the international community and adopt the WTO's definition of the term. The definition contains three elements. It's a “financial contribution...by a government or any public body...which confers a benefit.” In the WTO's definition, the financial contribution includes grants, loans, loan guarantees and incentives. The WTO says that “the existence of a benefit is to be determined by comparison with the market-place (i.e., on the basis of what the recipient could have received in the market).” A loan guarantee, for example, that's intended to de-risk private equity would clearly fit this bill.
With respect to the question of inefficient subsidies or whether giving tax breaks and other incentives to reduce emissions should be counted, this too has been explored. In fact, the G20 commitment describes inefficient fossil fuel subsidies as those that, among other things, “impede investment in clean energy sources and undermine efforts to deal with the threat of climate change.”
Given the scarcity of capital, a subsidy to oil and gas companies can well be seen as impeding investments in clean energy sources. Otherwise, how else can we explain why subsidies for fossil fuels exceed those for clean energy? They most certainly undermine efforts to deal with the threat of climate change because they make the construction and expansion of fossil fuel infrastructure viable when it would not otherwise be so, and they delay and obfuscate what is actually needed to reduce emissions in Canada and the world, which is to phase out fossil fuels.
Subsidies for carbon capture and storage are extremely inefficient. The Canadian public has spent $5.8 billion on CCUS since 2000. Collectively, these expensive projects have captured only 3.5 megatonnes of carbon per year, which is 0.05% of Canada's greenhouse gas emissions. Furthermore, 70% of the carbon captured has been used for enhanced oil recovery, which is actually increasing oil production, so these public subsidies have likely resulted in more emissions, not less.
I would further argue that fossil fuel subsidies are inefficient in Canada, as they run directly counter to one of Canada's most prominent policies: carbon pricing. Effectively, subsidies for the fossil fuel sector act as a negative price on carbon. Subsidies for cleanup also run counter to the polluter pay principle, which is the foundational concept underpinning carbon pricing in Canada.
I want to make one final point. Canada promised to phase out international fossil fuel finance a year ago at COP26. That's a great thing. Specifically, the agreement says that countries will “end new direct public support for the international unabated fossil fuel energy sector by the end of 2022”.
I think Canada should recognize that its fossil fuel sector is international. We export nearly four million barrels of oil per day. Smoothing the way for domestic oil and gas production intended for export should be viewed as support for the international fossil fuel sector. Indeed, it's Export Development Canada that provides all of these subsidies.
Thank you, committee members, for the opportunity to speak to you today. I will be happy to take any questions when the time comes.