Fuelling the oil addiction

A report released last week by the Climate Action Network Canada tells the story behind the government's nearly $1.4 billion per year in tax breaks and subsidies to the oil, gas and coal industry in Canada. It shows that despite obvious problems, as well domestic and international pressure, this government has actively tried to protect tax breaks to big fossil fuel companies.

With the forthcoming budget in early 2011, there is an urgent opportunity for the government to stop being reckless and end these giveaways.

Giving big oil and gas companies huge tax breaks in and of itself sounds pretty unnecessary given that these are companies who have revenues in the billions, but there are also some other critical problems with these breaks.

By making oil and gas production cheaper for big companies, the government is making it easier and faster for big oil projects, such as those in the tar sands, to grow and pollute more. In fact, a new study from the International Institute for Sustainable Development shows that the greenhouse gas emissions of the tar sands are 12 per cent higher than they would have been if companies weren't getting a free ride from the government.

Globally, artificially low costs of fossil fuels have been shown to encourage wasteful consumption, distort energy markets, and allow for increased greenhouse gas pollution, thereby fueling the climate crisis. Subsidizing oil extraction also makes investments in oil more attractive compared to lower carbon, lower risk alternatives, thereby increasing the lock-in of economies into fossil fuels.

The numbers are new, but the story is not. Demands to stop subsidizing the fossil fuel industry have been high on many agendas this year. In Sept. 2009, President Barack Obama led a G20 initiative to phase out fossil fuel subsidies and tax breaks, an initiative which was agreed on by all G20 leaders including Prime Minister Stephen Harper.

Leaders returned to their respective countries after that meeting and asked finance departments to submit plans and proposals for the phase out. In May of last year, shortly before countries were to submit their plans at the G20 meeting in Toronto in June, a memo was leaked to the media. This memo was the Department of Finance's recommendation to the Minister of Finance for a fossil fuel subsidy phase-out plan.

The memo laid out two clear options. #1. Act (the highly recommended option), or #2. Don't Act, but lead people to believe you are.

The finance department recommended the government take concrete fiscally and environmentally responsible measures as supported by many G20 leaders as well as organizations such as the International Energy Agency and the Organization for Economic Cooperation and Development to begin to end these giveaways to rich oil and gas companies.

Instead they went for option #2. When the final reports were public Canada's "plan" was identical to the "don't act, but lead people to believe you are," option in the Department of Finance memo. They cited certain initiatives that had been taken years ago, but nothing new.

One could guess as to why the government continues to let big oil keep their money in their pockets. According to the lobby registry and media articles, these companies certainly get significantly more face time with the likes of the prime minister and the minister of the environment.

Whatever the motivations for the ongoing tax breaks, the consequences are much harder to swallow. Ongoing subsidies and tax breaks to the fossil fuel industry are irresponsible and are fuelling climate change, one of the biggest crises facing humanity today. The government's inability to take action even on the most elemental levels, such as putting an end to tax breaks for the richest companies in the world, reflects a broader recklessness towards this problem.

Vulnerable regions around the world are already bearing the brunt of some of the devastating consequences of global warming, and the prognosis is not encouraging. In east Africa, over 20 million people are enduring a humanitarian crisis with the worst droughts to hit their region in history, and in west Africa another 10 million face a similarly extraordinary crisis. The World Health Organization estimates the number of people at risk of hunger will increase by over 50 million people in the next 40 years as a result of climate change.

Here in Canada, the impacts of extreme weather are also becoming increasingly severe. In the wake of unprecedented number of forest fires in British Columbia this year, the province has admitted its forest fire strategies are outdated in light of the dramatic climate change the province is experiencing. In our northern regions, entire cultures are being challenged as traditional ways of life become incompatible with the changing climate.

The National Round Table on the Environment and the Economy (NTREE) warns that unless action is taken to address climate change, with projected warming, Canada can expect sea level rise, increased frequency of wildfires in the western provinces, desertification and drought in the Prairie provinces, reduced water quality and quantity across the country, increased risk to people and property from extreme weather events, increased exposure to vector-borne diseases, and increasing risk to farming from drought and agriculture pests and disease (among many other impacts).

While other world governments are taking this problem seriously, the Government of Canada continues to ignore the will of parliament and the majority of the Canadian public that wants strong action on climate change now. Prime Minister Harper may have failed to protect our environment and our climate up until now, but if we act urgently, it is not too late.

Ending tax breaks and other subsidies to dirty oil will not in and of itself avoid dangerous climate change, but unless we stop fuelling the problem it will be that much harder to embrace the solutions. This government has an opportunity to change direction and move towards a cleaner future. In the 2011 budget Prime Minister Harper and Minister Flaherty should end tax breaks for oil, gas and coal companies. This will lead to increased revenue of over one billion dollars and eliminate an important obstacle to fighting climate change. 

Hannah McKinnon is the communications co-ordinator with Climate Action Network Canada where she is working together with over 70 leading non-governmental member organizations in Canada. She can be reached at

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