Canada’s Federal Fossil Fuel Subsidies Jumped More than 200% from 2019 to 2020

February 25, 2021, Ottawa—Canada’s quantified federal fossil fuel subsidies rose to CAD 1.9 billion last year, marking a threefold increase since 2019, according to a new report from the International Institute for Sustainable Development (IISD). The findings indicate that this increase can be largely attributed to fossil fuel funding commitments made in COVID-19 recovery packages. 

“With the Canadian government expected to release its budget for the upcoming year in March, policy-makers need to carefully consider how to spend billions of stimulus dollars in a way that accelerates the transition away from fossil fuels and towards zero emissions while also protecting workers and communities,” says Vanessa Corkal of IISD, lead author of Federal Fossil Fuel Subsidies in Canada: COVID-19 edition. “How recovery funds are spent could make or break the success of Canada’s newly strengthened climate plan, and ultimately, our ability to ensure an equitable and climate-safe future.”

While some of the fossil fuel subsidies provided since the start of the pandemic aim to address environmental or employment-related issues, others do not. To achieve Canada’s climate targets, the report emphasizes that governments must phase out fossil fuel subsidies. 

The report also highlights the importance of applying green strings—clear environmental and social conditions—to all COVID-19 recovery measures. This must be coupled with increased transparency and accountability, experts say, noting that the CAD 1.9 billion total is incomplete since many fossil fuel subsidies are unquantifiable due to a lack of government data.

“The reported $1.9 billion in federal fossil fuel subsidies is only part of the picture in Canada since that figure doesn’t encompass the even higher total for subsidies extended at the provincial level,” says Philip Gass, Transitions Lead at IISD Energy. “The increase in fossil fuel support since the pandemic began is mirrored by some provinces as well, so the upward trend is consistent across different levels of government.”

As Canada reinforces its international climate commitments, the report offers policy-makers concrete steps to realize their promises and bridge the gap between words and action through subsidy reform. The government should avoid introducing new fossil fuel subsidies whenever possible, the report urges. 

The report calls for the federal government to develop a detailed roadmap for fossil fuel subsidy phaseout by 2025, complemented by strong just transition measures for fossil fuel workers and communities. Other actions recommended in the study include completing Canada’s overdue fossil fuel subsidies peer review with Argentina, phasing out public finance for fossil fuels including by aligning Export Development Canada’s policies with the country’s climate ambitions, and employing subsidy reform as a key emissions reduction tool in Canada’s next Nationally Determined Contribution to the Paris Agreement.

“Any serious plan to address the climate crisis must include a phase-out of subsidies and public finance for fossil fuels,” says Corkal. “Among G20 OECD member countries, Canada was recently ranked as the worst performer in terms of the scale of government support for oil and gas production. However, with the right policies and political will, a genuine turning point for Canada’s climate action is within reach.”