“Fossil Fuels – At What Cost?” A look at Government support for upstream oil activities in three Canadian provinces: Alberta, Saskatchewan, and Newfoundland and Labrador

Canadian federal and provincial governments provided $2.84 billion to support oil production in 2008, according to study released today by the International Institute for Sustainable Development.

The comprehensive report uses an internationally agreed definition of subsidy adopted by the World Trade Organization* to determine the value of oil production subsidies in Alberta, Saskatchewan and Newfoundland & Labrador. This detailed analysis is the first of its kind in Canada and allows appropriate comparisons of subsidies with other countries.

“The data in this study will help Canadian and provincial governments as they develop an energy strategy for Canada over the next year,” said IISD president and CEO Franz Tattenbach. “The report is a constructive input to that process.

“It sets out the financial, economic and environmental trade-offs implied by these subsidies at the federal and provincial level. This is invaluable to decision-makers as they seek to integrate economic development with options to improve public finances and lower greenhouse gas emissions.”

The report estimates the impact of existing subsidies over the next 10 years. The study forecasts the cost of subsidies to governments would double by 2020. The report estimates a 2 per cent rise in Canada’s greenhouse gas emissions by 2020 and a projected rate of growth for the oil production industry.

As a member of the G20, Canada has recognized that efforts to deal with climate change, wasteful energy consumption, market distortions and barriers to clean energy investment are undermined by inefficient fossil-fuel subsidies and has pledged to phase out its inefficient fossil-fuel subsidies over the medium term.

The federal and provincial governments have already made progress in reducing the level of subsidies and incentives to the oil production industry, though a number of significant subsidies remain and new ones have emerged.

According to the study, the federal government’s share of subsidies in 2008 was $1.38 billion. Within the provincial governments, Alberta was estimated at $1.05 billion, Saskatchewan at $327 million and Newfoundland & Labrador at $83 million. A total of 63 subsidy programs were identified. In most cases, the subsidies were intended to increase exploration and development through a mix of tax breaks and royalty reductions.

The report, Fossil Fuels: At What Cost? Government support for upstream oil activities in three Canadian provinces: Alberta, Saskatchewan, and Newfoundland and Labrador, is part of a series of sector-specific studies that survey government subsidies by IISD’s Global Subsidies Initiative (GSI), a Geneva-based program.

About the International Institute for Sustainable Development

The world is challenged by a changing climate, biodiversity loss, abject poverty and environmental degradation. What can make a difference? Good ideas. Creativity. Passion. Innovation. The achievement of change.

IISD is in the business of promoting change towards sustainable development. As a policy research institute dedicated to effective communication of our findings, we engage decision-makers in government, business, NGOs and other sectors in the development and implementation of policies that are simultaneously beneficial to the global economy, the global environment and to social well-being.

In the pursuit of sustainable development, we promote open and effective international negotiation processes. And we believe fervently in the importance of building our own institutional capacity while helping our partner organizations in the developing world to excel.

Established in 1990, IISD is a Canadian-based not-for-profit organization with a diverse team of more than 150 people located in more than 30 countries. Through our dynamic portfolio of projects, we partner with more than 200 organizations throughout the world. To learn more about our history, please visit the IISD Timeline.

Click here to learn more about our project work and programs, which are guided by our strategic institutional directions. And please visit our IISD Linkages site to follow our coverage of international negotiations on environment and development.

IISD is registered as a charitable organization in Canada and has 501(c)(3) status in the United States. IISD receives core operating support from the Government of Canada, provided through the Canadian International Development Agency (CIDA), the International Development Research Centre (IDRC) and Environment Canada, and from the Province of Manitoba. The Institute receives project funding from numerous governments inside and outside Canada, United Nations agencies, foundations and the private sector.