Why $1.6B in aid for oil and gas industry is awkward for Canada

Pipeline politics

Alberta's oil problems — too much production and not enough pipeline capacity to get it to foreign markets — are costing the province and the Canadian economy an estimated $80 million a day.

But with both a provincial and federal election on the horizon, it's fair to say that the potential political price of the crisis is also weighing on the minds of Premier Rachel Notley and Prime Minister Justin Trudeau.

Over the past couple of days, there have been noisy and sizeable pro-pipeline demonstrations in both Grande Prairie and outside of Calgary's city hall, with crowds of oil workers and their supporters demanding more government action.

And now, the money is suddenly starting to flow in hopes of inducing the bitumen to do the same.

This morning in Edmonton, Natural Resources Minister Amarjeet Sohi and International Trade Diversification Minister Jim Carr announced a $1.6 billion federal aid package for Canada's oil and gas industry. The money is spread over a variety existing programs to help companies find new markets, invest in clean technology and train staff.

The move comes on the heels of an additional $1.6 billion in royalty credits and infrastructure support unveiled by the Alberta government in late November, and Notley's as-yet unpriced promise to buy two trains to haul 120,000 more barrels of oil per day out of the province by late 2019.

Throw in Ottawa's summer purchase of the aging Trans Mountain pipeline — $4.5 billion, with a promise to spend as much as $7.4 billion more for a planned expansion — and Canadian taxpayers now find themselves on the hook for somewhere between $7.7 billion and $15 billion in new support for an industry that was already receiving more than $3.3 billion a year in government subsidies.

All of which poses a different sort of political problem, given that Canada has repeatedly promised to eliminate the bulk of fossil fuel subsidies by 2025 as part of its greenhouse gas reduction commitments.

It was Stephen Harper's Conservatives who originally made the pledge to do away with "inefficient" subsidies in 2009, as part of its membership in the G7, G20, and the Asia-Pacific Economic Cooperation, explicitly recognizing that subsidies undermine efforts to deal with climate change and impede clean energy development.

The Trudeau Liberals reiterated the promise in 2015, making it part of their campaign platform.

Some progress has been made towards that goal, with the phasing out or tweaking of seven federal policies since 2011, but even before the recent spending spree it was clear that Canada was a long way from living up to its word.

In his spring 2017 report, the auditor general found that the Department of Finance along with Environment and Climate Change Canada — responsible, respectively, for the tax and non-tax portion of the commitment — hadn't yet defined what an "inefficient" fossil fuel subsidy was, let alone figured out a way to cut or phase them out.

 And real numbers have been hard to come by.

Under pressure from environmental groups this past June, Jim Carr announced a study to pinpoint how much Ottawa and the provinces actually spend to support the fossil fuel industry, the results of which will eventually be made public.

A recent report from the Overseas Development Institute, a U.K. think tank, that compares all the G7 nations gave Ottawa low marks on transparency and ranked Canada the worst at ending support for oil and gas production.

By its figures, Canada was providing a total of $4.63 billion US ($6.25 billion CDN) in support to fossil fuel industries, the most per capita in the G7.

If you factor in the additional government funds that have been pledged since the spring, Canada will now be spending more, dollar for dollar, than Japan, France or the U.K., and isn't that far from catching Germany and Italy.

To be fair, all the G7 members are proving to be hypocrites, having collectively handed out more than $100 billion US a year to oil, gas and coal companies at home and abroad since they signed the 2015 Paris Agreement.

It is, however, hard to reconcile with the UN's "life or death warning" for more and immediate action to limit global warming.  

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