Posted on January 13, 2010 (updated: January 13, 2010)

Misdirected spending: Groups demand investigation into billions in federal subsidies to Canada’s booming oil and gas industry

A coalition of national environmental organizations and the former Chair of Parliament’s environment committee today filed a petition with the Auditor General of Canada demanding an investigation into billions of dollars of federal subsidies to the oil and gas industry. The petition highlights federal tax breaks and other subsidies that promote one of the country’s largest sources of greenhouse gas (GHG) pollution and cancel out spending on Canada’s effort to meet its emission reduction target under the Kyoto Protocol. Sierra Legal Defence Fund filed the petition on behalf of Friends of the Earth Canada, the Pembina Institute, and Charles Caccia.

“Canada cannot meet its commitment under the Kyoto Protocol unless tax subsidies to the oil and gas industry are eliminated,” said Charles Caccia, the long time Liberal chair of Parliament’s environment and sustainable development committee. “These subsidies encourage greater greenhouse gas emissions and undermine Canada’s drive to meet its Kyoto targets.”

Estimated federal tax subsidies to the oil and gas sector are $1.4 billion per year, based on the latest available data. Most of the subsidies are in the form of tax breaks under Canada’s Income Tax Act. In the period, 1996-2002 these tax subsidies amounted to a staggering $8 billion. Between 1990 and 2003 Canada’s GHG emissions increased by 24%, with a significant part of the increase attributable to the oil and gas industry.

“Since 1997 when Canada first agreed to its Kyoto target, the federal government has been spending $2 on oil and gas industry tax subsidies — and indirectly promoting greenhouse gas emissions — for every $1 it has spent on reaching its Kyoto goal,” said Sierra Legal lawyer Albert Koehl. “We are asking the obvious question of how this can possibly be part of a consistent government policy.”

“The federal government has a unique opportunity to show international leadership by shifting tax subsidies for the oil and gas industry towards initiatives such as renewables and conservation that will reduce emissions,” said Marlo Raynolds, executive director of the Pembina Institute. “This would not only help Canada meet its obligations under Kyoto but prove to the world that Canada is a fitting host for the world climate change conference in Montreal later this year.”

The petition warns that Canada’s current Kyoto implementation plan shifts responsibility to the public for emission reductions instead of requiring the largest polluters to carry an equitable share. Under the proposed plan, Canada’s largest industrial polluters, including the oil and gas industry, are being asked to reduce emissions by only 36 megatonnes (Mt). If large industry were required to reduce emissions by an amount proportionate to its 50% share of Canada’s emissions, its 36Mt target would need to be increased to 135Mt.

“Instead of heeding the calls to reduce oil and gas subsidies the federal government is intent on perpetuating them,” said Beatrice Olivastri of Friends of the Earth. “The big winners are the oil and gas companies and the big losers are the taxpayers and those committed to achieving the Kyoto target.”

The petition is to the Commissioner for the Environment and Sustainable Development — within the Auditor General’s Office — for action from the federal Ministers of Finance, Industry, Natural Resources, and Environment. It calls for the elimination of the counterproductive federal tax subsidies to the oil and gas industry and an equitable distribution of the responsibility for reducing emissions under Canada’s Kyoto plan.

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