ENVI Committee Report

The Bloc Québécois would like to thank all the witnesses, citizens and organizations who participated in this study. The briefs sent to the Committee, as well as the testimonies and answers to our questions, helped further our knowledge on the issue at hand. We would also like to express our gratitude to the dedicated analysts and those at the Library of Parliament for their work.

The oil and gas sector is accountable for approximately 26% of Canada's GHG emissions, making it the economic sector generating highest emissions in 2019. Since 2005, emissions from this sector have increased by 137%, mainly due to significant growth in fossil fuel production.

Examining the on-going practice of subsidizing this sector of the economy remains vital in the current context, one where the State must honor its international commitments made in 2021 under the Paris Agreement. To achieve this, the Canadian government must undertake bold and effective action to reduce its GHG emissions by 40-45% (to 2005 levels) by 2030 and reach net-zero by 2050.

If this study has taken an inordinately long time, it is because the subject is likely to raise positions that are often diametrically opposed as to what would justify, or not, public funding for this sector.

The Bloc Québécois deplores the fact that some of the testimonies were intended to mislead, namely one suggesting the rising costs of solar energy and the use of coal required to manufacture solar panels[1] or statements extolling the merits and efficiency of carbon capture, utilization and storage (CCUS) technology, without providing any supporting evidence[2] - some going as far as claiming that enhanced oil recovery (EOR) is not only good for the economy, it is also good for the environment.  

Phasing out fossil fuel subsidies: Efficient, Inefficient

On-going statements, shifting commitments in 2009, 2012, 2015, instructions to the 2021 mandate letters and several more commitments in 2021: how can we explain the government's inaction on the issue of subsidies to the fossil fuel industry?

We believe it can be attributed to "semantic relentlessness" which rejects any established definition of what a subsidy is - in the broadest sense - in order to determine a Canadian definition of the term subsidy, specific to fossil fuels. To achieve this, the government is using the tandem words efficient-inefficient.

This study served as a reminder that definitions of what constitutes a "subsidy" already exist: indeed, as specified in the report, international organizations such as the International Monetary Fund (IMF), the Organization for International Cooperation and Development (OECD) and even the World Trade Organization (WTO), have determined concise definitions that are widely recognized throughout the world. Canada has chosen to do otherwise.

The study also revealed the full extent of the government's lack of interest in implementing its own plans to phase out public financing of the fossil fuel sector, which included the financing involving federal Crown corporations such as Export and Development Canada (EDC).

The Assistant Deputy Minister of the Strategic Policy Branch at the Ministry of the Environment and Climate Change (ECCC) confirmed in her testimony[3] that these proceedings were still at the planning stage, and that no specific initiative aimed at achieving this "phase-out" was in place.

As for EDC's President and CEO, she acknowledged being unaware of the internationally recognized definitions of a subsidy, while pointing out that EDC did not offer any grants or any subsidies. The fact that the government of Canada incurs financial obligations – with taxpayers' money - through loan guarantees via EDC’s Canada Account still does make it a subsidy[4].

The Bloc Québécois is concerned by the willful blindness of an organization that has earmarked $13.6 billion in 2021 to support carbon-intensive industries, with the oil and gas sector at the top of the list. Such support explains why Canada is considered as a dunce when it comes to environmental issues when compared to G20 and OECD countries. This financial support is directly linked to Canada's mediocre G20 and OECD rankings.

Canada may echo, over and over again, that EDC does not subsidize this sector: at the end of the day, international organizations are doing the math, indifferent to Canada's dithering.

Expert testimony on carbon capture, utilization and storage -CCUS

Energy policy specialists, academics and other experts whose work focuses on these issues were specific in their comments and straightforward in answering members questions[5].

They highlighted that the federal government should not be providing any financial assistance or subsidies for CCUS, some witnesses harshly criticizing the technology as a “lifeline”, a means of perpetuating the industry that is at the very root of the climate crisis.

A letter[6]  signed by over 400 academics, scientists and experts was sent to the government in January 2022, its content, urging the government not to fund this immature technology: extremely expensive, impossible to deploy in time, having cumulated failures wherever it has been attempted. The facts, along with the undisputed fact that CCUS is used for enhanced oil recovery (EOR), has not deterred the government from including it throughout its 2023 budget. Two signatories to this letter were invited to testify for the study.

A third signatory of this letter, Éric Pineault, Ph.D. – Professor at Institut des sciences de l’environnement - Université du Québec à Montréal, was unable to testify due to the defective headset he had received prior to his scheduled participation to the study. The Bloc Québécois believes it worthwhile to quote him (our translation):

“On the international market, are we sending the right signal by saying that our research capacity and fiscal leeway are in line with a model that aims to make the most polluting oil on the market less polluting? [...] The CCUS technology is not consistent with a transition strategy[7].”

There are no recommendations echoing the comments made by witnesses critical of the CCUS.

We understand that committee reports must focus on witness testimony, as well as on the contents of briefs submitted to the members. However, we cannot disregard the irreconcilable government policies and actions put forward since March 2022, shortly before the committee began its work.

The last few months have confirmed what we foresaw: the Canadian government is continuing its policy of "turning a deaf ear", not addressing the misuse of public funds, going as far as increasing its financial support for the fossil fuel sector.

Incentivizing the source of the problem - EDC and Canada Account

While committee was progressing through the study, EDC obtained new loan guarantees from the Government of Canada for the Trans Mountain pipeline expansion. The Bloc Québécois considers that this modus operandi - through the Canada Account – is, without a doubt a (hidden?) subsidy.  (Emphasis added)

• Canada Account is used to support export transactions which we are unable to support, but which are determined by the Minister for International Trade to be in Canada's national interest.[…]
• We negotiate, execute and administer these transactions on the same basis as corporate account activities but the risks are assumed by the Federal government.
• Before we enter into a Canada Account transaction, we require authorization from the Minister for International Trade, with the concurrence of the Minister of Finance. Transactions exceeding $50 million or those of a sensitive nature are, in practice, approved by Cabinet[8]. 

We must also express dismay regarding the disingenuous behavior of the government, following the loan guarantee of $10 billion it provided to the Trans Mountain pipeline expansion project. Although the May 2022 transaction made through the Canada Account had the minister of Finance commit to no longer provide public funding for the project, we learned that additional loan guarantees were concluded in March and May of 2023. The total costs are now estimated at $30.9 billion.

Budget 2023 - tax measures to benefit the oil and gas sector

The 2023 federal budget[9] is exactly what the Bloc Québécois apprehended. While this study on fossil fuel subsidies was proceeding, the industry's enthusiasm for CCUS (also voiced by industry stakeholders in committee hearings) convinced the government: ultimately, the investment tax credit and the clean technology tax credit will give access to several tens of billions of dollars in tax benefits to the oil and gas sector.

The Bloc Québécois considers these measures irresponsible and unjustifiable in the current context:

• Irresponsible, because genuine action to fight climate change requires major investments but more importantly, the accelerated and scaled deployment of clean technologies (with a focus prioritizing renewable energies). Those technologies that will enable us to reduce our GHG emissions, meet our commitments under the Paris Agreement and, above all, reduce our dependence on fossil fuels.
• Unjustifiable, because financial statements (2022) of the major oil and gas companies operating in Canada show profits that are unprecedented in the industry’s history in Canada, soaring over $38 billion ($220 billion internationally)[10]. In light of the wealth provided to company executives and shareholders, it is fair to claim that these companies could be expected to invest more and not be offered public funds for projects such as CCUS.

The Bloc Québécois believes that the 21 recommendations made in the report should have been studied further. Recommendations 17 and 18 reflect the inconsistency of the government's actions: there is absolutely no point in considering the other recommendations if these two proposals are favored by the government.

The Bloc Québécois vigorously denounces these inconsistencies, which could ultimately lead to our failure in meeting our commitments made under the Paris Agreement.

Our recommendation for this study was the following:

• That the Government of Canada, in accordance with :
  1. Its commitment to the G7 and G20;
  2. Its 2030 GHG emission reduction target and net-zero by 2050 goal, confirmed by international commitments under the Paris Agreement and the Glasgow Agreement;
  3. Its commitment to eliminate all forms of fossil fuel subsidies by 2023
• a) move quickly to eliminate all subsidies to the fossil fuel industry and plan to end government funding to this sector, including Crown corporations;
• b) plan with great care and attention for workers and indigenous communities, the transition to a net-zero economy;
• c) ensure that public funds in support of the energy sector are exclusively dedicated to renewable energy, with a focus on projects involving green technologies that are ready for commercialization and deployment;
• d) finalize by the end of 2023 the G20 peer review on fossil fuel subsidies, in conjunction with Argentina, a review process that begun in 2018 and, to this day, is unfulfilled,
• e) Publish the report and synthesis of this review upon its completion.

The Bloc Québécois considers that there is no such thing as an efficient fossil fuel subsidy. Any and all subsidies to the fossil fuel sector are inefficient.

We believe that the only eligible subsidies should be those dedicated to retraining and supporting the transition of the workforce from this sector to industries that aim to produce renewable energies.