RNNR Committee Report

EMISSIONS REDUCTION FUND ONSHORE PROGRAM –

SUPPLEMENTARY OPINION FROM HER MAJESTY’S OFFICIAL OPPOSITION

Committee Members of the Official Opposition would like to thank the witnesses who appeared before the committee to contribute to this study on reviewing the Emissions Reduction Fund – Onshore Program. We also appreciate the efforts of our committee analysts in the drafting of the original report.

As the Commissioner of the Environment of Sustainable Development (hereafter, ‘the Commissioner’) stated in his report, the government did not design and implement the fund to achieve greenhouse gas emission reductions in the oil and gas sector in a manner that would ensure value for money.

Even though the government touted the program would help maintain jobs in the oil and gas sector, the Commissioner found they did not include job retention as a feature in the program’s design.  

Government programs must be designed and implemented in a manner to ensure value for taxpayers’ money.  Moreover, when the government announced job retention would be a key aspect of the program, it is unacceptable they did not list job retention as an eligibility condition or an assessment criterion for funding decisions.

One of the recommendations in the Committee’s report, which calls on the Government of Canada to identify and eliminate “inefficient fossil fuel subsidies” by 2023, should have been more substantial and provided clear guidance to the government.

Recommendation 1:

We recommend the government should clearly identify, quantify, and phase out programs for the Canadian energy sector that subsidize compliance with existing regulations.

In this regard, ‘Inefficient subsidies’, as applied to the Government of Canada, should be defined as follows:

• Government of Canada grants or payments; below-market provisions of capital; contracts for difference; social financing; unequal capital cost allowance allocation differentials; trade-access program funding; and expenditures to reduce or delay taxation, such as ‘flow-through’ financing mechanisms.

In addition, as energy is an essential input to economic activity and our standard of living, and the source of the energy is fungible with respect to its social utility, common measurements must be applied across all energy sources that receive any government subsidies or programming.   Common comparison elements must include full cycle costing, including:

• Purchase and disposition of capital equipment; common depreciation schedules or capital cost allowance rates; and accredited capital costs.  

A level comparison of costs and benefits is essential to determining relative effectiveness of subsidies.

Some government funding is, by necessity, inefficient.  For example, programming aimed at pursuing advancements in environmental technologies to better the outcomes of energy sources are, by design, inefficient.  This is especially true at early stages of development, which is when government support may be most beneficial.  However, government funding should not be directed to programming that aims to attain societal objectives beyond the aim of sourcing safe, secure, affordable energy for Canadians.

We also note, with clarity, that methane emissions in 2020 (the last year that measurements are available), attributable to the oil and gas sector, have decreased by 11% from 2019 – while oil and gas production decreased by 4% due to the economic effects of the COVID pandemic.  The excess reduction of 7% is indicative of an industry that is at the forefront of meeting challenges with respect to the environmental outcomes of its production, which meets an essential public need.  This 7% reduction is on a full production-measured basis, and should be considered in the context of the oil and gas industry’s consistent, proven reduction in emissions intensity (emissions per unit produced) over the past three decades.  This reduction in emissions intensity leads the world.

We recognize that outcomes matter – and the Emissions Reduction Fund has appeared to help in the indication of lowering emissions produced by Canada’s oil and gas industry.

Recommendation 2:

We recommend the government design the program (and all similar programs in the future) to attain measurable objectives. 

Those objectives should clearly include retention of labour force, when that is part of the program’s intent – and the outcome should be measured – from retained labour perspective, as well as retained personal and corporate taxes paid because of the retention.  Ancillary government revenues – including, but not limited to excise taxes, sales taxes, and royalties, should also be measured in assessment of the outcomes of the program to the Canadians Treasury.

The objectives should also measure the desired environmental outcome in determining if the program accomplished its intended outcome.