Will Budget 2023 Eliminate Fossil Fuel Subsidies?

Ottawa | Traditional, unceded territory of the Algonquin Anishinaabeg People - On March 28, Minister Freeland will publish this year's federal budget. Environmental Defence is calling on the Minister to fulfill the government's promise and use this budget to finally eliminate fossil fuel subsidies.

Our new analysis shows that in 2022, the federal government provided at least $20.215 billion in financial support to the fossil fuel industry despite oil and gas companies making record profits last year. The Pathways Alliance - a coalition of the six companies that make up 95 per cent of the oilsands - spent only 0.4 per cent of their total 2022 cashflow on their climate and environmental goals. Yet, the federal government extended even greater financial support in 2022 than the previous two years, which totalled $8.6 billion and $18 billion respectively.

"Budget 2023 is a critical opportunity for the Government of Canada to uphold its commitment to ending all fossil fuel subsidies and redirect that support into clean energy," said Julia Levin, Associate Director, National Climate at Environmental Defence Canada. "Oil and gas companies - which are raking in huge cash flows and funneling that money towards their shareholders instead of reducing their emissions - keep lobbying for more and more subsidies for carbon capture and hydrogen. These technologies are not climate solutions: they are dangerous distractions that will prolong our dependence on fossil fuels. Every dollar spent on carbon capture or hydrogen is a dollar that cannot be spent on proven, effective and affordable climate solutions, such as solar and wind energy."

What Environmental Defence is Looking For in Budget 2023:

• An end to fossil fuel subsidies. The Government of Canada has committed to ending fossil fuel subsidies this year (a promise first made in 2009). The federal budget would be an ideal moment to lay out a clear roadmap and framework to ensure that promise is met. In addition, Budget 2023 should eliminate existing tax breaks, as President Biden did earlier this month in his proposed budget plan.

• No subsidies for false solutions (Carbon Capture Utilization and Storage, fossil-derived hydrogen). The science is clear: fossil fuels are causing the climate crisis. A transition off of fossil fuels is necessary to meet international goals of limiting temperature rise to 1.5 degrees. Carbon Capture Utilization and Storage (CCUS) and fossil hydrogen prolong our dependence on fossil fuels, with limited impact on lifecycle emissions. They are not part of a net-zero plan. The proposed hydrogen investment tax credit should only be made available for hydrogen produced from renewable energy, based on the recommendations of over 100 academics and 55 environmental and health organizations. Similarly, there should be no funding made available for CCUS (a recommendation made by over 400 of Canada's leading academics and experts ahead of Budget 2022).

• Aggressive spending on renewable energy, electricity transmission and energy efficiency.

"The Government of Canada promised to end fossils back in 2009, yet continues to give billions of dollars to the very companies fueling the climate crisis," said Levin. "The pathway to zero emissions and a climate-safe future does not include subsidies or public financing for the oil and gas industry. It's time for Canada to turn off the financial taps to Canada's most polluting industry."

See our backgrounder for more details on Canada's 2022 subsidies as well as what Environmental Defence will be watching for in Budget 2023.

Additional Material: Letter to Minister Freeland on hydrogen subsidies in Budget 2023 from 100+ academics and 55 civil society organizations:

ABOUT ENVIRONMENTAL DEFENCE (environmentaldefence.ca): Environmental Defence is a leading Canadian environmental advocacy organization that works with government, industry and individuals to defend clean water, a safe climate and healthy communities.

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For more information or to request an interview, please contact:

Allen Braude, Environmental Defence, [email protected]