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Canadian Taxpayers Fork Out $3.3 Billion Every Year to Super Profitable Oil Companies

Kevin Grandia's picture
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Kevin is the President of Spake Media House Inc. a consulting firm that brings online power to non-profits, campaigners and advocacy groups.

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  • Sep 1, 2016

Some of the largest, most profitable companies in Canada are collectively receiving an estimated $3.3 billion in subsidies every year from Canadian taxpayers, according to a new analysis.

The report, released today by the International Institute for Sustainable Development, a Canadian-based think tank, outlines how billions in federal and provincial tax breaks and corporate incentives benefit companies in the oil and gas sector like Imperial Oil, whose earnings in 2015 were CDN$1.1 billion.

The new analysis comes as Trudeau is in China for the G20 Summit. In 2009 G20 leaders committed to a complete phase out of all fossil fuel subsidies over the medium term and Justin Trudeau, while on the campaign trail, made an election promise to fulfill that commitment.

“Fossil fuel subsidies work against Canada’s commendable progress in putting a price on carbon — they give money and tax breaks to the sources of carbon pollution that we’re trying to scale back,” Amin Asadollahi, North American Lead on Climate Change Mitigation at the International Institute for Sustainable Development, said.

Fossil Fuel Subsidies in Canada

Between 2013 and 2015 the federal government handed out an average of CAD $1 billion every year through the Canadian Development Expense program. During that same period an average of CAD $148 million was provided to oil and gas companies through the Canadian Exploration Expense program.

B.C. and Alberta also provide the lion’s share of oil and gas subsidies through royalty reductions and drilling credits.

Canada oil and gas subsidies IISD

Oil and gas subsidies across Canada. Image: IISD

Canada oil and gas subsidy kinds IISD

Some of the largest oil and gas subsidies in Canada. Image: IISD

Fossil Fuel Subsidies Better Spent Elsewhere

The new analysis details how those taxpayer funds could be better spent in Canada.

For instance, the institute calculates that $3.3 billion could pay for the education of 260,000 students, or job training for 330,000 Canadians, each year. Or each Canadian could just pay $94 less per year in taxes.

fossil fuel subsidies cost canada

Image: IISD

Despite the global downturn in oil prices, some of the largest oil and gas companies in Canada have turned an impressive profit. In 2014 oilsands giant Suncor Energy posted a record profit, with operating earnings of CDN$1.37 billion.

Last year Suncor Energy and Imperial Oil ranked 11th and 12th respectively for most profitable companies in Canada.

Subsidies for Fossil Fuels Undermine Carbon Tax

While oil and gas companies are getting windfall tax breaks, the Canadian government is proposing to put a tax on the greenhouse gas emissions that result from the production of oil and gas.

As IISD analyst Amin Asadollahi describes it, “[i]magine the Canadian government taxed cigarettes with one hand, while handing out tax breaks to tobacco companies with the other.”

Fossil fuel subsidies also undercut taxs breaks and financial incentives for renewable energies like wind, solar and geothermal.

In a 2015 report the International Institute for Sustainable Development along with Oil Change International found global subsidies for the fossil fuel industry are four times greater than subsidies for clean energy alternatives.

Clean energy analysts say the overwhelming emphasis on support for fossil fuel development has prevented the renewable energy industry from reaching its full potential. The renewable energy industry, despite the lack of help, is still booming and outpacing even the most optimistic predictions for its growth.

In its election platform the Liberal party promised to eliminate fossil fuel subsidies in order to support the growth of alternatives.

“The saving will be redirected to investments in new and clean technologies,” the party platform says.

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Jarmo Mikkonen's picture
Jarmo Mikkonen on Sep 2, 2016

This article is a model of how to cherrypick statistics to improve your case. For example:

Canadian Taxpayers Fork Out $3.3 Billion Every Year to Super Profitable Oil Companies…Despite the global downturn in oil prices, some of the largest oil and gas companies in Canada have turned an impressive profit..In 2014 oilsands giant Suncor Energy posted a record profit, with operating earnings of CDN$1.37 billion.

Lets see how Suncor has fared in 2016:

1st quarter: Operating losses were $500 million ($0.33 per common share), driven by low commodity prices, wider bitumen differentials to Western Canadian Select (WCS), weak benchmark refining margins and a Refining and Marketing first-in, first-out (FIFO) loss of $192 million.

2nd quarter: Operating loss was $565 million ($0.36 per common share), driven by the shut in of Oil Sands production in response to the forest fires, combined with low benchmark prices for crude oil. Net loss was $735 million ($0.46 per common share).

The subsidies mentioned, 3.3 billion, are mainly for oil exploration and resource development. I would call it an investment. And the return for investment? In 2014, oil and gas industry paid 18 billion in taxes to the Canadian federal and provincial governments. Not to mention taxes paid by oil industry workers who at the time were very highly paid.

In purely economic terms, oil and gas industry is a cash cow for the Canadian government and subsidizing oil exploration is a rational policy.

Kevin Grandia's picture
Kevin Grandia on Sep 2, 2016

I am in good company with my position. Here’s a great additional read from the Bloomberg editorial board: Fuel Subsidies Are the World’s Dumbest Policy –

To quote:

“These ridiculous outlays would be economically wasteful even if they didn’t also harm the environment. They fuel corruption, discourage efficient use of energy and promote needlessly capital-intensive industries. They sustain unviable fossil-fuel producers, hold back innovation, and encourage countries to build uneconomic pipelines and coal-fired power plants. Last and most important, if governments are to have any hope of meeting their ambitious climate targets, they need to stop paying people to use and produce fossil fuels.”

Jarmo Mikkonen's picture
Jarmo Mikkonen on Sep 3, 2016

Whatever your company, it does not alter the fact that oil and gas industry has been a great money maker for the Canadian govenment. And the government of Norway…Saudia-Arabia…the US…Russia. That’s why they subsidize oil and gas production.

For example, in 2012 the federal government of US collected 85 million dollars per day in corporate income taxes from oil and gas industry.

And the renewables get subsidized too. Extension of wind and solar tax credits in the US is estimated to cost around 24 billion USD. Germans pay 23 billion euros a year as renewable energy FITs.

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