Comments on Environment and Climate Change Canada’s Draft Federal Sustainable Development Strategy (FSDS) 2016–2019

  • Fulfilling Canada’s G20 commitment to phase out subsidies for the fossil fuel industry

The significance of this proposal of course depends on how subsidy of the fossil fuel industry is defined. A November 2015 ODI (UK) report puts the figure at $2.5 billion (USD), including the Accelerated Capital Cost Allowance for LNG development, the Canadian Development Expenses (CDE) and Canadian Exploration Expenses (CEE) credits, and others. However, the effective subsidy of Canada’s fossil fuel economy extends far beyond tax credits and research and development funding. It would be no exaggeration to say that the ongoing prioritisation of passenger vehicle oriented road transportation infrastructure under funding programs such as the $3 billion gas tax funds effectively amounts to a subsidy. For example, federal investment in the Calgary Ring Road development alone ($583 million), a commitment of the previous government that has been carried forward, amounts to more than five times the total federal contribution toward VIA Rail capital investment over the next two years ($102 million up to fiscal year 2017/18). All federal contributions toward the development and expansion of airports, for new bridges dedicated to passenger vehicle traffic, and for any other transportation infrastructure that actively accommodates fossil fuel based transportation would seem to amount to a subsidy for the fossil fuel industry.

Moreover, what of the federal responsibility for monitoring and enforcement of environmental regulations and safety standards for oil and gas infrastructure? These contribution are difficult to quantify, but would seem to merit significant research in order to determine its full extent. Infrastructure such as oil and gas pipelines, which may cross both provincial and national jurisdictions, are unequivocally under the purview of the federal government. Few other federally regulated industries benefit in such a direct way from federal assistance, cooperation and, as was perplexingly evident in the previous government, outright lobbying and advocacy, as do the oil and gas industry. The resources devoted to this work should at an absolute minimum be quantified as an exercise in transparency and accountability.

The limits to what constitutes federal subsidisation of the fossil fuel industry could conceivably extend as far overly lenient vehicle fuel economy requirements, building codes and energy efficiency standards for appliances. While a line must be drawn at some point, taking as comprehensive an approach as possible and analysing the entire economy and its constituent carbon infrastructure components would provide valuable context for future policy decisions. Renewable energy industries and experimental technologies like carbon capture and storage do not benefit from the same hidden, structural subsidies that fossil fuels do, and their up-front subsidies therefore appear disproportionately large. This can be rectified through honest and rigorous accounting of both the funding and regulatory mechanisms, both of which are underpinned by taxpayer dollars, that go into supporting Canada’s fossil fuel economy.

  • Developing proposals to allow a Canadian Exploration Expenses tax deduction only in cases of unsuccessful exploration and using any savings to invest in new and clean technologies;

The Canadian Exploration Expenses tax deduction is also effectively a subsidy, and one specifically dedicated to supporting risky, environmentally destructive and often wasteful and unprofitable mining and exploration activities. By allowing mining companies to carry forward these tax deductions indefinitely, or pass them on to their investors via flow-through shares, the federal government is serving to incentivise maximum mineral exploration activities. University of Victoria economist Lindsay Tedds’ excellent analysis of this and similar tax credits for the mining industry is salient. Eliminating the subsidy for profitable mining activities makes good fiscal sense, but from an environmental protection standpoint, and this definitely a positive step. The Natural Resource Governance Institute has criticised the Canadian mining industry for a lack of regulatory clarity and institutional and legal accountability, stating that “Despite comprehensive extractive industry legislation, Alberta’s revenue collection mechanisms and the rules governing its natural resource funds are not entirely clear”. Ensuring an extremely rigorous standard of transparency and accountability regarding the CEE going forward will be critical.

  • Creating a new Low Carbon Economy Trust to help fund projects that materially reduce carbon emissions

There is an enormous amount that can be achieved through the federal government’s “power of the purse”. For example, it is no exaggeration to say that Canada has the potential to be a world leader in Carbon Capture and Storage technology (CCS). Any climate modeling scenario that achieves a 2ºC or less scenario by the end of this century depends on the development and deployment of CCS on a massive scale (see IPCC 5th Assessment Report, IEA World Energy Outlook and Energy Technology Perspectives modelling). At present, no jurisdiction offers adequate funding for CCS technology development and infrastructure or an appropriately stringent carbon price. Canada can be that first mover. The Boundary Dam project in Saskatchewan is already internationally revered among CCS experts worldwide. We have essentially limitless land and geological resources, tremendous infrastructure capacity, technical expertise and proven technology. There is no material reason why there could not be at least a dozen CCS pilot projects underway across Canada within the next three years. With a relatively modest level of federal funding, perhaps to be matched by provincial and private sector dollars, along with a concerted effort to build support among key stakeholders and educate the public, CCS in Canada could be an international success story with profoundly positive implications for the global fight against climate change.

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