(Credit: Flikr)Canada’s Minister of Environment and Climate Change Steven Guilbeault released guidelines toward eliminating fossil fuel subsidies and intensifying focus on clean energy in order to create a net-zero economy by 2050. Canada is the only G20 country to phase out inefficient fossil fuel subsidies in advance of the 2025 deadline decided on by Canada, the United States, and Mexico in 2016.
The Inefficient Fossil Fuel Subsidies Government of Canada Self-Review Assessment Framework and Inefficient Fossil Fuel Subsidies Government of Canada Guidelines will work to eliminate inefficient fossil fuel subsidies and ensure that government support of the sector will not delay the clean energy transition. Further, Canada plans to phase out public financing of the fossil fuel sector and will announce an implementation plan by the fall of 2024.
According to the guidelines, fossil fuel subsidies are defined as benefitting the fossil fuel sector or solely supporting fossil fuel development and consumption. They must also fit the World Trade Organization’s definition of a subsidy.
The methodology will also be used to determine subsidies that are not considered inefficient. For instance, if they enable net emissions reductions, support clean or renewable energy, or provide essential energy to a remote community, they will not be deemed inefficient.
Federal funding for carbon capture technology will also be exempted, and Canada has pledged $12.4 billion in tax credits toward the technology. Carbon capture technologies are controversial as they allow for continued fossil fuel development and still lack widespread implementation.
This announcement attends to decisions made by G20 leaders more than a decade ago when pledges were made toward phasing out inefficient fossil fuel subsidies. Ending government support of the fossil fuel industry is key to reducing global emissions and achieving goals set in the Paris Agreement. Canada is the first of these countries to deliver.
At the April 2023 G7 Ministers’ Meeting on Climate, Energy, and Environment, Canada and the other G7 members also committed to speed up phasing out unabated fossil fuels in combustion applications.
In the release of its new guidelines, Canada emphasizes the economic possibilities of transitioning away from fossil fuels. As subsidizing fossil fuels has been used to stimulate economic growth, ending dependence on the sector must be supplemented by economic opportunity elsewhere. The renewable energy sector is becoming increasingly able to meet this requirement.
“The Government of Canada is committed to supporting energy innovation and environmental improvements to ensure that Canadians, communities, and businesses can thrive in a net-zero world with a reliable, affordable supply of clean power,” said Guilbeault. “By eliminating inefficient fossil fuel subsidies, we are encouraging smart and efficient government investment decisions that can increase Canada’s competitiveness in a decarbonizing global economy, while avoiding creation of stranded assets. Phasing out fossil fuel subsidies in Canada will ensure government programs and spending support an energy sector that is aligned with our ambitious climate goals.”
