Two new reports call for end to subsidies and phase-out of Canada’s oil and gas industry

Two new reports expose Canada’s continuing financial support of the fossil fuel industry and call for a phase-out. These appeared in the same week as the federal government reported Canada’s latest National Inventory of Emissions to the United Nations’ UNFCC, showing that the oil and gas industry is the top source of carbon emissions in Canada.

The first report, by Environmental Defence, is Paying Polluters: Federal Financial Support to Oil and Gas in 2020 , released on April 15. It estimates that the government has provided or promised at least $18 billion to the oil and gas sector in 2020 alone, including  $3.28 billion in direct subsidy programs and $13.47 billion in public financing. Paying Polluters decries the lack of transparency – especially for funding through Export Development Canada  – but nevertheless attempts to list the tax subsidies and direct spending programs, in an Appendix at the end of the report. In addition to obvious subsidies, the tally includes loans for pipeline construction, research into new technologies for cleaner processes, job subsidies for reclamation of oil wells, and even policing costs for pipeline construction – think $13 million taxpayer dollars paid to the Royal Canadian Mounted Police to protect the construction site of the Coastal GasLink pipeline.

Environmental Defence concludes with five recommendations, including a call for greater transparency, and for “a roadmap to achieve Canada’s commitment to phase out inefficient fossil fuel subsidies before 2025, and shift these investments and public finance towards supporting a path to resilient, equitable zero-carbon societies.” It should be noted that the government first pledged to phase out these subsidies in 2009. The report is summarized, with reactions, by Sarah Cox in The Narwhal, on April 16.  

A second report, Correcting Canada’s “One-eye shut” Climate Policy, was released on April 16 by the Cascade Institute. It summarizes Canada’s history of fossil fuel production, and refutes those who argue that we are a small country whose emissions don’t compare to those of China or the U.S. Calling on Canada to accept its global responsibility, the authors state that “Canada’s 2021-2050 oil and gas production would exhaust about 16 percent of the world’s remaining carbon budget. Canada is indeed a “carbon bomb” of global significance.”  This is the first of many hard-hitting, frank statements in the report, including a highly critical discussion of the “fool’s gambit” of hydrogen production, and an assessment that “A highly resourced and well-organized “regime of obstruction” has developed in Canada to block effective climate action and ensure increased fossil fuel extraction.”

Correcting Canada’s “One-eye shut” Climate Policy references the Environmental Defence  Paying Polluters report, agreeing with the call for a phase-out of government support and subsidies. It also offers more information about subsidies – for example, an estimate that the provincial supports, including royalty credits, constitute an additional estimated $4.2 billion a year. Other less-than-obvious examples of support for oil and gas:  subsidies that encourage fossil fuel consumption, like aviation or mobility investments,  and over $250 million  directed to four oil sands major companies under Canada’s Emergency Wage Subsidy during Covid-19.  The report states that Imperial Oil alone received $120 million in wage support while concurrently issuing $320 million in dividends. Yet on the issue of oil and gas jobs, the authors state that in 2019, the oil and gas sector represented just 1 percent of direct employment in Canada, and 5.5 percent in Alberta. “To save costs, the industry has aggressively cut jobs, by 23 percent over the 2014 to 2019 period, even as oil and gas production increased by 24 percent, reaching record highs, over that same period.”

The One-Eye Shut report goes further, offering specific policy options within the federal jurisdiction to phase out the industry, including: “prohibiting the leasing of federal lands and waters for fossil fuel production and infrastructure; implementing a “climate test” on all new fossil fuel projects and removing federal impact review exemptions; canceling the Trans Mountain expansion pipeline; divesting federal public investment funds from fossil fuel production; and removing federal subsidies and public financing that supports fossil fuel exploration, production, or transportation, including federal funding for technologies that delay a transition away from oil and gas.”

Correcting Canada’s “One-eye shut” Climate Policy: Meeting Canada’s climate commitments requires ending supports for, and beginning a gradual phase out of, oil and gas production  is a Technical Paper written by University of Waterloo professor Angela Carter and PhD. Student Truzaar Dordi, and published by the Cascade Institute.   Participating Institutions include the Corporate Mapping Project, University of Waterloo, Royal Roads University, and the McConnell Foundation.

How phasing out fossil fuel subsidies can contribute to Canada’s green recovery

Recovery Through Reform is a new series by the International Institute for Sustainable Development, assessing Canada’s green recovery spending from COVID-19 with a focus on the issue of fossil fuel subsidy reform, and an eye on the upcoming federal Budget 2021 consultations. The first of three Briefs,  Assessing the climate compatibility of Canada’s COVID-19 response in 2020 evaluates energy-related spending in Canada in 2020 – specifically federal government commitments for electric vehicles, public transit, building retrofits, hydrogen, and fossil fuels. Using data from the global Energy Policy Tracker, the Brief quantifies federal government recovery spending, noting that transparency is a problem – especially in the case of the financing provided by Export Development Canada and the Business Development Bank of Canada. Spending trends in Canada are compared to flagship policies France, Germany, and the United Kingdom – including a discussion of the financial support for fossil fuels. The Brief concludes with recommendations – including a call “to apply the  principles from the IISD report Green Strings: Principles and Conditions for a Green Recovery From COVID-19 (2020), including transparency and inclusion of support for just transition for workers and communities.  Other recommendations are to end fossil fuel subsidies, and to measure recovery ambition against international standards rather than “domestic precedence”.

The second Brief in the Recovery through Reform series is Advancing a Hydrogen Economy. This report examines the question of promoting and incentivizing hydrogen, and calls for the government to ensure that any subsidies for hydrogen are in line with the government’s commitments to phase out “inefficient fossil fuel subsidies by 2025” and meet net-zero by 2050.  “Based on IISD’s analysis, subsidies for hydrogen based on natural gas without significant levels of carbon capture and storage (CCS) should not be eligible for government assistance. Subsidies for blue hydrogen should only occur if blue hydrogen can meet the same level of environmental performance (including emission intensity) and is at or below the cost of green hydrogen.”  (a more thorough discussion appears in a January 2021  blog from IISD: Should Governments Subsidize Hydrogen? ). 

The third report in the Recovery through Reform series is Export Development Canada’s role in fossil fuel subsidy reform, which argues that despite EDC’s well-known history as a supporter of the oil and gas industry, it could be an important actor in Canada’s green recovery.   The Brief documents the existing situation of poor transparency and dirty investments, stating: the EDC “provides an average of over CAD 13.2 billion in support for oil and gas every year, representing over 12% of finance committed by the institution.”  It also notes: “So far, EDC has provided over CAD 10 billion in loans for the Trans Mountain Pipeline and expansion via the Canada Development Investment Corporation.” Further, “When it comes to fossil fuel support, EDC is one of the worst-performing export credit agencies in the world, as it has provided more oil and gas finance than any other G20 export credit agency.”  Despite this track record, the Brief calls on the EDC to change its ways by matching the performance of other international financial institutions, phasing out fossil fuel subsidies, and setting clear targets for climate action-related investments.  

What’s ahead for Canadian climate and energy policy in 2021?

The Canadian government has a full climate change agenda ahead when it reconvenes Parliament on January 25, not the least of which will be the debate and passage of Bill C-12, the Net-Zero Emissions Accountability Act , analyzed by the Climate Action Network here.  After its introduction in November, C-12 was criticized for lacking urgency and specific plans – for example, in an article by Warren Mabee in The Conversation which calls for three per cent to four per cent GHG reductions “every year, starting now.”

On December 11, the government  released its latest climate plan,  A Healthy Environment and a Healthy Economy, previously discussed in the WCR and noted primarily for its proposed carbon tax hike to $170 per tonne by 2050. According to  “The good, the bad and the ugly in Canada’s 2030 climate plan” (The National Observer, Jan. 18):  “The good news is that …The government’s recently announced A Healthy Environment and a Healthy Economy plan contains enough new climate policy proposals that, if implemented, will allow Canada to reach its 2030 target. The bad news is….Climate laws enacted by Canadian politicians to date don’t come anywhere close to meeting our 2030 target. With time running out and a gigantic emissions gap to close, Canada needs to enact climate laws now.”

Clean Fuel Standard, Hydrogen, and Small Nuclear Energy Policies released

On December 19, the government released the long-awaited draft regulations for a Clean Fuel Standard, triggering a 75-day consultation period, with final regulations expected in 2021, to take effect in 2022.   According to the government Q&A  website, the new regulations differ from previous drafts in that they apply only to liquid fossil fuels : gasoline, diesel and oil.  Producers and importers of fossil fuels will be required to reduce their carbon content by 2.6% by 2022 and by 13% by 2030 over 2016 levels.  Clean Energy Canada compiled the reactions of several environmental groups here .  The Pembina Institute called the regulations “both fair and cost-effective” in a press release reaction.  Their report , The Clean Fuel Standard: Setting the Record Straight (Nov. 2020) stated: “ The Clean Fuel Standard is expected to create as many as 30,000 jobs as new clean fuel facilities are built, supplied and operated. While some job losses could result from choices made under the CFS, robust modelling shows a net gain for Canadian workers: Energy-economic modelling suggests the CFS will yield a net employment gain resulting in between 17,000 and 24,000 additional jobs.” These projections are taken from on a technical analysis, conducted by Navius and EnviroEconomics consultants before the switch in scope to liquid fossil fuels only.  

Next, on December 16, the Minister of Natural Resources Canada released A Hydrogen Strategy for Canada: Seizing the Opportunities A Call to Action, another long-awaited strategy document which is the result of three years of study, analysis, and consultations, along with collaboration with industry associations: the Transition Accelerator, the Canadian Hydrogen and Fuel Cell Association (CHFCA), the Canadian Gas Association, and others . The report states that the government will now establish a Strategic Steering Committee, with several targeted task teams, to implement recommendations.  Key highlights of the Hydrogen Strategy are here; the government’s Hydrogen website is here . 

From page 86, a glimpse into the thinking behind the report:

“The energy transition will fundamentally shift the Canadian economy and alter value chains in many related sectors. One shift of particular importance is the transition away from the direct burning of fossil fuels without carbon abatement. Canada’s energy sector accounted for 900,000 direct and indirect jobs as of 2017, with assets valued at $596 billion . This industry’s significant energy expertise and infrastructure can be leveraged to support the development of the future hydrogen economy in Canada. Hydrogen will be critical to achieving a net-zero transformation for oil and natural gas industries. It provides an opportunity to leverage our valuable energy and infrastructure assets, including fossil fuel reserves and natural gas pipelines, providing a pathway to avoid underutilizing or stranding these assets in a 2050 carbon neutral future. Leveraging these valuable assets will not only be instrumental in achieving the projected economic growth for the domestic market, but also presents the opportunity for Canada to position to become a leading global clean fuels exporter.”

Regarding regulatory changes, the report states: “Policies and regulations that encourage the use of hydrogen technologies include low carbon fuel regulations, carbon pollution pricing, vehicle emissions regulations, zero emission vehicle mandates, creation of emission-free zones, and renewable gas mandates in natural gas networks. Mechanisms to help de-risk investments for endusers to adapt to regulations are also needed.”  There is no mention of training or transition policies, although the report  forecasts a  job creation potential for hydrogen which might reach more than 350,000 jobs in 2050 at the upper end  – “a combination of new job growth and retrained and reskilled labour”. (pages 85 and 86).  

 An article in The National Observer discusses the strategy, the state of hydrogen initiatives in Alberta , and reaction of environmental groups, including a quote from  Environmental Defence, saying: “…. “a focus on fossil hydrogen only serves the interests of the oil and gas sector as they seek to create new markets for their products.” Similarly, Clean Energy Canada released a statement saying, “Canada’s long-awaited federal hydrogen strategy … falls short of what some other nations have put forward in terms of investment and ambition.”   A New Hope, published in October 2020, fleshes out Clean Energy Canada’s recommendations about hydrogen in Canada.

Finally, on December 18, Canada’s Minister of Natural Resources released a national Small Nuclear Reactor Action Plan (SMR) , which responds to the 53 recommendations identified in Canada’s SMR Roadmap from November 2018. The list of organizations endorsing the SMR Agenda reflects the entrenched “who’s who” of Canada’s “ 75-year nuclear energy heritage.”  Each of these organizations – governments, public utilities, Indigenous groups, and unions, contributed a chapter to the Plan – available here. Individual endorsements include: the International Brotherhood of Electrical Workers; The International Union of Operating Engineers ; Power Workers Union – which highlights the pending closure of the Pickering Nuclear Generating Station in 2025 and the need to transition that workforce; and the National Electrical Trade Council (NETCO) a workforce development organization for Red Seal electrical trades in Canada, jointly led by  the Canadian Electrical Contractors Association (CECA) and the International Brotherhood of Electrical Workers (IBEW) .

Green Hydrogen in Canada – Alberta sets a goal of 2040 for exports

Clean Energy Canada released a new report on hydrogen as a clean energy source, providing a history of policy and development in Canada and around the world, and a call to action.  A New Hope states that “.. Canada is among a small group of countries with the highest potential for exporting clean hydrogen, thanks to a clean power system (82% of Canada’s electricity grid is already non-emitting) and plenty of access to water (required for electrolysis). But the time to act is now. Already, 18 economies comprising more than 75% of global GDP are developing and rolling out hydrogen strategies. Some, like the EU and South Korea, have dedicated post-pandemic recovery funds to make it happen. …. Germany’s priming of the hydrogen market with a €9-billion ($13.7-billion) strategy could lead to a snowballing competitive market—and increasingly cheaper clean hydrogen.”  The EU Hydrogen Strategy for a climate neutral Europe was released in July 2020.

Green, Blue or Grey? Colour-coded hydrogen holds keys to Canada’s energy transition” appeared in The National Observer in August, and gives an excellent overview of the policy landscape for hydrogen in Canada – the perspective of the Canadian Hydrogen and Fuel Cell Association and the Canadian government, which has promised a Hydrogen Strategy – but no date is set. The article cites a very thorough consultant’s report circulating amongst government officials: 2019 Hydrogen Pathways : Enabling a Clean Growth Future for Canadians .

The Pembina Institute had also published Hydrogen on the path to net-zero emissions Costs and climate benefits (July), a 6-page overview of  the terminology (blue, green or grey hydrogen?),  the production process, transportation and storage, and its many possible applications across industry, transportation, power and buildings sectors.

Alberta seems to be heeding the call:  in September, the Alberta Industrial Heartland Hydrogen Task force released Towards Net-Zero Energy Systems In Canada: A Key Role For Hydrogen, and on October 6, the Alberta government released its Natural Gas Vision and Strategy, part of its Recovery Plan for petrochemicals, LNG production ,  plastics recycling, and hydrogen.   Along with the October 6 press release, the Plan states “…. Alberta is already a leader in hydrogen production and has strong carbon capture and storage infrastructure in place. Combined with a number of projects being built across the province, Alberta has the potential to be a strong global competitor through the creation of a hydrogen economy.”  The goals stated in the Plan: 1. “Large-scale hydrogen production with carbon capture, utilization and storage (CCUS) and deployment in various commercial applications across the provincial economy by 2030; and 2.  Exports of clean hydrogen and hydrogen-derived products to jurisdictions across Canada, North America, and globally are in place by 2040.”

International Energy Agency roadmap for a sustainable recovery forecasts job growth led by retrofitting and electricity

The International Energy Agency, in cooperation with the International Monetary Fund, released a roadmap which would require global investment by governments of USD 1 trillion annually between 2021 and 2023 to create jobs and accelerate the deployment of clean energy technologies and infrastructure.  The World Energy Outlook Special Report: Sustainable Recovery , released on June 18th states:  “Through detailed assessments of more than 30 specific energy policy measures to be carried out over the next three years, this report considers the circumstances of individual countries as well as existing pipelines of energy projects and current market conditions.” The report data and analysis will form the basis for the IEA Clean Energy Transitions Summit on July 9 2020, where decision-makers in government, industry and the investment community will meet to discuss policy options for economic recovery post Covid-19.

From the report: ” Our new IEA energy employment database shows that in 2019, the energy industry – including electricity, oil, gas, coal and biofuels – directly employed around 40 million people globally. Our analysis estimates that 3 million of those jobs have been lost or are at risk due to the impacts of the Covid-19 crisis, with another 3 million jobs lost or under threat in related areas such as vehicles, buildings and industry. “ The recommendations promise to save or create approximately 9 million jobs per year, with the greatest number in building retrofitting for energy efficiency, and in the electricity sector.  The Sustainable Recovery Plan also seeks to avoid the kind of rebound effect which occurred after the 2008/2009 recession, claiming that it would stimulate economic growth while achieving annual energy-related greenhouse gas emissions which “would be 4.5 billion tonnes lower in 2023 than they would be otherwise”,  decreasing air pollution emissions by 5%, and thus reducing global health risks.

Under the heading of “Opportunities in technology innovation”, the report examines four specific technologies: “hydrogen technologies, which have a potentially important role in a wide range of sectors; batteries, which are very important for electrification of road transport and the integration of renewables in power markets; small modular nuclear reactors, which have technology attributes that make them scalable as an important low-carbon option in the power sector; and carbon capture, utilisation and storage (CCUS), which could play a critical role in the energy sector reaching net-zero emissions. We also compare the near-term job creation potential of some of these measures.” The IEA is preparing an Energy Technology Perspectives Special Report on Clean Energy Technology Innovation, which will be released in early July 2020.

Pembina proposes a low-carbon blueprint to create 67,2000 jobs in Alberta

alberta emerging economyA report released on June 15 calculates  that, with supportive government policies, 67,200  jobs could be created in Alberta by 2030 in four key areas: renewable electricity; transit and electric vehicle infrastructure; energy efficiency in buildings and industry; and environmental cleanup and methane reduction in the oil and gas industry.  Alberta’s Emerging Economy: A blueprint for job creation through 2030  was funded by the Alberta Federation of Labour  and written by researchers at the Pembina Institute.  It provides detailed data for each of the four sectors, along with well-informed policy discussion. Notably, the number of jobs forecast represents a significant diversification of the labour market for the province: 67,200 jobs is equal to 67% of the total workforce of the mining, and oil and gas extraction industry in 2019.

Alberta’s Hydrogen initiative

Alberta’s Emerging Economy does not consider the potential jobs from new technologies such as carbon capture and storage, or hydrogen production.  Fundamental to understanding that technology is the difference between “grey hydrogen”,  “blue” hydrogen and “green” hydrogen”- explained by an expert at the International Energy Agency here , or in Green Tech Media in “The Reality Behind Green Hydrogen’s Soaring Hype”.

On May 14, the Alberta Industrial Heartland Hydrogen Task Force was launched as “an independent working group created to develop a framework to implement a hydrogen economy in the region” and “produce a public report detailing the approach and steps needed to advance a zero-emission fuel economy in Alberta’s Industrial Heartland.” The Task Force includes local mayors from Alberta and Saskatchewan (including  Edmonton Mayor Don Iveson). The full list of Task Force members and advisors is here , and is organized by Transition Accelerator – itself launched in 2019, by the University of Calgary research group CESAR.  A recent report in their  “The Future of Freight” series, Implications for Alberta of Alternatives for Diesel  advocates for “blue hydrogen” production (hydrogen made from natural gas by steam-methane reforming (SMR) coupled to carbon capture and storage (CCS)).

Hydrogen production is described in the Globe and Mail on June 14, “Ottawa, Alberta develop new hydrogen strategies” .  An overview in Corporate Knights magazine on May 14  claims “Hydrogen can make Canada an energy superpower again”.  It concludes:

We live in Alberta, so know the danger in including the words ‘national’ and ‘energy’ in the same sentence. But picture a Canada where hydrogen is the focus of a pan-Canadian strategy that would have all provinces working together for a net-zero emission energy future that revitalizes our economy and again positions Canada as an energy superpower.