NorthAmOil: Canada proposes curbs on ‘inefficient’ fossil fuel subsidies

The Canadian government on July 24 unveiled a controversial framework for eliminating “inefficient” fossil fuel subsidies.

It is the first G20 country to do so. In 2009, members committed to phase out government support for the sector in the medium term.

Such subsidies "encourage wasteful consumption, reduce our energy security, impede investment in clean energy sources and undermine efforts to deal with the threat of climate change," said the bloc’s communique.

Canada is the world’s fourth-largest oil producer, with its vast oil sands reserves in Alberta,

The framework phases out much support for oil and gas, but it also allows support to continue for oil and gas projects that plan to use carbon capture and storage (CCS) to reduce emissions. 

The procedure, which has yet to be commercialised, is a major plank in the climate plans of both the province of Alberta and the federal government in Ottawa. A federal investment tax credit for CCS was announced last year.

Climate policy analysts said the framework was an important step forward, but fell short by continuing to allow government support for oil and gas projects that plan to reduce emissions through technologies such as carbon capture and storage (CCS).

The framework will apply to existing tax measures and 129 non-tax measures, but not subsidy agreements that are already under way even if multi-year.