Stop giving money to GHG emitters

Published: Sunday, February 24, 2008
John Dillon, Montreal Gazette
Canadians are preparing to demonstrate their commitment to fighting climate change by reducing power use for one hour on March 29. Though largely a symbolic gesture, this collective effort will send a strong message to politicians concerning the urgent need to reduce greenhouse gas (GHG) emissions. But will Finance Minister Jim Flaherty back this commitment in his February 26 budget?
Currently some federal spending and many tax breaks have the perverse effect of encouraging the industries that are most responsible for increased GHG emissions. During a recent seven-year period the federal government spent $8.3 billion on subsidies to the GHG-emitting oil and gas industries. For the most part these subsidies continue today at around $1 billion a year.
Why do these subsidies continue for industries that earned a record $31.1 billion in profits in 2006? In 2007 Imperial Oil alone had profits worth $3.2 billion.
Prime Minister Stephen Harper calls Canada an "energy superpower" as he promotes more investment in Alberta's tar sands. Extraction of synthetic crude from the tar sands produces three times as much greenhouse gas as conventional petroleum. If tar sands operations continue to expand, it will not be possible to meet our international commitments to reduce carbon emissions undertaken at the Kyoto and Bali conferences.
In his last budget, Flaherty announced a very slow phase out of a tax break allowing tar sands operators to defer taxes until all their capital costs have been paid off. But this subsidy, worth about $300 million a year, will not end until 2015.
By 2015 GHG emissions from the tar sands alone are predicted to equal or exceed the annual reductions from all the emission-cutting programs announced to date by the federal government.
During 2006 and 2007 the federal government announced $8.6 billion in new spending on 20 energy efficiency and GHG reduction initiatives over the next two to nine years. After accounting for inflation, these funds amount to less than the subsidies provided to the oil and gas industries from 1996 to 2002.
More importantly, Environment Canada predicts that all the government's subsidy and regulatory programs together would only reduce total greenhouse gas emissions by 105 million tonnes of CO2 in 2012. As a result, total Canadian emissions would remain 31% above Canada's Kyoto targets. Other analysts say that Environment Canada's predictions overestimate the likely effects of their programs by a wide margin.
What then should Mr. Flaherty do in his budget?
A first step would be to announce an immediate end to the accelerated capital cost allowance (ACCA) for tar sands, instead of phasing it out in 2015 which may only encourage companies to speed up the pace of tar sands development in the meantime.
Secondly, Mr. Flaherty should redirect the spending on this and other subsidies for oil and gas exploration and development to programs promoting energy efficiency, conservation and renewable energy alternatives. In general, programs that promote public transportation, improved vehicle technology, more efficient freight transport, and the retrofitting of buildings are among the best options.
Since redirecting subsidies alone will not reduce our greenhouse gas emissions sufficiently to meet our Kyoto commitments, Ottawa must announce other initiatives including putting firm limits on greenhouse gas emissions from large industrial emitters and a carbon tax.
Consequently, a third budget initiative should involve a tax on carbon emissions to promote energy efficiency, conservation and markets for low-carbon alternatives. In conjunction with a tax on the carbon content of various fuels, Flaherty's budget must also include measures to ensure that low-income Canadians and those living in remote communities without alternatives to fossil fuels are not penalized financially.
Finally, Flaherty should reorient current policies that promote fossil fuel production abroad through Canadian and multilateral agencies. The government should refocus the priorities of Export Development Canada enabling it to help Canadian companies ensure their products and services support a greener, less fossil-fuel dependent energy future.
Similarly, it should redirect existing energy financing from the Canadian International Development Agency and the World Bank for fossil fuels to renewable technologies and energy efficient projects.
Canadians participating in Earth Hour by turning off lights at 8 p.m. on March 29 will send a powerful message to Ottawa. Will Ottawa listen? Or will the government continue pumping tax dollars into the industries that are most responsible for the rise in greenhouse gas emissions?
John Dillon is Program Coordinator for Global Economic Justice at KAIROS: Canadian Ecumenical Justice Initiatives and co-author of a forthcoming KAIROS report entitled Pumped Up: How Canada subsidizes fossil fuels at the expense of green alternatives. www.kairoscanada.org. In November 2007, KAIROS, a social justice organization of Canadian churches, and Ecojustice, the Canadian Environmental law group, demanded that Canada's Auditor General investigate the government's ongoing oil and gas subsidies in the context of cuts to programs for poor households. Adiat Junaid is communications coordinator of KAIROS: Canadian Ecumenical Justice InitiativesJo