Government of Canada delivers on key climate commitment to phase out inefficient fossil fuel subsidies

From: Environment and Climate Change Canada

News release

July 24, 2023 – Montréal, Quebec

The Government of Canada is committed to investing in a strong, sustainable economic future that will deliver good, middle‑class jobs, clean air, and energy security for generations to come.

Today, the Honourable Steven Guilbeault, Minister of Environment and Climate Change, released the Inefficient Fossil Fuel Subsidies Government of Canada Self‑Review Assessment Framework and the Inefficient Fossil Fuel Subsidies Government of Canada Guidelines, which were jointly developed by Environment and Climate Change Canada and the Department of Finance Canada. Eliminating inefficient fossil fuel subsidies and redoubling our focus on clean energy is a key step in building Canada’s net-zero economy by 2050 and supporting good-paying jobs for Canadians for generations to come.

The Assessment Framework and Guidelines support the decarbonization of Canada’s oil and gas sector and support a strong future for workers in the industry while making real progress to fight climate change. The Government of Canada’s commitment to eliminating inefficient fossil fuel subsidies signals both greater support for clean technology as well as emission reductions across the economy from traditional sectors. This will help create and secure middle‑class jobs from coast to coast to coast while protecting the environment. From support for the Come By Chance biodiesel refinery in Newfoundland and Labrador, to the Enerkem biomethanization plant in Varennes, Quebec, to the Oneida battery storage project in Ontario and Indigenous-led solar projects in Alberta, clean energy investments mean good jobs and clean air.

The Assessment Framework builds on Canada’s commitment under the 2021 Glasgow statement to end new direct public support for the international unabated fossil fuel energy sector. Putting the Assessment Framework and Guidelines into force will ensure any government supports for the sector will not delay the transition to renewables, are in compliance with the goals of the Paris Agreement to limit warming to 1.5 °C, and account for the availability of credible alternative energy sources.

The Assessment Framework—the first transparently published methodology worldwide—will be used to determine which tax and non-tax measures constitute an inefficient fossil fuel subsidy. Subsidies will be considered inefficient unless they meet one or more of the following six criteria:

  1. Enable significant net greenhouse gas emissions reductions in Canada or internationally in alignment with article 6 of the Paris Agreement.
  2. Support clean energy, clean technology, or renewable energy.
  3. Provide essential energy service to a remote community.
  4. Provide short-term support for emergency response.
  5. Support Indigenous economic participation in fossil fuel activities.
  6. Support abated production processes, such as carbon capture, utilization, and storage (CCUS), or projects that have a credible plan to achieve net-zero emissions by 2030.

The Guidelines become effective today and apply to all federal departments and agencies.

Canada is also committed to phasing out public financing of the fossil fuel sector. This refers to financing beyond the scope of today’s fossil fuel subsidies commitment. The Government’s work will identify current public financing by 2024 and announce by fall 2024 the implementation plan to phase out public financing of the fossil fuel sector.

Canada is the only G20 country to phase out inefficient fossil fuel subsidies ahead of the 2025 deadline. We are the first country to release a rigorous analytical guide that both fulfills our commitment and transparently supports action. By eliminating inefficient fossil fuel subsidies, the Government of Canada is enabling greater support for clean technology, clean growth, and accelerated efforts to decarbonize important Canadian industries, including the oil and gas sector, which continues to play an important role in the Canadian economy.

Quotes

“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. 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.”
– The Honourable Steven Guilbeault, Minister of Environment and Climate Change

“With the $120 billion clean economy plan detailed in our 2023 budget, our government is building Canada’s clean economy and creating great careers for workers across Canada. Investing in building a thriving, clean economy is essential to helping us achieve our climate goals, bringing investment to our communities, and ensuring Canada remains competitive as the global economy moves at speed towards net zero.”
– The Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance

Quick facts

  • Cutting pollution in our communities is good for our climate, economy, health, and well‑being. It will also help Canadians reduce the impacts of climate change that are already costing the Canadian economy billions of dollars every year.

  • The Guidelines can be updated at any point to better reflect new policy developments and enable increased stringency and may be formally reviewed periodically.

  • The Guidelines will provide a standardized methodology to ensure future government support is aligned with Canada’s climate and energy priorities and would preclude project funding within discretionary programs that do not align with the Assessment Framework.

  • As Ministers Guilbeault and Wilkinson announced at the April 2023 G7 Ministers’ Meeting on Climate, Energy, and Environment in Japan, Canada, along with other G7 members, committed to accelerate the phase-out of unabated fossil fuels in combustion applications and called on other non-G7 countries to do the same, consistent with Canada’s 2030 Emissions Reduction Plan and the need to apply large-scale decarbonizing technologies and practices to achieve net zero. Canada also secured an agreement among partner nations to report back by the end of the year on the progress to phase out fossil fuel subsidies and international fossil fuel finance

  • In Budget 2023, the government announced new investments in jobs and growth as part of its $120 billion clean economy plan, including new investment tax credits to support clean electricity, clean technology manufacturing, clean hydrogen, and carbon capture, utilization, and storage.

Associated links

Contacts

Kaitlin Power
Press Secretary
Office of the Minister of Environment and Climate Change
819-230-1557
Kaitlin.Power@ec.gc.ca

Media Relations
Environment and Climate Change Canada
819-938-3338 or 1-844-836-7799 (toll-free)
media@ec.gc.ca

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Environment and Climate Change Canada’s Facebook page

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