Fossil fuel subsidies undermine BC’s efforts on climate change

November 25, 2019, Winnipeg – British Columbia has long held a reputation for being one of the most environmentally friendly provinces in Canada, but, according to a new report, it is also one of the country’s top supporters of the fossil fuel industry.

The Global Subsidies Initiative of the International Institute for Sustainable Development found that BC’s subsidies to fossil fuel production and consumption reached CAD 830 million in 2017–2018. This makes BC the second highest provider of fossil fuel subsidies among Canada’s provinces and territories.

Experts warn that these subsidies undermine the CleanBC plan, a low-carbon energy strategy that was introduced by the provincial government in 2018. These subsidies also hold the province back from meeting its climate change targets to reduce greenhouse gas emissions.

“While BC tries to ramp up policy ambition to address climate change, fossil fuel subsidies are the elephant in the room,” says Vanessa Corkal, author of the report and Policy Analyst at IISD’s Global Subsidies Initiative. “There is no getting around it: these subsidies promote the production and consumption of fuels that cause climate change. They encourage increases in the same pollution that other policies aim to reduce.”

The authors of the report Locked In and Losing Out: British Columbia’s Fossil Fuel Subsidies note that fossil fuel producers are those benefiting the most. Oil and gas companies receive hundreds of millions each year in provincial tax exemptions, royalty reductions, direct investments and more.

“When fossil fuel producers receive millions in subsidies, vital government resources are pulled away from social services, renewable energy and other important areas. This means that other sectors of the economy have to compensate for the vast amounts of foregone government revenue because of subsidies—something that is neither fair nor efficient,” says Philip Gass, Senior Policy Advisor at IISD.

According to the study, a major issue in BC is the millions of dollars in credits that fossil fuel producers claim each year to reduce their royalty payments. Oil and gas royalties are intended to provide benefits to BC residents, but royalty credits reduce those benefits. In 2018–2019 alone, fossil fuel producers in BC claimed over CAD 631 million in deep well credits. The province has also accumulated between CAD 2.6 billion and 3.1 billion in outstanding credits—money that fossil fuel producers won’t be paying in future years, and therefore won’t be put toward social services and other areas.

BC has also been making moves to increase subsidies for the natural gas industry, particularly for Liquefied Natural Gas (LNG). The province recently signed an agreement with LNG Canada that sets a precedent for similar subsidies for other fossil fuel producers. The agreement also functions to lock in high-carbon infrastructure for decades, at the expense of more sustainable options.

The report recommends that BC identify and reform policies that undermine climate action, giving special attention to fossil fuel subsidies. Specifically, the researchers call on BC to:

• Determine the size of the problem by completing a self-review of fossil fuel subsidies and publicly releasing all data related to government spending on subsidies.
• Create an action plan to phase out subsidies and shift to new policies that achieve economic, environmental and social goals without promoting polluting fuels.
• Coordinate with the Government of Canada as it completes a review of federal fossil fuel subsidies, making sure the federal process considers the provinces.
• Ensure no new fossil fuel subsidies are created that jeopardize the transition to a low-carbon economy.

“British Columbia has a clear choice to make for its future,” says Corkal. “Either take bold action to spur a low-carbon transition that works for its residents or support a costly fossil fuel sector that worsens the effects of climate change.”

For media inquiries, please contact:

Vanessa Farquharson vfarquharson@iisd.ca
Paulina Resich presich@iisd.org