Ontario provides roughly CAD 700 million annually to subsidize fossil fuels at a time of fiscal constraint, new report shows

Ontario, a province undergoing an aggressive push to balance its budget after projecting a deficit of CAD 11.7 billion in 2018/19, still provides roughly CAD 700 million in subsidies to fossil fuels that increase greenhouse gas emissions and contribute to climate change, according to a new study by the International Institute for Sustainable Development (IISD)’s Global Subsidies Initiative.

In a new report, The (Public) Cost of Pollution: Ontario’s Fossil Fuel Subsidies, experts found that, in 2018/19, Ontario provided CAD 320 million in support through tax exemptions to fuels used by the aviation and rail industries, CAD 225 million to coloured fuels that are commonly used in agriculture, and it continues to spend millions to enable natural gas expansion.

“These subsidies represent large amounts of foregone public revenue that could be invested in everything from good jobs to education and health care. Spending money subsidizing fossil fuels encourages their use, increases pollution and hinders efforts to transition to a clean economy,” said Vanessa Corkal, Policy Analyst, IISD, and co-author of the report.

The report notes that some of these subsidies, such as agricultural fuel subsidies or fuel subsidies for remote communities, serve important social and economic goals. However, it also underlines that it is essential to consider alternative methods to meet these goals that do not contribute to climate change through subsidizing polluting fossil fuels with public funds.

 “With the combined urgency of the need to balance the provincial budget and the need to address climate change, it is crucial that the provincial government examine all opportunities to ensure efficiency in public spending, including a review of fossil fuel subsidies, to ensure that each taxpayer dollar is spent effectively with the best possible outcomes,” said Philip Gass, Senior Policy Analyst, IISD. “Ultimately, the goal should be to transition Ontario to non-subsidized cleaner energy sources.”

The authors of the report recommend that, as a first step, Ontario should undertake a transparent self-review of fossil fuel subsidies and identify areas to improve policy efficiency from economic, environmental and social perspectives. All subsidies must be evaluated to ensure that they are consistent with a low-carbon economy and ensure affordable energy access and competitiveness for Ontarians. This review should consider both climate change impacts and the need to ensure value for money in the use of taxpayer dollars in a time of fiscal restraint.

Further recommendations include developing an action plan to phase out subsidies and establishing clear guidelines to make sure that that no new fossil fuel subsidies are introduced.

The experts also underline the need for Ontario to proactively engage with the Government of Canada as it completes the G20 peer review of fossil fuel subsidies that is currently underway, to make sure that federal reform considers provincial impacts.