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Subsidies and the Oil Industry

This week we have had the 40th Anniversary celebrations here at Lester Pearson College . I had an interesting discussion with a graduate  on subsidization of the oil industry in Canada.  So I had to make a trip to Google to check out just what was being reported in the media.
At the top of the search list was today’s publication of ” Canada Subsidizing Exploration For Oil Reserves That Can’t Be Used: Report” August 15, 2015 Huffington Post:

“Using subsidy definitions from the World Trade Organization, the think-tank calculated the total value of those breaks (in Canada)— not including additional subsidies offered by provinces — at $928 million a year.
That means:

  • every Canadian subsidizes energy exploration by $26 a year.
  • Only Australia, where subsidies reach up to $153, is more generous among G20 countries on a per capita basis.
  • United Kingdom subsidies are up to about $18 per capita;
  • Russia spends about $17;
  • the United States spends $16.
    The report says the annual value of state subsidies for exploration is about twice the $37-billion cash energy companies put up themselves.
    “This suggests that their exploration activities are highly dependent on public support,” the report says.”

The Tyee website has published this reference:

IMF Pegs Canada’s Fossil Fuel Subsidies at $34 Billion
By Mitchell Anderson, 15 May 2014, TheTyee.ca

“These figures are found in the appendix of a major report released last year estimating global energy subsidies at almost $2 trillion. The report estimated that eliminating the subsidies would reduce global carbon emissions by 13 per cent. The stunning statistics specific to this country remain almost completely unreported in Canadian media.
Contacted by The Tyee, researchers from the IMF helpfully provided a detailed breakdown of Canadian subsidies provided to petroleum, natural gas and coal consumption. The lion’s share of the $34 billion are uncollected taxes on the externalized costs of burning transportation fuels like gasoline and diesel — about $19.4 billion in 2011. These externalized costs include impacts like traffic accidents, carbon emissions, air pollution and road congestion.
The report also referenced figures sourced from the OECD showing an additional $840 million in producer support to oil companies through a constellation of provincial and federal incentives to encourage fossil fuel extraction. This brought total petroleum subsidies in Canada in 2011 to $20.23 billion — more than 20 times the annual budget of Environment Canada.
In comparison to other countries, Canada provides more subsidies to petroleum as a proportion of government revenue than any developed nation on Earth besides the United States and Luxembourg.”

The  IMF study referred to was a report by the International Monetary Fund: January 28, 2013

“Energy subsidies are pervasive and impose substantial fiscal and economic costs in most regions. On a ―pre-tax basis, subsidies for petroleum products, electricity, natural gas, and coal reached $480 billion in 2011 (0.7 percent of global GDP or 2 percent of total government revenues). The cost of subsidies is especially acute in oil exporters, which account for about two-thirds of the total. On a ―post-tax‖ basis—which also factors in the negative externalities from energy consumption—subsidies are much higher at $1.9 trillion (2½ percent of global GDP or 8 percent of total government revenues). The advanced economies account for about 40 percent of the global posttax total, while oil exporters account for about one-third. Removing these subsidies could lead to a 13 percent decline in CO2 emissions and generate positive spillover effects by reducing global energy demand.”


A paper from the International Institute for Sustainable Studies titled: The Impact of Fossil-Fuel Subsidies on Renewable Electricity Generation provides a perspective on forces mitigating against investment in alternate energy technology:

“This paper contends that fossil-fuel subsidies can act as a barrier to the development and deployment of renewable energy technologies. It identifies three impacts of fossil-fuel subsidies on renewable energy. First, subsidies reduce the costs of fossil-fuel-powered electricity generation and thereby impair the cost competitiveness of renewable energy. Second, subsidies create an incumbent advantage reinforcing the position of fossil fuels in the electricity system. Finally, the presence of fossil-fuel subsidies creates conditions under which investments in fossil-fuelbased technologies are favoured over renewable alternatives. Accordingly, fossil-fuel subsidy reform should be a priority for governments, to remove barriers to renewable energy and realize numerous other economic, social and environmental benefits.”

Forbes Tech:
Government Subsidies: Silent Killer Of Renewable Energy
” between 1994 and 2009 the U.S. oil and gas industries received a cumulative $446.96 billion in subsidies, compared to just $5.93 billion given to renewables in those years. (The nuclear industry, by the way.  received $185 billion in federal subsidies between 1947 and 1999.) Certainly, subsidies are a useful tool to help establish an emerging industry. But where there is no projected end to funding, subsidies stop being a catalyst, and start becoming a crutch. This is especially true when companies supported by subsidies become powerful enough to influence governments to perpetuate their support”


Further reading in other references provides an account of one of the more insidious implications for oil industry subsidies in poorer countries:  From NBC NEWS  (3/1/2012) quoting a Christian Sceince Monitor publication, The countries with the cheapest gasoline
fuel subsidies tend to benefit the rich (who own motor vehicles) more than the poor. The IMF estimated that 65 percent of the fuel subsidies in Africa benefit the richest 40 percent of households (2010). Only 8 percent of the $410 billion in government fuel subsidies worldwide went to the poorest 20 percent of the population.”


Of course you will find the argument proposed by many in the oil industry that it is necessary to subsidize the oil industry because governments gain so much from the income generated by oil royalties. But does that help to solve our climate crisis? If Alternate energy industries were subsidized as much as Fossil fuel industries, we would certainly  be able to decrease the impact of Carbon emissions. Lets not just assume that the oil industry is the most important employer in Canada..

From a  report in the Huffington Post from Clean Energy Jobs Now Exceed Oilsands Jobs In Canada:
“Employment in Canada’s clean energy sector has jumped 37 per cent in the past five years, says a new report from the think tank Clean Energy Canada, (a program of the Centre for Dialogue at Simon Fraser University, in Vancouver, British Columbia.) and now exceeds employment in the oilsands.

There were 23,700 people directly employed by the clean energy industry in 2013, compared to 22,340 jobs in the oilsands, the report found. Those green jobs include people employed in clean power production, energy efficiency, biofuels and manufacturing of green energy technologies.

Those job gains were the result of about $25 billion in new investment over the past five years, the report said. It singled out Ontario, Quebec and British Columbia as the three provinces leading the way in clean energy investment.”

Although the United States also subsidizes its fossil fuel industries, at least they do place some emphasis on subsidizing Alternate Energy efforts. This website of the USDA provides an example of what they do for the rural sector:

“Our programs, authorized by the Agricultural Act of 2014, offer funding to complete energy audits, provide renewable energy development assistance, make energy efficiency improvements and install renewable energy systems. We have programs that help convert older heating sources to cleaner technologies, produce advanced biofuels, install solar panels, build biorefineries, and much more. USDA Rural Development is at the forefront of renewable energy financing, with options including grants, guaranteed loans and payments.”

The Pembina Institute has put out a useful report
Without better support for clean tech, Canada could miss out big time: Solutions for climate leadership — Part 4
on the need for Canada to support Clean Energy Technologies :

“What’s going wrong with clean tech in Canada? A report we released today shows that Canada lacks a comprehensive strategy and clear policy framework, both federally and provincially, to support the growth of this sector — particularly when it comes to exports.”

This is one of the reasons I have put  a lot of time and energy over this past year into being an Intervenor for the Friends of Ecological reserves in the National Energy Board Hearings on the Kinder Morgan/ Trans Mountain Pipeline  Project.

You may see our posts on the Process on the Ecological reserves websites at :
Oil Spill Threat: http://ecoreserves.bc.ca/category/issues/oil-spill-threat/

and see what we have to lose on the Race Rocks website at: http://www.racerocks.ca/wp/administration-of-race-rocks/environmental-impacts-from-human-disturbances-to-life-at-race-rocks/marine-vessel-traffic-past-race-rocks/


Oil Tankers in the Strait

I have put together a gallery  on the Race Rocks website to which we add images of ships passing by in the Strait of Juan de Fuca  with seals, sealions and marine birds in the foreground click on this image to link to the gallery :