ENERGY “SUBSIDIES”: A TAXPAYER-FUNDED ATTACK ON OIL AND GAS

Contributed by Robert Lyman © 2025. Robert Lyman’s bio can be read here.

EXECUTIVE SUMMARY

A frequent claim by those who seek radically to reduce greenhouse gas (GHG) emissions in Canada and other countries is that doing this requires the elimination of large government subsidies for the production and consumption of oil and natural gas. This claim has been accepted by several governments.

The Canadian federal government has taken several measures to eliminate tax credits that previously were available to oil, natural gas and coal producers. Nonetheless, through the programs of the International Institute for Sustainable Development (IISD) and other organizations, the government continues to spend millions of dollars annually propagating the thesis that Canada and other countries must do more to eliminate any financial benefits that might accrue to those producers.

IISD’s Energy program is also home to the Global Subsidies Initiative, which carries out research and seeks to influence policy concerning fossil fuel subsidies and fisheries subsidies. It serves the Beyond Oil and Gas Alliance (BOGA) whose objective is to phase out oil and gas production globally. The organization is richly funded, mainly by Canadian taxpayers. Its most recently published annual report (for 2024) indicated that it had $55.5 million in revenue that year, as well as $36.7 million in assets.

There is no universally agreed definition of what constitutes a subsidy, except that it refers to a government financial support paid out to an individual, business or organization in order to promote a certain activity.

In 2014 the Montreal Economics Institute performed an analysis it which it found that Canadian energy sector (I.e. energy production) subsidies amounted to just $71 million and that those were being phased out[1]. Finance Canada publishes an annual report of federal tax expenditures. Its most recent report indicates that since 2016 Canada has been phasing out tax measures that are “inefficient” fossil fuel subsidies. The tax expenditures on these former programs in 2024 were zero.

How do the subsidies to fossil fuels compare to the subsidies that governments provide to competing energy sources, and especially wind and solar energy? There unfortunately has not been a thorough study of the subsidies to renewable energy in Canada. The situation is clearer in the United States, where the Texas Public Policy Foundation has twice conducted reviews[2] of the funding provided by the US federal government.

Over the 2024 to 2027 period, subsidies to renewables are projected to be almost 12 times as high as those to fossil fuels.

How do the revenues provided by governments to encourage oil and gas development and production compare to the financial benefits that Canada derives from that development? According to the Montreal Economic Institute, in recent years governments have collected $18 billion per year on average in taxes and royalties from oil and gas activities. This does not include personal income taxes paid to governments by hundreds of thousands of Canadians who work directly in the energy sector, property taxes and fees paid to municipalities and indigenous governments, and the billions of dollars collected in fuel taxes. (Federal fuel tax revenues from the excise taxes, Goods and Services Tax (GST), and the federal fuel charge in 2021 totaled about $9.3 billion in 2021).

It is shameful that the agencies of the Canadian government like the Office of the Commissioner of the Environment and Sustainable Development and the largely publicly-funded non-governmental organizations like the International Institute for Sustainable Development should continue to promote policies that seek to defame the oil and gas industry and deprive it of tax benefits that are broadly available to other industries. The IISD enjoys charity status; how does promoting policies that harm an industry integral to the economic prosperity of at least three Canadian provinces possibly qualify as charitable?

[1] https://www.iedm.org/files/note0414_en.pd

[2] https://www.texaspolicy.com/wp-content/uploads/2024/10/2024-10-LP-Federal-Energy-Subsidies-BrentBennett_FINAL-1.pdf