Government Spending on Canada’s Oil and Gas Industry

News Release
Pembina Institute
31 Jan 2005

Government Spending on Canada’s Oil and Gas Industry — Undermining Canada’s Kyoto Commitment

Ottawa— Government Spending on Canada’s Oil and Gas Industry — Undermining Canada’s Kyoto Commitment, a study released today by the Climate Action Network — Canada, reveals that the federal government gave Canada’s oil and gas industry more than $1.4 billion in 2002 in tax concessions and other subsidies — an increase of 33% over the 1996 level. The 60-page report was prepared by the Alberta-based Pembina Institute, a close observer of the industry for many years.

“At a time when the Minister of Natural Resources is proposing to weaken Kyoto targets for industry on economic grounds, we wanted to understand the extent to which the federal government is actually bolstering the profits of this already highly profitable sector,” said John Bennett, Executive Director of the Climate Action Network.

Twenty percent of Canada’s greenhouse gas emissions came from the oil and gas sector in 2002 — an increase of 47% over the 1990 level. “Kyoto targets for the oil and gas industry should be significantly toughened, especially in light of this corporate welfare that the sector is receiving,” added Bennett.

According to recent media reports, Natural Resources Canada is proposing that industry be required to reduce annual emissions by only 37 megatonnes under the government’s revised Kyoto plan, compared to 55 megatonnes in the current plan. These reductions will still allow the oil and gas sector’s emissions to increase well beyond present levels. The Deputy Minister of Natural Resources recently acknowledged that even the current target would cost the oil sector no more than 25 cents per barrel. Oil is currently selling for around US$45 (CAN$55) per barrel.

The report found that federal support of the oil and gas industry totaled $8.3 billion during 1996–2002. This compares to the $3.7 billion that the government has allocated to the Kyoto Protocol since 1997. The Protocol requires Canada to reduce its greenhouse gas emissions to 6% below the 1990 level by 2008–12.

“We attempted to examine every aspect of government subsidies to the oil and gas industry. It was a complex endeavor, but the numbers are based on the best publicly available data and verifiable,” said Amy Taylor of the Pembina Institute, the report’s lead author. “To bring fiscal and environmental policy into alignment, the government should establish a timetable to eliminate these subsidies.”

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The full report is available here.

For more information contact:

John Bennett, Executive Director, Climate Action Network, 613-291-6888

Amy Taylor, lead author, Pembina Institute, 819-483-6288 ext. 33 (January 31 only) or 403-678-3355

Matthew Bramley, co-author, Pembina Institute, 819-483-6288 ext. 26