Eliminating fossil fuel subsidies makes for a great soundbite on the evening news but doesn’t represent a viable path to decarbonisation, the Canadian Chamber of Commerce’s Mark Agnew informed a federal government committee studying the subsidies issue.
“The G7 and G20’s voluminous communiques regularly reference eliminating fossil fuel subsidies. It makes for a great soundbite, but nuance has unfortunately been lost,” Agnew Canadian Chamber Senior Vice President, Policy and Government Relations, told the House of Commons Standing Committee on Environment and Sustainable Development this week.
Agnew said oil and gas plays a critical part in both Canada’s pathway to net zero since “without reliable supply there will not be the political conditions for a decarbonisation push.” Additionally, he said, Canada needs an approach to fossil fuel subsidies that recognizes the regional dynamics in our country.
This will require nuance in policy setting, Agnew continued, and provided three examples “that all feed into the simple point that immense capital investment is needed in the transition to net zero.”
First is carbon capture, utilization and storage. CCUS plays a critical role in the transition to net zero emissions, especially when looking at the 2030 time horizon. Industry is stepping up in a big way and we are seeing collaborative initiatives such as the Oilsands Pathway to Net Zero alliance, Agnew said but CCUS is a prime example of what some would see as a “fossil fuel subsidy” to industry. “Yet, CCUS is not cheap and without this tax credit there is no credible pathway to net zero,” Agnew said.
Second is the Net Zero Accelerator Initiative, a fund whose launch the Canadian Chamber of Commerce welcomed, and which has the potential to play a vital role de-risking the deployment of new technologies by oil and gas companies in both their traditional and new business lines, according to Agnew. Again, some would peg support to an oil and gas company as a so-called fossil subsidy, but cutting off oil and gas companies will make our transition to net zero that much more difficult, Agnew countered.
The third example are multi-sector tax measures such as capital cost allowances. The Canadian tax code is already complex enough, Agnew argued, and blocking certain sectors from accessing these types of tax credits would only serve to complicate – and distort – the tax code and make capital deployment more difficult.
“Fossil fuel subsidies are not a binary issue. Phase outs make a good soundbite but we urge careful deliberation to ensure our net zero transition is not inadvertently made more difficult,” Agnew concluded.
