DeSmog

Canada May Soon Give a $15.3B ‘Carbon Bomb’ Subsidy to Big Oil, Experts Say

Business leader says government tax credit for oil and gas ‘extends the life of Canada’s largest industrial sector.’
Geoff Dembicki
Geoff Dembicki
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The government of Alberta, home to the tar sands pictured here, has announced taxpayer funding in the range of $3.5 billion to $5.3 billion for CCS projects. Credit: (CC BY-NC-ND 2.0)

As world leaders meet in Dubai for the COP28 climate negotiations, federal and provincial governments in Canada are preparing to give an estimated $15.3 billion in new subsidies to oil and gas companies, and other heavy emitters, for expanding the production of fossil fuels, according to climate experts. 

Those subsidies are taking the form of massive new tax credits for carbon capture and storage (CCS), which is a technology that companies use to grow their extraction of oil and gas while burying a fraction of their greenhouse gas emissions underground. 

“I completely agree that Canada’s tax credit for carbon capture and storage is a subsidy to the oil and gas industry,” Jason MacLean, an adjunct professor who studies climate policy at the University of Saskatchewan, told DeSmog in an email. 

The federal Canadian government is close to announcing details on a tax credit that will go to top oil and gas companies like Suncor, Cenovus, and Imperial Oil, along with other major industrial polluters. Policymakers previously estimated the value of these investment tax credits to be $10 billion. The government of Alberta, home to the tar sands, has meanwhile announced taxpayer funding in the range of $3.5 billion to $5.3 billion for CCS projects.

The Pathways Alliance, an industry lobbying and marketing group representing 95 percent of tar sands production, says these tax credits are essential for oil and gas producers to lower their emissions in line with achieving “net-zero emissions” by 2050. Reaching “net-zero” entails stabilizing global temperature rise at 1.5 degrees Celsius, a level beyond which scientists warn the impacts to humankind could be catastrophic. 

Yet, in submissions to the federal government, the Pathways Alliance explained that lowering a portion of oil sands emissions via carbon capture will create opportunities for the industry to expand globally — even as other countries move away from fossil fuels. “We believe Canada should seek to increase its market share for responsibly produced, lower emissions energy, even if global market demand, as a whole, begins to decline,” the group said in one submission. 

“We need to keep in mind that this is about reducing emissions and not reducing production,” the organization said last year in a separate submission, as revealed by DeSmog. 

Representatives of the Pathways Alliance are among the 35 people with ties to the fossil fuel sector who are part of Canada’s official delegation to COP28 this year. At the climate talks, they are pushing for policies supporting global deployment of carbon capture, which will allow companies to keep producing oil as countries get stricter about regulating emissions.   

“It is really important for the energy industry in Canada because it extends the life of Canada’s largest industrial sector and maintains our competitiveness over the long term,” Scott Crockatt of the Business Council of Alberta told the Calgary Herald last month.

However, tax credits supporting carbon capture risk accelerating already dangerous levels of global temperature rise, MacLean argues. Even if the technology can fully capture emissions from the production of oil and gas in Canada — which is an expensive and uncertain proposition — the vast majority of climate impacts occur when fossil fuels are burned in places like car and truck engines and house furnaces. 

“No possible innovation or improvement to [carbon capture technology] can change the fact that it applies only to the direct and upstream greenhouse gas emissions arising from the production of oil and gas, not the downstream emissions resulting from the combustion of oil and gas, which represent approximately 85 percent of the total emissions,” MacLean told DeSmog.  

Allowing oil and gas to expand while relying on carbon capture could result in the release of 86 billion additional tonnes of greenhouse gas emissions worldwide between 2020 and 2050, according to a new analysis from the organization Climate Analytics. This “86 billion tonne carbon bomb” could derail efforts to keep global warming from exceeding dangerous thresholds, the group argues. 

The Canadian government earlier this year unveiled detailed plans to remove “inefficient” oil and gas subsidies, with Environment and Climate Minister Steven Guilbeault saying at the time that “the simple reality is that it’s no longer free to pollute in Canada.” 

But climate campaigners say that promise risks being completely undermined by the new carbon capture tax credits. 

Geoff Dembicki
Geoff Dembicki is an investigative climate journalist based in New York City. He is author of The Petroleum Papers and Are We Screwed?

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