If you want to understand where governments really stand, it’s always a good idea to follow the money. That is why Greenpeace commissioned the Global Subsidies Initiative to do some research for us on tax breaks to corporations producing “high cost” oil (tar sands and deep-water off shore wells) in five countries: Canada, the US, the UK, Brazil and Mexico.
All of these countries committed to “phase out over the medium term inefficient fossil fuel subsidies that lead to wasteful consumption” at the G20 Leaders Summit in Philadelphia in 2009. No new actions have been taken since then, so we want to turn up the heat on keeping that promise when the G20 gets together again in Korea later this week.
The main conclusion of the GSI report commissioned by Greenpeace is that all five countries are providing more subsidies to oil companies than they admit publicly, and that “it makes little sense to make fiscal cutbacks [to other government programs because of rising deficits] while granting inefficient subsidies; or to attempt to curb greenhouse gas (GHG) emissions while concurrently subsidizing GHG emissions through fossil fuel subsidies.”
It also notes that these subsidies also have a more insidious long-term effect of undermining the green economy: “Subsidizing oil extraction has a range of secondary effects, including making investments in oil more attractive compared to lower carbon, lower risk alternatives, thereby increasing the lock-in of economies into fossil fuels.”
Oil companies in Canada are getting a particularly sweet deal, as the subsidies that they were able to put a dollar figure to totalled over $2.8 billion in 2008 (and there were more subsidies that they couldn’t quantify). Most of that came from the federal ($1.38 billion) and Alberta ($1.05 billion) governments, with the tar sands taking in the lion’s share ($1.59 billion) of this money.
To put this in perspective, more of our money is going to subsidize oil companies’ destruction in the tar sands than there is in the combined 2008 budgets of Environment Canada ($1.12 billion) and Alberta Environment ($403 million).
But what would happen if we stopped giving some of the richest companies in the world billions in public dollars to go after the dirtiest and riskiest types of oil?
The report’s economic modeling found that:
Deficits would go down: Government revenues go up by five per cent in Alberta, four per cent in Saskatchewan, and one per cent federally. A small decline is observed in Newfoundland and Labrador, where the removal of the relatively large federal subsidy decreases production royalties more than is gained in reducing provincial subsidies.
Pollution would go down: Nationally, emissions would be about 2 per cent higher in 2020 with the subsidies. In Alberta, the subsidies lead to 5 per cent more provincial emissions, including 12 per cent more emissions from the tar sands.
There would be no impact, or a positive impact, on employment: The report concludes that since the sector is capital intensive, the impacts on total employment are negligible. If the subsidy savings were spent on programs by governments, more labour would be employed relative to the with subsidies case.
This is why getting Canada and the G20 to move forward on ending tax breaks for oil companies is a key step in building an Energy [R]evolution that would meet our energy needs, avoid dangerous levels of global warming and eliminate the market demand for high-cost oil from the tar sands.
For more detail on what we’re looking for from the November 11-12 G20 meeting in Seoul, click here.