It’s time to finally put an end to public funding of fossil fuels

In recent days, residents of Jasper, Alta., have begun to return to witness firsthand the heartbreaking devastation brought on by wildfires. Meanwhile, the Jasper Park fire and more than 800 other active wildfires rage on, threatening dozens of communities—disproportionately Indigenous communities—and blanketing large swaths of the continent in smoke. While the country rallies to support people in the midst of emergencies and evacuations, the backdrop of this devastating reality must also be called into view: the federal government is worsening these challenges by investing more public funds in the industry most responsible for catastrophic climate change impacts. Laura Cameron is a policy advisor with the International Institute for Sustainable Development. Photograph courtesy of Michele Bouvier In the past month alone, the Crown corporation Export Development Canada announced financing of $500- to $700-million for two new LNG expansion projects, and re-financing of $200- to $300-million for Enbridge U.S., while the Canada Growth Fund put up to $1-billion on the line for Strathcona Resources’ new oilsands carbon capture and storage project. Carbon capture and storage is an expensive and unproven approach to decarbonize the energy system. Canada has long pledged to end its financial support of the fossil fuel industry. The government has taken some steps forward in recent years with the introduction of two policies: the first put an end to international public financing for fossil fuels, and the second provided rules to do away with "inefficient" fossil fuel subsidies. But continued support for the sector exposes loopholes in such policies, and demonstrates the need to address the last and largest source of funding. The bulk of Canada’s support to the fossil fuel sector flows through domestic public financing, which has not yet been addressed. In recent years, Export Development Canada and other Canadian Crown corporations have provided at least $7.6- to $13.5-billion annually to the fossil fuel sector in Canada, through loans, equity, grants, and guarantees. A substantial portion of these funds have gone to backing the Trans Mountain Pipeline expansion, which started transporting oil this past May. In the six years since the federal government bought the pipeline, construction costs ballooned to more than $34-billion amidst significant delays and public opposition. The government is now looking to offload the project, which will be challenging without creating further subsidies to the industry. With peak demand for both oil and gas in sight, and an anticipated glut in global LNG supply, investing in fossil fuel infrastructure with multi-decade lifespans is not only fuelling heat domes and fire storms that are devastating communities across the country, but is a highly risky investment economically. Taxpayers are being saddled with the long-term economic risks of investing in a sunsetting industry. Shifting public funds away from fossil fuels and toward the clean energy and climate resilience solutions we desperately need is a key lever governments must pull to tackle climate change effectively. Experts estimate that Canada needs to spend approximately two per cent of GDP per year on climate action, and current spending falls about $10-billion short of that annually. Redirecting public finance can help close this gap. Next year, Canada will host the G7, an opportune moment to lead by example in aligning spending with its climate commitments. But before it steps into the spotlight, Canada needs to finish the job by ending domestic public finance for fossil fuels, and clearly demonstrating how its policies are being put into action. Clear and accountable reporting of public funds will be essential to ensure credibility with Canadians and international peers. And—it should go without saying—no more public investment should be committed to fossil fuel projects before the forthcoming domestic finance policy is published. Canada is approaching the final stretch of its finance reform, which has been a cornerstone of the government’s climate agenda since 2015. Canadians, reeling from devastating climate impacts playing out in tandem with an ongoing affordability crisis, deserve to see them cross the finish line and redirect resources into supporting communities, and growing the energy industry of the future. Laura Cameron is a policy advisor with the International Institute for Sustainable Development, working on shifting financial flows and advancing just transition policies in Canada. The Hill Times