https://www.nationalobserver.com/2019/04/02/news/canadas-environment-department-didnt-think-trans-mountain-purchase-was-fossil-fuel
[Recently I posted that the Canadian federal government was looking for
Canadians to identify fossil fuel subsidies for them, and I thought that
was a bit rich given these folks are paid to do this. However, based on
this subsequent news item, it may be that this is the best they can do,
as their existing staff don't appear to understand what a subsidy is.
Or perhaps it's fossil fuel that puzzles them.
I will posit that - based on conventional free-market economic theory -
that any and all government subsidies are 'inefficient', as they distort
the market's pricing mechanisms. In the case of fossil fuels, any
subsidy would mean that the fossil fuels would sell in the market at a
lower price than is justified by their true cost, thus artificially
increasing demand for those products relative to competing products
which are not subsidized or are subsidized less. A true advocate of
free-markets would not only demand that subsidies for a mature product
like oil be removed, but that a realistic tax representing the
externalized costs on society from using the product be levied on the
nominal 'free-market' price. Yet, somehow I don't recall such demands
from the Canadian oil patch in recent years. Odd.
So the target wording can ignore the word 'inefficient'. We're looking
to find ALL the subsidies to the fossil fuel industry - tax and on-tax -
and eliminate them.
links in online article]
Canada's environment department didn't think the Trans Mountain purchase
was a fossil fuel subsidy
By Carl Meyer in News | April 2nd 2019
Julie Gelfand says she's never clashed with a federal department over
one of her recommendations in the five years she's been Canada's
environment watchdog.
On Tuesday, when the commissioner of environment and sustainable
development tabled her final reports in Parliament before she leaves the
position this fall, that streak ended.
Finance Canada rejected her recommendation that, in its hunt for
favourable tax measures for the oil and gas industry, the department
take into account evidence that integrates economic, social, and
environmental sustainability on an equal basis.
"Disagreed," the department retorted. Some of those considerations, it
argued, may be more "relevant" than others.
"It is the first time that a department has disagreed with one of my
recommendations. Was I surprised? A little bit; it hadn't happened
before," Gelfand told reporters in a press conference Tuesday.
"It is their right to disagree, and really it's up to parliamentarians
and Canadians to ask the departments why they disagreed, and what are
they going to do about that."
The dispute with federal bean counters is contained in one of several
audits Gelfand submitted April 2 to federal MPs and senators, on a range
of issues including invasive species and water pollution from mining
companies.
She also found that the federal Environment Department did not consider
the Canadian government's $4.5 billion purchase of the Trans Mountain
oil pipeline and expansion project in its ongoing assessment of
corporate handouts to the oil and gas sector.
The pipeline purchase, completed by the Trudeau government last summer,
is among a series of federal investments, including some “that were
designed to increase production of fossil fuels and manage waste from
oil sands production” that should have been on a list of subsidies, said
Gelfand's audit.
Oil and gas subsidies punish clean technology companies by tilting the
market in favour of carbon polluting energy sources that hurt Canada's
chances at tackling climate change.
Gelfand’s investigation of fossil fuel subsidies follow up on a
commitment, made at a 2009 G20 summit in Pittsburgh by former prime
minister Stephen Harper, to phase out inefficient fossil fuel subsidies.
The Trudeau government has also made a pledge to phase out non-tax
“inefficient fossil fuel subsidies” by 2025.
Her office reviewed the commitments by looking at both tax subsidies and
non-tax subsidies, concluding that the federal government still had a
lot of homework to do.
“Overall, we found that Environment and Climate Change Canada’s work to
identify inefficient, non-tax subsidies for fossil fuels was incomplete
and not rigorous,” said the report by Gelfand. “In our view, this is
partially because the department used unclear definitions.”
Gelfand said the federal environment department also failed to probe
things such as energy sector regulators and research grants.
“In addition, after the period covered by our audit, the government
purchased the Trans Mountain Pipeline, and the department did not
consider assessments related to its expansion or purchase,” the report said.
Gelfand also found that Finance Canada's attempt to ferret out
favourable tax measures to the oil and gas sector was "incomplete" and
that the department did not clearly define how a tax subsidy for fossil
fuels would be inefficient.
McKenna, department tout public consultations
In its response, included in the report, the government avoided saying
whether it agrees that items such as the pipeline purchase should be
included.
However, Environment and Climate Change Minister Catherine McKenna
announced last week that the government was launching public
consultations about what needs to be on its list of fossil fuel subsidies.
McKenna touted that announcement as a response to the audit's
recommendations, in a statement she issued shortly after the audits were
tabled. "To ensure Canada continues to show leadership on this front, we
recently launched a consultation to seek public feedback on the
government's framework to review non-tax measures," she said.
The consultation, which will run until June 30 and seek public feedback
on the definitions of “fossil fuel subsidy” and "inefficient," will also
be used in the government's peer review process to identify fossil fuel
subsidies with Argentina that was launched in June 2018.
The department also relied on the newly-launched consultations when it
responded to some of the commissioner's recommendations.
"The department will conduct consultations to solicit feedback," it said
in one response, and will submit its review of inefficient fossil fuel
subsidies "to a panel of experts" as part of the Argentina peer review.
"The department will conduct consultations to solicit feedback," it
repeated in another response.
But Karen Hamilton, program officer at Ottawa-based corporate
accountability non-profit Above Ground, argued that a debate over what
was a subsidy was missing the point.
"Ottawa should eliminate all public financial support for fossil fuels,
regardless of whether it defines the support as a subsidy," she said in
an interview.
Environment Canada looks at non-tax subsidies
Meanwhile, Finance Canada's assessments "focused almost exclusively on
fiscal and economic considerations and did not consider the integration
of economic, social, and environmental sustainability in subsidizing the
fossil fuel sector over the long term," Gelfand wrote.
"In the context of the G20 commitment, the term 'inefficient' is not
susceptible to the use of simple criteria, given the breadth of
potential issues that may need to be considered," the finance department
said in response.
While it agreed that economic, social, and environmental sustainability
"are important considerations," the department said it "would not be
practical to develop assessments that systematically devote equal
attention" to them. "Depending on the context of the analysis, some
types of considerations may naturally be more prevalent and relevant
than others."
While Finance Canada is investigating tax measures, Environment and
Climate Change Canada (ECCC) is looking at non-tax subsidies, which are
things like government grants, favourable loans, or research and
development funding.
In the two years since the auditor general found in 2017 that ECCC “did
not yet know” the extent of non-tax subsidies, Gelfand's findings show
that the department was able to examine 23 out of approximately 200
possible federal organizations.
Within those 23 organizations, it found four subsidies — none of which,
it decided, should be eliminated, since it found they were not
"inefficient."
"The department’s approach to creating the inventory of potential
non-tax subsidies for fossil fuels excluded several projects that in our
opinion should have been on the list," Gelfand wrote in the April 2 report.
The four subsidies that ECCC found related to “electric and alternative
fuel vehicle infrastructure,” the government’s term for electric car
chargers, natural gas and hydrogen fuel cell charging stations, as well
as "oil and gas clean technology research" and support for electricity
prices in Indigenous communities
The department "did not conduct rigorous and complete assessments" for
three of the four subsidies, Gelfand said, and there was insufficient
information to determine subsidy efficiency. The government is planning
on spending $22 million on natural gas stations and $50 million on
"clean oil and gas" tech.
Department 'guidelines' seen as inadequate
Part of the problem was that ECCC had not actually defined what
“inefficient" meant in the first place, said Gelfand.
The Environment Department "did not clearly define criteria" for what
made something inefficient, nor did it give any "detailed guidance" on
how to made that decision to other government organizations, she said.
"Instead, the department established a list of broad considerations that
could be used to guide the assessment of whether a non-tax subsidy was
inefficient. In our opinion, the list of considerations was not
sufficient to be a definition and did not have clear criteria."
ECCC also came up with a way to exclude some fossil fuel projects as
subsidies by deciding that programs had to "disproportionately" benefit
the oil and gas sector, although it failed to define what
"disproportionate" meant.
In a discussion paper that was released alongside McKenna's
announcement, the department laid out a proposed definition of non-tax
subsidies as federal programs "that provide preferential treatment that
specifically supports the production or consumption of fossil fuels."
That isn't precise enough, Gelfand told reporters Tuesday. "What they
gave us was a broad set of guidelines," she said.
"Really, you should read them. They don't meet the term of a definition.
It's up to them to define 'inefficient,' what they gave us didn't meet
our test, and is not an adequate definition to guide the work that they
need to do."
Gelfand's report also noted that there are several international
organizations with definitions of subsidies that the government could
use: The World Trade Organization, International Energy Agency,
International Monetary Fund and World Bank all have such definitions.
But the discussion paper points to those organizations as providing
"different definitions" and says there is "no single international
definition of what constitutes a fossil fuel subsidy, or how to approach
inefficiency."
The paper also says the department found that Export Development Canada,
which provides loans and financing to Canadian business including in the
energy sector, should not be specifically singled out.
Providing loans "on commercial terms," even from a Crown corporation,
"would not constitute a subsidy to the fossil fuel sector, as there is
no additional benefit provided by the government," the paper stated.
Export Development Canada's services are also "widely available to the
general economy and are not specific to the fossil fuel sector."
Hamilton of Above Ground said that this finding was particularly
troubling for her.
"Canada has pledged to make finance flows consistent with a pathway
towards low greenhouse gas emissions. With $17.7 billion in EDC support
to the oil and gas sector last year alone, we're headed in the wrong
direction," she said.
"And as EDC's sole shareholder, the government is profiting from a
sector that's directly fueling the climate crisis."
--
Darryl McMahon
Freelance Project Manager (sustainable systems)
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