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Fossil Subsidies Phaseout in Doubt as Canada Lags on Basic Definitions

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Nearly a decade after Canada and other G20 countries committed to phase out “inefficient” fossil fuel subsidies, the federal government still hasn’t defined some of the key terms it will need to start getting the job done, Auditor General Michael Ferguson told the House of Commons Standing Committee on Public Accounts Tuesday, in an update on his March 2017 annual report.

Canada pledged to phase out fossil fuel subsidies by 2015 at a G20 meeting in Pittsburgh in 2009 and has repeated that promise every year since,” iPolitics noted [1] when Ferguson issued his report earlier this year. But despite some positive movement, “Finance Canada and Environment Canada haven’t clearly defined what the promise means, leaving doubts about whether the promise is being met.”

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In his committee appearance yesterday, Ferguson noted that the 2009 G20 statement left it to each participating government to decide how to define and apply key terms like “inefficient fossil fuel subsidies,” “rationalize,” and “support for the poorest.” The audit revealed that Finance Canada “still had not defined what an inefficient fossil fuel subsidy was, nor could the Department tell us how many inefficient fossil fuel subsidies there could be,” he told MPs. “We also found that Finance Canada did not have an implementation plan to meet Canada’s 2025 deadline to identify, phase out, and rationalize tax measures that it considers to be inefficient fossil fuel subsidies.”

The review showed that Finance had focused its efforts so far on some preferential tax measures targeted to fossil production and consumption, but had failed to address others. The department has since delivered some supplementary information to the Auditor General, including a package this past Friday that included “unredacted strategic environmental assessments and other documents that contain explanations, analyses of problems, or policy options.”

Environment and Climate Change Canada, meanwhile, acquired responsibility for non-tax measures like government grants and contributions, loans or loan guarantees at favourable rates, and other forms of grants and market interventions, when Prime Minister Trudeau issued his 2015 mandate letter [3] to ECCC Minister Catherine McKenna. But the audit determined the department “did not know the extent of non-tax measures that could be inefficient fossil fuel subsidies,” Ferguson said.

“The detailed action plan that the Department provided to this Committee contains timelines to identify these non-tax measures and to interpret the G20 commitment.”