British Columbia

B.C.'s $830M in fossil fuel subsidies undermines efforts to fight climate crisis, report says

A report by the International Institute for Sustainable Development says B.C. gave an estimated $830 million in fossil fuel subsidies in the 2017-18 fiscal year.

Royalties, exemptions, investments undermine action on climate change, including carbon tax, says author

The report says the B.C. NDP government has committed to progressive hikes of the carbon tax, but at the same time has introduced or entrenched fossil fuel subsidies. (Larry MacDougal/Canadian Press)

The British Columbia government gives hundreds of millions of dollars annually in subsidies for fossil fuels, including an estimated $830 million in the 2017-18 fiscal year, a new report says.

Most of the money goes to fossil fuel producers rather than consumers, says the report released Monday by the International Institute for Sustainable Development, an environmental think-tank.

The subsidies include royalty reductions, provincial tax exemptions and direct investments, undermining B.C.'s action on climate change including its long-standing carbon tax, says co-author Vanessa Corkal.

"If you have a boat and you're trying to use the carbon price to bail water out of the boat, fossil fuel subsidies are kind of like the leak in that boat," she said in an interview.

"As long as you're funnelling money to an industry that is going to increase use and production of fossil fuels, a carbon price is only going to do so much."

Major portion of subsidies come from royalty reductions

The report says oil and gas companies are required to pay royalties meant to provide benefits to B.C. residents, including helping fund health care and education.

But every year, it says companies claim credits to reduce the royalties they pay. The report estimates B.C. has amassed at least $2.6 to $3.1 billion in outstanding royalty credits.

While a large portion of tax exemptions go to fossil fuel consumers, that doesn't just mean average residents trying to heat their homes. Airlines, cruise ship companies and the agriculture sector also benefit.

B.C. Energy Minister Michelle Mungall said in a statement that a number of provincial initiatives have been "inaccurately characterized" in the report, though she didn't specify which ones.

B.C. Energy Minister Michelle Mungall. (Mike McArthur/CBC)

She says the CleanBC plan to fight climate change includes a program for industry that will reduce emissions by 2.5 million tonnes of CO2 equivalent per year by 2030.

"We regularly review royalty programs. Our government will keep working hard to keep B.C. on the path to a cleaner, better future that creates opportunities for all," she said.

The report notes the B.C. NDP government has committed to progressive hikes of the carbon tax, but at the same time has introduced or entrenched fossil fuel subsidies in recent years.

The mining exploration tax credit, which helps to subsidize coal, was made permanent in 2019, the report says. Coal exploration increased by 58 per cent the previous year, it says.

B.C. also still exempts emissions from the carbon tax for controlled venting, or the releasing of gases into the air from natural gas operations, according to the report. 

LNG subsidies at odds with climate goals, report says

The government has also established new subsidies and increased access to existing ones for the liquefied natural gas sector, the report says. This year the province signed an agreement with LNG Canada, a joint-venture group formed to build a major liquefied natural gas project in northern B.C.

In the agreement, the province committed to provide electricity at the standard industrial rate, eliminate the LNG income tax, allow LNG Canada to claim a natural gas income tax credit and defer provincial sales tax on construction costs.

This year the province signed an agreement with LNG Canada to build a major liquefied natural gas project in northern B.C., in which it agrees to eliminate the LNG income tax, allow LNG Canada to claim a natural gas income tax credit and defer provincial sales tax on construction costs. (The Associated Press)

The report prompted environmental group Stand.earth to call for the province to end subsidies to the oil and gas industry before the next election.

International program director Tzeporah Berman notes B.C. committed $902 million over the next three years to CleanBC, only a little more than the $830 million the report says it gave fossil fuel polluters in 2017-2018.

"We cannot be getting off fossil fuels by handing taxpayer dollars to the biggest polluters to help them pollute," Berman says.

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