How much are taxpayers really subsidizing Canada's fossil fuel industry?

We've heard that Canada's fossil fuel industry gets billions in subsidies, and that it's making it harder for us to reach our climate goals.

But how much funding are taxpayers actually giving the fossil fuel industry in different parts of the country? What's it used for? And what impact does it actually have? Here's a closer look.

There's no agreed-upon definition, even within Canada. 

Canada's auditor general says that at its most basic level, a subsidy provides an advantage and can include tax measures such as deductions or credits, grants or direct funding (which may be earmarked for things like equipment or R&D), or government loans or loan guarantees (which are often described by the more specific term public financing).

Subsidies can also include reduced royalties or royalty credits — effectively, a discount on the lease of Crown land for oil and gas production. The lease agreement usually includes a share of the oil and gas produced, or its value.

The auditor general's definition is based on that of the World Trade Organization. It says a subsidy is a "financial contribution by a government or any public body… that confers a benefit."

More generous definitions, such as the International Monetary Fund's, also include "externalities" — costs to society, including environmental damage such as oil spills, health impacts from pollution and damage due to climate change impacts like extreme weather.

Narrower definitions exclude many of these things. 

Export Development Canada, a federal agency and an important lender for the fossil fuel industry, says the loans, equity and insurance it offers to fossil fuel producers are not subsidies, even though it's been argued that they're crucial for making private financial institutions comfortable about lending the balance of the funding needed for projects. 

CAPP (The Canadian Association of Petroleum Producers) says it does not consider tax measures to be subsidies, despite a report from Canada's Parliamentary Budget Officer in December showing that tax deductions by fossil fuel producers reduced annual federal tax revenue by $2.3 billion in 2019. 

It may not feel like it, but you and your family are probably the beneficiaries of some fossil fuel subsidies. You're also definitely contributing to some through your taxes.

Subsidies can make it cheaper to:

That depends on who you ask, how they define a subsidy and what data is used to calculate the total — resulting in highly variable estimates. 

In Canada in 2020, estimates range from $4.5 billion (OECD) to $18 billion (Environmental Defence, including public financing to support pipelines) to $81 billion (IMF, including externalities), although most reports note that a lack of transparency makes complete and accurate calculations difficult.