Canada first committed to phasing out "inefficient" fossil fuel subsidies in 2009 alongside its G20 peers, but has yet to adopt a clear definition of what this means. This brief presents four criteria to assess the efficiency of fossil fuel subsidies in Canada to ensure this commitment is met with transparency, timeliness, and accountability.
The matter of determining inefficiency in the Canadian context, on the other hand, has received less attention and is the focus of this brief. The criteria presented here provide a critical assessment framework for determining the efficiency of fossil fuel subsidies. These criteria, which are in line with Canada’s existing commitments on climate change, make it clear that there is very limited room for efficient fossil fuel subsidies within these commitments, except in very specific, time-limited circumstances.
Subsidies must meet all four of these criteria to be considered efficient; failing to meet a criterion would deem the subsidy inefficient. In the following sections, we briefly describe each of these assessment criteria to provide guidance, as Canada has committed to evaluating and eliminating these subsidies in the next year:
- Alignment with climate commitments;
- support for the low carbon economy;
- just transition consistency;
- and the best way to achieve the overall policy goal.
Ending government subsidies for fossil fuels and aligning financial flows with the Paris Agreement targets is imperative to addressing the worsening climate crisis. The most recent report from the Intergovernmental Panel on Climate Change (IPCC) paints a stark picture of the narrowing window for action to transition to low-carbon economies and for high-emitting countries like Canada to take responsibility for leading the way.
pdf - 0.31 mb Identifying Inefficient Fossil Fuel Subsidies in Canada
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