Untangling the Subsidy Knot: A Panel Discussion of Fossil Fuel Subsidy Reform

Please join Sustainable Prosperity and the International Institute for Sustainable Development for a panel discussion on fossil fuel subsidy reform on October 2, 2013. This free, public seminar will explore potential paths to achieving both environmental and economic benefits from phasing out existing subsidies to fossil fuel production. It will draw on both international and Canadian perspectives.

Panel participants will include:

Peter Wooders, Senior Economist at the International Institute for Sustainable Development (IISD) and part of the Global Subsidies Initiative (GSI)

Dave Sawyer, Principal of EnviroEconomics and author of a recent report on environmental implications of upstream oil and gas subsidies in Canada

Mike Cleland (Moderator), Nexen Executive in Residence, Canada West Foundation; former President and CEO of the Canadian Gas Association; Sustainable Prosperity Advisory Board

Subsidy reform is an important policy lever for reducing greenhouse gas (GHG) emissions and other environmental damage. Government subsidies — i.e., transfers of public dollars to firms or individuals — can be useful instruments as part of a policy tool-kit. In many cases, however, reforming existing subsidies may have merit on both environmental and economic grounds. First, subsidies may incent environmentally damaging activities. Subsidies to fossil fuel production, for example, may lead to increased GHG emissions. At the same time, subsidies have opportunity costs for public spending: given that government resources are finite, could alternative uses of public dollars lead to a greater public good?

Fossil fuel subsidies remain prevalent, but governments are making progress on reform. The International Energy Agency estimates total fossil fuel subsidies to be $253 billion in 2011. Meanwhile, the G20 has committed to phasing out inefficient fossil fuel subsidies. Canada has signaled its intent to follow through on this commitment, and indeed in its 2011 and 2013 budgets has begun to phase out tax allowances for capital expenditures in mining and oil-sands sectors.

Yet fossil fuel subsidy reform is both analytically and politically tricky. Parsing public and private interests to identify a path toward subsidy reform can be challenging. Internationally, the Global Subsidies Initiative (GSI) is undertaking research to analyze how subsidies in various jurisdictions are supporting or undermining sustainable development. This body of work includes research commissioned on fossil fuel subsidies in Canadian provinces estimating total subsidies at around $2.8 billion annually. Analysis from the University of Calgary School of Public Policy, however, argues that that estimating subsidies is complex particularly given interactions between provincial and federal tax policies and resource royalty regimes. It suggests that subsidies in Canada might actually be much smaller.

Despite this complexity, the potential for opportunities for environmental and economic win-wins makes subsidy reform an important public policy issue in Canada and internationally. We hope that you can join the discussion on October 2.