Why Government Support for Decarbonizing Oil and Gas Is a Bad Investment

This policy brief from the International Institute for Sustainable Development (IISD) argues that providing government financial support for the decarbonization of Canada's oil and gas sector is an ineffective use of public funds. The document asserts that the industry possesses sufficient windfall profits to fund its own emissions reductions and that public subsidies risk prolonging the lifespan of fossil fuel projects, creating stranded assets, and slowing the transition to renewable energy. It specifically critiques the reliance on Carbon Capture, Utilization, and Storage (CCUS) as a high-cost, low-impact solution and advocates for redirecting public investment toward proven low-carbon technologies like wind, solar, and grid electrification.

• Government financial support for decarbonizing the oil and gas sector is viewed as a bad investment because it lowers production costs, extends the life of fossil fuel projects, and increases the risk of stranded assets. The document notes that global stranded assets in oil and gas exceed USD 1 trillion, with approximately USD 100 billion located in Canadian fields.
• The Canadian oil and gas industry has the financial capacity to decarbonize without public funds due to significant windfall profits. Projected profits for Canadian oil and gas companies are CAD 152 billion for the current year, and five major firms saw free cash flow increase by nearly 350% between Q1 2021 and Q2 2022.
• Industry commitments to net-zero are described as insufficient and inconsistent with 1.5°C pathways. Many companies omit Scope 3 emissions, lack robust interim targets, and rely on offsets. Furthermore, the industry plans to expand production by nearly 30% from 2020 to 2030, which is expected to increase annual emissions by 25%.
• Carbon Capture, Utilization, and Storage (CCUS) is criticized as an expensive 'wild card' technology that is unlikely to significantly reduce emissions before 2030. In Canada, seven operational CCUS plants capture only 0.05% of national emissions, and 70% of the captured carbon is used for enhanced oil recovery to increase production.
• The Canadian government has provided substantial financial support to the sector, including an investment tax credit for CCUS estimated to cost up to CAD 1.5 billion annually until 2030, and CAD 2 billion in CCUS support since 2000. However, the document claims Canada is the last among 11 OECD countries in progress toward ending fossil fuel support.
• Previous government efforts to fund emissions reductions in the sector have been unsuccessful. The Onshore Program of the Emissions Reduction Fund (up to CAD 675 million) saw 27 funded projects lead to increased oil or gas production, which offset the emissions reductions achieved.
• Public funds are more effectively spent on proven low-carbon technologies such as renewable energy and building retrofits. Between 2010 and 2019, the unit costs of solar and lithium-ion batteries both fell by 85%, while wind energy costs fell by 55%.
• The oil and gas industry has left significant environmental and financial liabilities for taxpayers. In Alberta, there are 300,000 unreclaimed wells with estimated cleanup costs between CAD 40 to 70 billion, and companies owe Alberta municipalities CAD 253 million in unpaid property taxes.

APA

Dusyk,, L. C. C. (2022). Why Government Support for Decarbonizing Oil and Gas Is a Bad Investment. International Institute for Sustainable Development. https://www.iisd.org/articles/canada-oil-gas-decarbonization-support-unwise

Chicago

Dusyk,, Laura Cameron,Vanessa Corkal,Nichole. Why Government Support for Decarbonizing Oil and Gas Is a Bad Investment. International Institute for Sustainable Development, 2022. https://www.iisd.org/articles/canada-oil-gas-decarbonization-support-unwise.

Wikipedia

{{cite report |last1=Dusyk, |first1=Laura Cameron,Vanessa Corkal,Nichole |title=Why Government Support for Decarbonizing Oil and Gas Is a Bad Investment |publisher=International Institute for Sustainable Development |date=24 October 2022 |url=https://www.iisd.org/articles/canada-oil-gas-decarbonization-support-unwise |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{dusyk2022why, author = {Dusyk,, Laura Cameron,Vanessa Corkal,Nichole}, title = {{Why Government Support for Decarbonizing Oil and Gas Is a Bad Investment}}, institution = {International Institute for Sustainable Development}, year = {2022}, month = oct, url = {https://www.iisd.org/articles/canada-oil-gas-decarbonization-support-unwise}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }