Five Key Priorities to End Fossil Fuel Subsidies in Canada

This briefing by the International Institute for Sustainable Development (IISD) argues that Canada continues to provide billions in public funds to the fossil fuel industry despite pledges to phase out subsidies. The document outlines five priority areas for reform—tax credits, the Trans Mountain Pipeline, carbon capture and storage, LNG infrastructure, and low-carbon funds—and calls for a comprehensive, transparent inventory of all financial supports to ensure Canada meets its international commitments as the 2025 G7 president.

• Canada has failed to meet its commitment to publish a comprehensive inventory of direct and indirect fossil fuel subsidies by December 2024, which hinders the ability to track the application of its "inefficient" subsidies policy.
• Significant fossil fuel subsidies persist through tax credits and deductions. The Parliamentary Budget Officer estimated that four specific exemptions—Canadian Exploration Expense Deductions (CEEs), Canadian development expenses (CDE), Canadian oil and gas property expenses (COGPE), and Foreign Resource Expense Deductions (FREs)—cost CAD 1.8 billion in foregone revenue in 2021.
• The Trans Mountain Pipeline expansion (TMX) is operated at a loss because the government charges oil companies CAD 11.37 per barrel, significantly lower than the CAD 25.53 per barrel required to recover capital costs. This discount could result in a total subsidy of up to CAD 18.8 billion, with an estimated CAD 1.2–1.3 billion already provided since May 2024.
• The federal government has committed over CAD 9 billion to carbon capture and storage (CCS) by 2030, primarily via an investment tax credit covering over 50% of capital costs. This is supplemented by provincial grants, such as Alberta's 12% grant, and investments from the Canada Growth Fund, including CAD 200 million in Entropy CCS and up to CAD 1 billion in Strathcona Resources oilsands CCS.
• Federal support for LNG in western Canada includes direct investments of CAD 275 million in LNG Canada in 2019 and an estimated CAD 1 billion in steel tariff exemptions. Additionally, the British Columbia government requested CAD 1.5 billion from the federal government for transmission infrastructure to serve northern LNG sites.
• Provincial governments provide substantial fossil fuel subsidies, estimated by the OECD at CAD 4.6 billion in 2023. Examples include BC's estimated CAD 5.4 billion in support for LNG Canada and various fuel tax cuts in Ontario (expected to cost CAD 620 million this fiscal year), Manitoba (estimated at CAD 340 million annually before January 2025), and Alberta (estimated CAD 295 million in 2024).

APA

Parenteau,, L. C. (2025). Five Key Priorities to End Fossil Fuel Subsidies in Canada. International Institute for Sustainable Development. https://www.iisd.org/articles/insight/five-priorities-end-fossil-fuel-subsidies-canada

Chicago

Parenteau,, Laura Cameron,Serene. Five Key Priorities to End Fossil Fuel Subsidies in Canada. International Institute for Sustainable Development, 2025. https://www.iisd.org/articles/insight/five-priorities-end-fossil-fuel-subsidies-canada.

Wikipedia

{{cite report |last1=Parenteau, |first1=Laura Cameron,Serene |title=Five Key Priorities to End Fossil Fuel Subsidies in Canada |publisher=International Institute for Sustainable Development |date=17 January 2025 |url=https://www.iisd.org/articles/insight/five-priorities-end-fossil-fuel-subsidies-canada |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{parenteau2025five, author = {Parenteau,, Laura Cameron,Serene}, title = {{Five Key Priorities to End Fossil Fuel Subsidies in Canada}}, institution = {International Institute for Sustainable Development}, year = {2025}, month = jan, url = {https://www.iisd.org/articles/insight/five-priorities-end-fossil-fuel-subsidies-canada}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }