International Best Practices: Estimating tax subsidies for fossil fuels in Canada

This report by the International Institute for Sustainable Development (IISD) examines the lack of transparency in reporting tax subsidies for fossil fuels in Canada. It argues that current reporting is incomplete and advocates for the adoption of international best practices, specifically the WTO definition of subsidies and the UN's SDG methodology, to accurately quantify foregone government revenue.

• Transparency regarding Canada's tax subsidies for fossil fuels is poor; of 128 identified revenue foregone policies, only 50% were quantifiable. These quantifiable policies accounted for approximately CAD 3.2 billion in foregone revenue.
• IISD estimates that total annual fossil fuel subsidies in Canada for 2018 and 2019 were approximately CAD 4.8 billion, with foregone revenue making up 67% (CAD 3.2 billion) of that total. This is considered a conservative estimate as it excludes many federal tax deductions and some provincial measures.
• The Canadian oil and gas industry is estimated to hold a multi-year stock of tax loss carryforwards totaling CAD 63 billion, which can be used to deduct tax payments over time.
• The report recommends that Canada adopt the World Trade Organization (WTO) definition of subsidies, which includes direct transfers of funds, government revenue foregone or not collected, government-provided goods or services, and price support.
• The 'revenue foregone method' is identified as the best practice for measuring tax expenditures. This method calculates the difference between the amount of tax paid with a concession and the amount that would have been due under a standard benchmark tax level.
• The report argues that comprehensive subsidy inventories are vital because fossil fuel subsidies create negative externalities, deplete public resources, and influence investment decisions by 'locking in' production through front-loaded benefits like accelerated depreciation.
• Canada has international commitments to phase out inefficient fossil fuel subsidies by 2025, as agreed upon by G20 leaders in 2009 and reaffirmed at the 2016 North American Leaders Summit. However, the Canadian federal government has not adequately defined what constitutes an 'inefficient' subsidy.

APA

Laan, T., & Corkal, V. (2020). International Best Practices: Estimating tax subsidies for fossil fuels in Canada. International Institute for Sustainable Development. https://www.iisd.org/system/files/2020-12/tax-subsidies-fossil-fuels-canada.pdf

Chicago

Laan, Tara, and Vanessa Corkal. International Best Practices: Estimating tax subsidies for fossil fuels in Canada. International Institute for Sustainable Development, 2020. https://www.iisd.org/system/files/2020-12/tax-subsidies-fossil-fuels-canada.pdf.

Wikipedia

{{cite report |last1=Laan |first1=Tara |last2=Corkal |first2=Vanessa |title=International Best Practices: Estimating tax subsidies for fossil fuels in Canada |publisher=International Institute for Sustainable Development |date=December 2020 |url=https://www.iisd.org/system/files/2020-12/tax-subsidies-fossil-fuels-canada.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{laan2020international, author = {Laan, Tara and Corkal, Vanessa}, title = {{International Best Practices: Estimating tax subsidies for fossil fuels in Canada}}, institution = {International Institute for Sustainable Development}, year = {2020}, month = dec, url = {https://www.iisd.org/system/files/2020-12/tax-subsidies-fossil-fuels-canada.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }