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

The report highlights a significant lack of transparency in Canada's reporting of fossil fuel subsidies, particularly regarding foregone revenue. It advocates for the use of the WTO definition of subsidies and the 'revenue foregone' method to accurately quantify tax expenditures and royalty subsidies, which the authors argue are essential for informed policy-making and meeting international climate goals.

• Transparency regarding Canada's tax subsidies for fossil fuels is poor; of 128 identified revenue foregone policies, only 50% were quantifiable, totaling approximately CAD 3.2 billion in foregone revenue.
• IISD estimates that total annual fossil fuel subsidies across Canada were approximately CAD 4.8 billion per year in 2018 and 2019, with foregone revenue accounting for 67% (CAD 3.2 billion) of that total.
• The Canadian oil and gas industry is estimated to have a multi-year stock of tax loss carryforwards valued at CAD 63 billion, which can be used to deduct tax payments over time.
• The report recommends that Canada adopt the World Trade Organization (WTO) Agreement on Subsidies and Countervailing Measures (ASCM) definition, which explicitly includes 'Government revenue foregone or not collected' as a subsidy.
• The 'revenue foregone method' is identified as the international best practice for measuring tax expenditures, calculating the difference between the amount of tax paid with a concession and the amount that would have otherwise been due based on a standard benchmark.
• The report argues that tax subsidies in the oil and gas sector, such as accelerated depreciation and royalty relief, incentivize the 'lock in' of fossil fuel production by increasing short-term cash flow and reducing the risk of early-stage capital investments.
• Canada has international obligations to report and phase out inefficient fossil fuel subsidies through G20 commitments (by 2025) and UN Sustainable Development Goal (SDG) indicator 12.c.1.

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} }