Assessment of Fossil Fuel Subsidies in Canada

The report finds that the Government of Canada is providing an inefficient fossil fuel subsidy to the oil industry by charging transportation tolls on the Trans Mountain Pipeline (TMP) that are significantly below marketplace costs. Using three different valuation methods, the report estimates the total subsidy to be between CAD 8.7 billion and CAD 18.8 billion, which translates to a cost of CAD 581 to CAD 1,255 per Canadian household. The analysis concludes that the project fails all criteria for an 'efficient' subsidy and that the overall cost-benefit analysis shows a net cost to Canada of CAD 23.1 billion. To phase out this subsidy, the author recommends either raising tolls to economic levels or implementing a cost-recovery levy of CAD 1.00 to CAD 2.00 per barrel on Western Canadian oil shipments.

• The Government of Canada's investment in the Trans Mountain Pipeline (TMP) constitutes an inefficient fossil fuel subsidy because tolls are set below the marketplace costs of transporting oil, meaning "government revenue that is otherwise due is foregone or not collected."
• The estimated value of the subsidy provided to Canada's oil industry ranges from CAD 8.7 billion to CAD 18.8 billion, which represents a cost to taxpayers of between CAD 581 and CAD 1,255 per household.
• A cost-of-service analysis indicates the subsidy is CAD 18.8 billion, as the base fixed marketplace toll should be CAD 24.53 per barrel based on 2024 capital costs of CAD 34.2 billion, rather than the requested interim toll of CAD 11.37 per barrel.
• Discounted Cash Flow (DCF) analyses using the PBO model and a separate SFU model both show significant negative Net Present Values (NPV), with the PBO-based update ranging from negative CAD 8.7 billion to negative CAD 18.7 billion and the SFU model ranging from negative CAD 11.3 billion to negative CAD 17.9 billion.
• The TMP subsidy is deemed inefficient under the Government of Canada's framework because it does not meet any of the six criteria for efficiency, such as enabling significant GHG reductions or supporting clean energy.
• A comprehensive cost-benefit analysis shows the TMP expansion results in a significant net cost to Canada, with a base case net cost of CAD 23.1 billion, accounting for construction costs, GHG emissions, and oil spill risks.
• If the Government of Canada sells TMP, it is expected to incur a net cash loss on the investment ranging from CAD 8.9 billion to CAD 18.0 billion, while the oil sector continues to benefit from below-market tolls.

APA

Gunton, T. (2024). Assessment of Fossil Fuel Subsidies in Canada. International Institute for Sustainable Development. https://www.iisd.org/system/files/2024-09/fossil-fuel-subsidies-trans-mountain-pipeline.pdf

Chicago

Gunton, Thomas. Assessment of Fossil Fuel Subsidies in Canada. International Institute for Sustainable Development, 2024. https://www.iisd.org/system/files/2024-09/fossil-fuel-subsidies-trans-mountain-pipeline.pdf.

Wikipedia

{{cite report |last1=Gunton |first1=Thomas |title=Assessment of Fossil Fuel Subsidies in Canada |publisher=International Institute for Sustainable Development |date=September 2024 |url=https://www.iisd.org/system/files/2024-09/fossil-fuel-subsidies-trans-mountain-pipeline.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{gunton2024assessment, author = {Gunton, Thomas}, title = {{Assessment of Fossil Fuel Subsidies in Canada}}, institution = {International Institute for Sustainable Development}, year = {2024}, month = sep, url = {https://www.iisd.org/system/files/2024-09/fossil-fuel-subsidies-trans-mountain-pipeline.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }