Canada set to cut direct spending on fossil fuel sector

Tue Feb 5, 2013 12:20pm EST
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By David Ljunggren

OTTAWA (Reuters) - Canada's federal government is set to sharply cut back its direct spending on the fossil fuel sector as part of an international push to phase out subsidies, the government's environment watchdog said on Tuesday.

Environment Commissioner Scott Vaughan said direct spending on the sector by the federal government totaled C$508 million ($508 million) from the 2007/08 fiscal year to 2011/12. It was Vaughan's first calculation of the total amounts Ottawa gives to energy companies.

"Extended over 30 years, this would represent a significant decline in direct spending support to the sector," he said, noting an official report in 2000, which found direct spending from 1970 to 1999 totaled C$40.4 billion.

Tax breaks aimed directly at the fossil fuel sector for 2006/07 to 2010/11 totaled C$1.47 billion.

In addition, separate tax breaks for the mining, oil and gas and clean energy sectors from 2006/07 to 2010/11 totaled C$2 billion. Fossil fuels accounted for most of the second amount but Vaughan said he was unable to ascertain exactly how much.

Canada sits on the world's third-largest proven reserves of crude and is the largest exporter of energy to the United States. Critics say the governing Conservatives, who have their roots in the Western Canadian oil patch, design their policies to benefit oil and gas producers.

As part of a 2009 agreement forged by the Group of 20 industrialized and developing nations, Canada committed to wiping out so-called inefficient subsidies to the fossil fuel sector.

The International Energy Agency says cutting all subsidies for fossil fuels would slash greenhouse gas emissions by 1.7 gigatonnes by 2020, about 40 percent of the abatement needed to limit global warming to a 2 degree Celsius rise by 2020.   Continued...

Canada's Environment Commissioner Scott Vaughan speaks during a news conference upon the release of his report in Ottawa February 5, 2013. REUTERS/Chris Wattie