In 2009, G20 members agreed to phase out inefficient subsidies to oil and gas sectors. This was an attempt to build opportunity for alternative energy technologies to break into the market, to reduce impacts on the environment and contribute to energy security for the future (not necessarily in this order). A recent report of the Inter-Monetary Fund challenges that despite these agreements, subsidies continue. The report argues that while subsidies may be important for protecting consumers (their initial purpose), they can also “aggravate fiscal imbalances, crowd-out priority public spending, and depress private investment, including in the energy sector”. In fact, “pre-tax” subsidies for petroleum products, electricity, natural gas and coal globally reached $480 billion in 2011 (or 2 percent of total government revenues). If accounting for negative externalities, like environmental degradation, public health and traffic congestion, on a “post-tax” basis, subsidies are much higher at $1.9 trillion (or 8 percent of total government revenues).
Advanced economies, particularly exporting countries, such as the US, China, Russia and Canada, now second largest holder of oil in the world, accounts for about 40 percent of global “post-tax” total. In Canada, despite its G-20 submission to phase out 100 per cent of capital cost allowances for oil sands by December 2015, subsidies continue to the tune of over $860 million per year. In addition, tax and royalty subsidies continue to encourage expansion of heavy oil reserves, including difficult to process bitumen placing greater demands on energy and water resources. The IMF report states that carbon dioxide emissions could decline by 13 percent if subsidies were removed, potentially generating additional benefits such as reducing global energy demand and creating opportunities for alternative energy technologies. Until this happens, countries worldwide, including Canada, are seriously still subsidizing climate change.