Tar sands- the money behind the goo comes from you.
The Canadian government not only supports the tar sands industry publicly (especially last week when a government spokesperson said that they are “proud” of the tar sands) but also privately- through billions of dollars in subsidies to the industry. This is despite the fact that the tar sands are the largest projected source of greenhouse gases in Canada and it would be impossible for Canada to meet its targets without curbing emissions from the tar sands sector.
So what’s the problem with the government providing support to the tar sands industry?
- Development induced by these subsidies effectively negates any and all reductions in greenhouse gases from other sectors in Canada.
- Without these subsidies, the tar sands industry would likely not be even be financially viable.
- Subsidies mean there is no incentive for the industry to become more efficient or find ways to reduce the costs. Subsidies can create a development boom that is unsustainable- which means huge social and environmental effects in the short term, and financial losses in the long term.
- The companies operating in the oil sands- Suncor, Syncrude, Total- are some of the richest multinational companies in the world.
- Renewable energy industries are struggling to compete- especially with the recent end of the ecoEnergy fund with no sign of more money in the future.
There are a number of types of subsidies for the tar sands industry.
First, to encourage new development, the government gives generous subsidies to cover the large start-up costs of tar sands production.
Secondly, the government funds the enormous volumes of natural gas (one billion cubic feet of gas or about 20 per cent of Canada’s overall consumption) needed to process the oil. The total cost of this gas is $3.4 billion, of which $1.7 billion (about half) is paid for by the public. Companies get this huge benefit through double-dipping- they can deduct fuel costs from their provincial and federal taxes, as well as deducting these same fuel expenses from the royalties.
Thirdly, companies only pay a fraction of the normal royalty rate until they recover 100 per cent of their capital investments, interest charges and operating expenses. Given the considerable costs of capital, it could be an extended period before Canadians earn any revenue from their public resources.
There are also huge amounts of funding available for research and development- particularly for carbon capture and storage. This is the proposed magic bullet to avoid emissions while allowing development to continue. Despite the fact that there are serious technical issues in actually capturing emissions, the government is still pursuing this, dumping $650 million from the (poorly-named) Clean Energy Fund into carbon capture research.
Canadians should be asking themselves how can a government that claims to be serious about emissions reductions happily gives billions of taxpayer dollars to an industry that will only create greater emissions, and why public money is used to prop up a private industry that is unsustainable.