Canada and other G20 countries have committed to phase out “inefficient fossil-fuel subsidies that encourage wasteful consumption” (European Council 2021). This has sparked debates about the definitions of inefficient and subsidy. On one hand, governments and industry have interpreted this language narrowly to defend measures that support increasing fossil fuel production and consumption. On the other hand, others have taken much broader interpretations that arrive at very high subsidy estimates.
This paper takes a different approach, which we hope will prove useful in guiding Canada’s implementation of its pledge to phase out fossil fuel subsidies. We assess whether existing and proposed government measures support or hinder the private investment needed to drive Canada’s long-term success through the global low-carbon transition. Success, in this context, means both strong economic growth and a smooth transition for workers and communities.