February 28, 2022
New report highlights climate risk exposure of fossil fuel subsidies in Canada’s net-zero transition
28 February 2022, Vancouver – The Canada Climate Law Initiative (CCLI) is launching a new report called Fossil Fuel Subsidies in Canada: Governance Implications in the Net-Zero Transition. The report discusses important considerations for corporate and investment fiduciaries, who must mitigate their risk exposure given changing policies towards fossil fuel subsidies. The Government of Canada has signed the COP26 Statement on International Public Support for the Clean Energy Transition, committing to prioritize the clean energy transition and end new direct public support for the international unabated fossil fuel energy sector by the end of 2022, and the Glasgow Climate Pact to accelerate the phaseout of inefficient fossil fuel subsidies. Canada’s ministers are also working together to phase out inefficient fossil fuel subsidies that encourage wasteful consumption by 2023.
Canada ranks highly among the developed countries that have provided subsidies to the fossil fuel industry, and the private sector will need to understand and manage fossil fuel subsidy risk and turn these risks into opportunities within the broader context of low-carbon governance. Canada has also committed to net-zero greenhouse gas (GHG) emissions targets by 2050, and it will be critically important that Canadian governments and private sector align their strategies with net-zero targets.
This report offers several ideas that will enhance transparency, enable stakeholder evaluation, promote policy targets, address vulnerabilities, and limit exposure to litigation, so that markets can appropriately respond to the risks associated with changing policies towards fossil fuel subsidies.
Written by Temitope Tunbi Onifade, Affiliated Research Scholar at CCLI and Vanier Scholar at the University of British Columbia, the report highlights the climate risks of business and investment related to fossil fuel subsidies in Canada as well as the governance implications, including government transparency, climate policy effectiveness, and climate justice for vulnerable Canadians. The report also recommends actions that companies, pension funds, fiduciaries and governments should take to deal with these implications in Canada’s transition to net-zero economy.
“Subsidies are not unique to fossil fuels. They have helped new and small businesses to be competitive in industries dominated by giant corporations, reduced production and supply costs that would otherwise pass to low-income consumers and communities, and served as a way to redistribute wealth in places that depend on coal, oil and gas, agriculture, fisheries, forestry, and other resources. However, the times have changed. This report says we should consider those changes to decide where government subsidies should go and how to deal with emerging challenges. Learning recent subsidy policies and their impacts discussed in this report should help business leaders know how to be proactive, give investors an idea where to direct their money, and nudge governments to close governance gaps,” says Temitope Tunbi Onifade, author of the report.
The report’s most important contributions are suggestions on how to address the challenges that policy makers, corporate directors and officers, pension trustees and other fiduciaries, as well as civil society will need to overcome, in order to accelerate Canada’s net-zero transition.
About the Canada Climate Law Initiative
The Canada Climate Law Initiative (CCLI) is Canada’s climate governance knowledge mobilization and policy hub. Using our academic rigour and active partnerships, we bring together knowledge, leading practice, and trusted insights to advise Canadian businesses and governments on how to respond to today’s urgent climate risks and opportunities through effective climate governance. CCLI is led by three principal investigators, Dr. Janis Sarra and Dr. Carol Liao from the Peter A. Allard School of Law, University of British Columbia, and Professor Cynthia Williams from the Osgoode Hall Law School, York University.
CCLI acknowledges that the UBC Point Grey campus is situated on the traditional, ancestral and unceded territory of the xʷməθkʷəy̓əm (Musqueam).
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