Canadian governments have spent $23 billion supporting three pipelines since 2018: report

A new report finds Canadian governments have provided billions to support pipelines — none of which have been completed to date — even as experts worry pipelines themselves undermine progress on climate goals

Governments in Canada have provided at least $23 billion in support for pipeline projects in Canada since 2018, according to a new report from the International Institute for Sustainable Development.

Government support for pipeline projects, the report said, “heavily undermines our ability to achieve our climate goals” and can result in “large increases in carbon emissions that last for decades.”

The report examines support in the form of direct transfers, loans, loan guarantees and other measures to three major pipeline projects: the Trans Mountain expansion, the now-cancelled Keystone XL and Coastal GasLink. 

“It’s critical that we move away from [financing fossil fuel projects] and finance climate positive investments if our country is going to have a fighting chance of meeting our climate targets,” Vanessa Corkal, a policy advisor at the International Institute for Sustainable Development and the lead author of the report, told The Narwhal.

“[Government financial supports for pipelines] have very clearly shaped the market, which is dangerous in the sense that we very arguably should be shaping the market towards a clean energy transition,” Corkal said.

“It also, frankly, puts taxpayer dollars at risk.”

Official Canadian pipeline subsidies difficult to trace

The report raises questions about government transparency regarding financial support for fossil fuel projects.

Though the report attempts to put a dollar value on government support for pipeline projects, it stops short of declaring the $23 billion provided so far as official “subsidies.” Subsidies have been defined by the World Trade Organization as a specific set of financial support mechanisms that can include loans, grants and tax incentives, among others. 

According to the World Trade Organization, a loan or loan guarantee is considered a subsidy if the cost to the company is less when it receives the funds from the government than it would have been had the company gone through the commercial market — if it could obtain a commercial loan or loan guarantee in the first place. 

Without more transparency from governments about the terms of loans and other arrangements, Corkal said, it is very difficult to discern which supports meet the internationally accepted definition of a subsidy. 

The International Institute for Sustainable Development submitted multiple Access to Information requests and received thousands of pages with information it described as “either withheld or heavily redacted, while the pages released contained little to no information addressing the types of support listed in this report.”

“Due to a lack of available data, the full amount of government support provided to the pipelines studied in this report is extremely difficult to quantify,” the report notes.

The Government of Canada has committed to ending “inefficient” fossil fuel subsidies by 2025, and is in the process of completing a ”peer review” of existing subsidies, though that process is reportedly delayed.

Obtaining information about the amount of public money being allocated to pipeline projects is “very difficult,” Corkal said.

Because no database exists to publicly track government spending on fossil fuel projects, Corkal added, “we have to do the legwork to quantify that for them.”

Governments more willing to provide pipeline financing than industry: report

The federal government recently passed Bill C-12, dubbed its “climate accountability” legislation, which requires federal governments to set binding targets to ensure Canada reaches net-zero carbon emissions by 2050.

But the report finds that governments, including the federal government, have not only been providing support for large fossil fuel projects in the meantime — but that the government has in some cases been more eager to finance pipeline projects than industry itself.

“There have been cases where [governments in Canada] have made concessions either through subsidies or they’ve directly invested in projects that the private sector wouldn’t necessarily have done — or the project wouldn’t have gone ahead were it not for subsidies and support,” Corkal said.

“We are seeing this trend,” she added. “The investments that we document in this report illustrate that the private sector is starting to appear unwilling to make these massive financial investments, especially on long-term, large infrastructure.” 

In the absence of industry willingness to provide the necessary funding, she added, governments have increasingly stepped in to provide support.

A spokesperson for the Alberta premier’s office did not respond to a request for comment by publication time. The Prime Minister’s Office referred a request to the office of the deputy prime minister, which did not respond by publication time. A spokesperson for the Minister of Environment and Climate Change referred The Narwhal’s questions to the Department of Finance. A spokesperson for that department said by email “Canada is firmly committed to phasing out inefficient fossil fuel subsidies and has already eliminated eight of out nine tax subsidies,” adding “the government has made unprecedented investments in a clean, green economy.”

The financial support provided to pipeline projects includes $6 billion in loan guarantees from the Alberta government to TC Energy for the now-cancelled Keystone XL project and $11 billion in federal loans and assumption of risk for the Trans Mountain project.

Both projects have been steeped in challenges: Keystone XL was scrapped in June, while Trans Mountain has seen four insurers — Argo Group, Munich Re, Talanx and Zurich Insurance Group — terminate their relationship with the Crown corporation.

In June, a spokesperson for the Argo Group told National Observer by email that “this type of project is not currently within Argo’s risk appetite.”

‘Opportunity cost’ also needs to be considered: report 

There are other, less direct costs to consider when assessing governments’ support of fossil fuel projects like pipelines, Corkal said.

“There are significant opportunity costs when governments directly support fossil fuels over social development and the development of cleaner energy sources,” the report notes.

And investments in pipelines and other fossil fuel infrastructure could be in place for long periods. “Government support to pipelines may place public money at significant financial risk for current and future generations,” the report warns.

“When governments are putting money towards these large projects — and tying up public money in these large projects — that money is not going towards things that it could have,” Corkal explained. “The examples are numerous: from building retrofits to renewable energy production and electrification.”

Updated July 7, 2021, at 10:30 a.m. MT: This article was updated to include a statement from the federal Department of Finance.