Canada releases framework to phase out inefficient fossil fuel subsidies

Canada released a framework on July 24, 2023 to identify and phase out inefficient fossil fuel subsidies, adopting the WTO definition and committing to end domestic public financing for fossil fuels by 2024. The move offers a reference model for subsidy-reform debates relevant to India's own fossil-fuel and energy-transition policy landscape.

On July 24, 2023, Canada released a framework identifying which measures fall under its commitment to phase out inefficient fossil fuel subsidies, aligning with its climate targets and international obligations. The policy adopts a fossil fuel subsidy definition consistent with the World Trade Organization, covering direct transfers, foregone revenue, transfer of risk, and provision of goods and services. The government also set a timeline to end domestic public financing for fossil fuels by 2024.

The framework affects oil and gas producers, public financing bodies, and government departments administering fossil-fuel support. The International Institute for Sustainable Development (IISD) welcomed progress but flagged that exemptions for 'abated' fossil fuel production, including carbon capture and storage and fossil-derived hydrogen, could permit continued support. IISD research argues decarbonisation support for oil and gas is costly and inefficient, and that carbon capture may not deliver a true net-zero outcome for the sector.

The government should publish a complete inventory of identified subsidy measures with rationale for any exemptions, plus a plan to end domestic public financing this year followed by a comprehensive policy next year. Standardised enforcement mechanisms across departments are also needed. IISD Policy Advisor Laura Cameron called the framework an exemplary model for G20 nations while urging closure of gaps so public funds advance climate solutions rather than oil and gas production.

Key figure — Commitment deadline: end domestic public financing for fossil fuels by 2024