Fossil Fuels

The Minister of Environment and Climate Change on Monday announced the release of the Inefficient Fossil Fuel Subsidies Government of Canada Self‑Review Assessment Framework (the Assessment Framework) and the Inefficient Fossil Fuel Subsidies Government of Canada Guidelines (the Guidelines). The Assessment Framework and Guidelines were jointly developed by Environment and Climate Change Canada (ECCC) and the Department of Finance Canada and are intended to support Canada’s 2009 commitment alongside other G20 countries to phase out and rationalize inefficient fossil fuel subsidies over the medium-term while providing targeted support for the poorest. The Assessment Framework also builds on Canada’s commitment under the Statement on International Public Support for the Clean Energy Transition (the Glasgow Statement) in 2021 at COP 26 in Glasgow, to end new direct public support for international unabated fossil fuel, except in limited and clearly defined circumstances that are consistent with the 1.5°C warming limit and the goals of the Paris Agreement. This bulletin briefly summarizes key information and criteria provided in the Assessment Framework and Guidelines. Assessment Framework. ECCC noted that the Assessment Framework is the “first transparently published methodology worldwide” and that it will be used to determine which tax and non-tax measures constitute an “inefficient fossil fuel subsidy”. The Assessment Framework defines “measures” as including: (i) expenditure programs (i.e., grants, contributions, transfers); (ii) intramural research and development; (iii) tariff and duty reliefs; and (iv) tax expenditures that support fossil fuel consumption or that can be claimed by the fossil fuel sector and that represent alternatives to expenditure programs (i.e., tax credits, accelerated capital cost allowances, flow-through shares), and utilizes the World Trade Organization’s definition of “subsidy” as set out in Article 1.1 of the Agreement on Subsidies and Countervailing Measures. The international carbon markets provisions of Article 6 of the Paris Agreement will have an…

The Globe and Mail reports on growing support in Europe for withdrawing from the Energy Charter Treaty (ECT) as the threat of multibillion-euro lawsuits by fossil fuel investors intensifies. The increasing costs associated with claims under the ECT may also put the ambitions of the Paris Agreement at risk if signatories choose to allow fossil fuel companies to continue to emit greenhouse gases (GHGs) instead of paying compensation for lost investments. The ECT was drafted and signed, as the Soviet Union was dissolving, to protect European energy firms entering Russia and former Soviet Republics. The intent of the ECT was to allow investors to sue governments for policies affecting their new investments. The ECT is quickly becoming a vehicle for claims by fossil fuel companies to attempt to recoup losses from their investments as a result of climate action and the decarbonization of economies across Europe. It is estimated that claims brought by fossil fuel companies seeking compensation for climate policies could reach €1.3 trillion by 2050. Remaining subject to the compensation mechanism of the ECT could result in large payouts to fossil fuel companies unless countries choose to allow them to continue to emit GHGs for at least another decade under the terms of the ECT. Four claims have already been brought under the compensation mechanism of the ECT, with a combined total of more than €2.5B. A similar claim, against the US government for $15B USD, was brought by TC Energy for the cancellation of the Keystone XL pipeline as a NAFTA legacy claim. For further information or to discuss the contents of this bulletin, please contact Lisa DeMarco at lisa@resilientllp.com.

ECCC Releases Inefficient Fossil Fuel Subsidies Assessment Framework and Guidelines

Energy Charter May Put Paris Agreement at Risk