Julie Gelfand says she's never clashed with a federal department over one of her recommendations in the five years she's been Canada's environment watchdog.

On Tuesday, when the commissioner of environment and sustainable development tabled her final reports in Parliament before she leaves the position this fall, that streak ended.

Finance Canada rejected her recommendation that, in its hunt for favourable tax measures for the oil and gas industry, the department take into account evidence that integrates economic, social, and environmental sustainability on an equal basis.

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"Disagreed," the department retorted. Some of those considerations, it argued, may be more "relevant" than others.

"It is the first time that a department has disagreed with one of my recommendations. Was I surprised? A little bit; it hadn't happened before," Gelfand told reporters in a press conference Tuesday.

"It is their right to disagree, and really it's up to parliamentarians and Canadians to ask the departments why they disagreed, and what are they going to do about that."

The dispute with federal bean counters is contained in one of several audits Gelfand submitted April 2 to federal MPs and senators, on a range of issues including invasive species and water pollution from mining companies.

She also found that the federal Environment Department did not consider the Canadian government's $4.5 billion purchase of the Trans Mountain oil pipeline and expansion project in its ongoing assessment of corporate handouts to the oil and gas sector.

The pipeline purchase, completed by the Trudeau government last summer, is among a series of federal investments, including some “that were designed to increase production of fossil fuels and manage waste from oil sands production” that should have been on a list of subsidies, said Gelfand's audit.

Oil and gas subsidies punish clean technology companies by tilting the market in favour of carbon polluting energy sources that hurt Canada's chances at tackling climate change.

Gelfand’s investigation of fossil fuel subsidies follow up on a commitment, made at a 2009 G20 summit in Pittsburgh by former prime minister Stephen Harper, to phase out inefficient fossil fuel subsidies. The Trudeau government has also made a pledge to phase out non-tax “inefficient fossil fuel subsidies” by 2025.

Her office reviewed the commitments by looking at both tax subsidies and non-tax subsidies, concluding that the federal government still had a lot of homework to do.

“Overall, we found that Environment and Climate Change Canada’s work to identify inefficient, non-tax subsidies for fossil fuels was incomplete and not rigorous,” said the report by Gelfand. “In our view, this is partially because the department used unclear definitions.”

Gelfand said the federal environment department also failed to probe things such as energy sector regulators and research grants.

“In addition, after the period covered by our audit, the government purchased the Trans Mountain Pipeline, and the department did not consider assessments related to its expansion or purchase,” the report said.

Gelfand also found that Finance Canada's attempt to ferret out favourable tax measures to the oil and gas sector was "incomplete" and that the department did not clearly define how a tax subsidy for fossil fuels would be inefficient.

McKenna, department tout public consultations

In its response, included in the report, the government avoided saying whether it agrees that items such as the pipeline purchase should be included.

However, Environment and Climate Change Minister Catherine McKenna announced last week that the government was launching public consultations about what needs to be on its list of fossil fuel subsidies.

McKenna touted that announcement as a response to the audit's recommendations, in a statement she issued shortly after the audits were tabled. "To ensure Canada continues to show leadership on this front, we recently launched a consultation to seek public feedback on the government's framework to review non-tax measures," she said.

The consultation, which will run until June 30 and seek public feedback on the definitions of “fossil fuel subsidy” and "inefficient," will also be used in the government's peer review process to identify fossil fuel subsidies with Argentina that was launched in June 2018.

The department also relied on the newly-launched consultations when it responded to some of the commissioner's recommendations.

"The department will conduct consultations to solicit feedback," it said in one response, and will submit its review of inefficient fossil fuel subsidies "to a panel of experts" as part of the Argentina peer review. "The department will conduct consultations to solicit feedback," it repeated in another response.

But Karen Hamilton, program officer at Ottawa-based corporate accountability non-profit Above Ground, argued that a debate over what was a subsidy was missing the point.

"Ottawa should eliminate all public financial support for fossil fuels, regardless of whether it defines the support as a subsidy," she said in an interview.

Environment Canada looks at non-tax subsidies

Meanwhile, Finance Canada's assessments "focused almost exclusively on fiscal and economic considerations and did not consider the integration of economic, social, and environmental sustainability in subsidizing the fossil fuel sector over the long term," Gelfand wrote.

"In the context of the G20 commitment, the term 'inefficient' is not susceptible to the use of simple criteria, given the breadth of potential issues that may need to be considered," the finance department said in response.

While it agreed that economic, social, and environmental sustainability "are important considerations," the department said it "would not be practical to develop assessments that systematically devote equal attention" to them. "Depending on the context of the analysis, some types of considerations may naturally be more prevalent and relevant than others."

While Finance Canada is investigating tax measures, Environment and Climate Change Canada (ECCC) is looking at non-tax subsidies, which are things like government grants, favourable loans, or research and development funding.

In the two years since the auditor general found in 2017 that ECCC “did not yet know” the extent of non-tax subsidies, Gelfand's findings show that the department was able to examine 23 out of approximately 200 possible federal organizations.

Within those 23 organizations, it found four subsidies — none of which, it decided, should be eliminated, since it found they were not "inefficient."

"The department’s approach to creating the inventory of potential non-tax subsidies for fossil fuels excluded several projects that in our opinion should have been on the list," Gelfand wrote in the April 2 report.

The four subsidies that ECCC found related to “electric and alternative fuel vehicle infrastructure,” the government’s term for electric car chargers, natural gas and hydrogen fuel cell charging stations, as well as "oil and gas clean technology research" and support for electricity prices in Indigenous communities

The department "did not conduct rigorous and complete assessments" for three of the four subsidies, Gelfand said, and there was insufficient information to determine subsidy efficiency. The government is planning on spending $22 million on natural gas stations and $50 million on "clean oil and gas" tech.

Department 'guidelines' seen as inadequate

Part of the problem was that ECCC had not actually defined what “inefficient" meant in the first place, said Gelfand.

The Environment Department "did not clearly define criteria" for what made something inefficient, nor did it give any "detailed guidance" on how to made that decision to other government organizations, she said.

"Instead, the department established a list of broad considerations that could be used to guide the assessment of whether a non-tax subsidy was inefficient. In our opinion, the list of considerations was not sufficient to be a definition and did not have clear criteria."

ECCC also came up with a way to exclude some fossil fuel projects as subsidies by deciding that programs had to "disproportionately" benefit the oil and gas sector, although it failed to define what "disproportionate" meant.

In a discussion paper that was released alongside McKenna's announcement, the department laid out a proposed definition of non-tax subsidies as federal programs "that provide preferential treatment that specifically supports the production or consumption of fossil fuels."

That isn't precise enough, Gelfand told reporters Tuesday. "What they gave us was a broad set of guidelines," she said.

"Really, you should read them. They don't meet the term of a definition. It's up to them to define 'inefficient,' what they gave us didn't meet our test, and is not an adequate definition to guide the work that they need to do."

Gelfand's report also noted that there are several international organizations with definitions of subsidies that the government could use: The World Trade Organization, International Energy Agency, International Monetary Fund and World Bank all have such definitions.

But the discussion paper points to those organizations as providing "different definitions" and says there is "no single international definition of what constitutes a fossil fuel subsidy, or how to approach inefficiency."

The paper also says the department found that Export Development Canada, which provides loans and financing to Canadian business including in the energy sector, should not be specifically singled out.

Providing loans "on commercial terms," even from a Crown corporation, "would not constitute a subsidy to the fossil fuel sector, as there is no additional benefit provided by the government," the paper stated.

Export Development Canada's services are also "widely available to the general economy and are not specific to the fossil fuel sector."

Hamilton of Above Ground said that this finding was particularly troubling for her.

"Canada has pledged to make finance flows consistent with a pathway towards low greenhouse gas emissions. With $17.7 billion in EDC support to the oil and gas sector last year alone, we're headed in the wrong direction," she said.

"And as EDC's sole shareholder, the government is profiting from a sector that's directly fueling the climate crisis."

Editor's Note: This story was updated at 2:15 p.m. ET on April 2, 2019 to include additional information and quotes from Gelfand and Hamilton.

Comments

In 2015, Trudeau made a campaign promise that he would run three small deficits and balance the budget in 2019. Year after year, those tiny deficits revealed to be much greater. And just last week, the 2019 budget confirmed what we already knew, the budget is not balanced. In fact, with a $19.8 billion deficit, it is far from balanced. The only way Trudeau can pay for his spending is to raise your taxes. The average Canadian family is already paying $800 more a year in taxes since he was elected. And his out-of-control spending will cost you even more money down the road.

To be clear, despite Liberal claims that their carbon tax is about the environment – it is not. The fact that Trudeau is giving large emitters massive exemptions proves that this is nothing more than the latest Liberal tax grab.

An extra $100 a month might not be a big deal for a Prime Minister who inherited a great family fortune, but it certainly matters to most Canadian families who are trying to balance their household budgets.

The carbon tax will cost the average Canadian family more than a $1,000 a year and that is just the start. When it kicks in, the carbon tax will start at $20 a tonne but internal government documents have confirmed that the Liberals are already planning to hike it to $300 a tonne. That’s 15 times larger.

You should not be punished for driving your kids to hockey or gymnastics. You should not have to choose between gas, groceries or even home heating. And making life more expensive for the people who can afford it the least is wrong.

Rosemarie Falk

You forget that the average family will get a rebate which is more than it pays in carbon tax.

Trudeau is doing a lot of things wrong. But the budget not being balanced is not one of them. First, because it's close enough--the debt-to-GDP ratio is actually going down, because the economy is growing faster than the debt. Small deficits, smaller than the country's economic growth, do not increase the proportional debt burden. The economy is big, so even tiny percentages of it look like huge numbers, but it's misleading. Mulroney used to run 40 billion dollar deficits when the economy was way smaller.

Second, because government surpluses are a drag on the economy. If the government spends too little that means fewer jobs, less goods and services being bought and so forth.

Third, because the real question is what the government is spending money ON--is it useful?
On that question, the Trudeau government does have some serious problems; $4.5 billion (so far) for a pipeline springs to mind.

I cannot imagine what kind of platform the Liberals are going to try and campaign on.

They’ve done a decent job managing Trump, cannabis legalization has gone pretty smoothly, the economy is not so bad, the senate is less of an s-show, and the Harper-era tone is gone.

On the negative side, they’ve set expectations far too high and under-delivered on a number of key files, the kids in short pants in the ministers’ offices seem to be largely out of control - at times machiavellian at others overly susceptible to lobbying pressure, they bought that crazy pipeline went hook-line-and-sinker over SNC ,and have yet to meaningfully address the culture/leadership at the NEB. Although to be fair on that last one there were a lot of last minute key Harper appointees that they still need to run out the clock on.

The question is, based on what we’ve seen to date, can Canadians trust them to advance those files, in particular the climate file, quickly enough?

This story is about the dispute between a 'watchdog' (the commissioner of environment and sustainable development) and a bureaucracy (the Finance Department) not about the Carbon tax. It is about how the Canadian government spends our money and specifically, it is about the definition of 'inefficiency' and the commitment to ' phase out inefficient fossil fuel subsidies'. The Finance Department 'did not clearly define how a tax subsidy for fossil fuels would be inefficient' which leads it to allow the purchase of TMX unaccounted as a subsidy.
The reference to a public consultation by Environment and Climate Change Minister Catherine McKenna (see: 'https://www.nationalobserver.com/2019/04/01/news/canada-wants-you-help-p...) is important here. Read the comment by Geoff Smith in this other story to get a flavour of how angry people are becoming.
Here is the link to the public consultation: https://www.canada.ca/en/environment-climate-change/services/climate-cha...

Again we confront the issue of environment vs. economy. If we choose the economy, we commit ourselves to colonization on Mars. Not much of an option if you ask me. Maybe the issue is meaningless, perhaps redundant. Julie Gelfand, Canada's environment watchdog, now tells us that climate change is irreversible. And we have politicians (Ford, Kenney, Moe, et al.) who question/deny climate change. I am disappointed our political leaders have succumbed to the fossil fuel industry. Our children Wii suffer.

I don't want to seem thick, but in what way would a fossil fuel subsidy be better if it was "efficient"?

Presumably, this would mean that the subsidy would create a net benefit to citizens ( not create more climate change, not cause huge health care bills, not reduce the possibility of producing healthy food on the land, not move our tax dollars from saving the environment to further contaminating it, and pay a reasonable level of taxes and royalties to the citizens). In other words, none are efficient.

The Transmountain Pipeline has got to be regarded as a subsidy! Kinder Morgan backed away from it. Oil and gas are resources that must be invested in by private industry.

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