Green corporate welfare is growing

Aaron Wudrik
Canadian Taxpayers Federation

Here’s a warning for taxpayers already frustrated with corporate welfare directed to the aerospace and automotive sectors: selected energy companies are also increasingly in receipt of taxpayer cash, and the reasons offered up are often environmental in nature.
Some background: When it comes to energy corporate welfare, economists often argue over what is a subsidy.
But one clear and defensible method is to ask this question: How much money does a government disburse or direct to a company – not for services or goods, but as grants, loans or above-market payments?
To arrive at that answer, I filed multiple Access to Information requests, reviewed auditor general reports and scoured government announcements.
I then focused on: Natural Resources Canada (NRC)—the federal department most likely to send taxpayer cash to energy companies; the province of Alberta, where energy subsidies might well show up if they exist; and the province of Ontario, due to its chronic defense of multiple corporate welfare programs.
The data was split into two main categories based on the justifications for government support. The first was “traditional”—references to claimed job creation or the “need” to boost a sector. The second was added after environmental justifications kept appearing in the data—that a government grant or loan would make some process or product “greener”.
Here’s what was found: Of $3.3 billion disbursed by Natural Resources between 2000 and 2016, $2.6 billion, or over 79 per cent, went to energy companies touting green projects; about 14 per cent or $472 million was given or loaned to those that promised technological advances; the department also cut cheques worth $196 million (six per cent) to companies for carbon capture and storage—to Shell Canada and Enhance Energy, for example.
In Ontario, between 2004 and 2015, $1.5 billion in traditional corporate welfare went to companies that promised manufacturing or technological improvements.
But Ontario’s biggest corporate welfare bill resulted from the Global Adjustment fees on Ontarians’ power bills. The province’s auditor general characterizes such fees as “excess payments to generators over the market price for electricity”—in other words, Ontario’s mandated corporate welfare subsidy to utility and energy companies but delivered via consumer power bills. The cost was $37 billion between 2006 and 2014 for such green energy subsidies.
In Alberta, between 2011 and 2017, and calculating both past and announced subsidies to business, it appears that of $6.7 billion in subsidies, 67 per cent or $4.5 billion, went to green initiatives/renewable energy. Another 18 per cent, or $1.2 billion, went to carbon capture and storage. Another $820 million or 12 per cent was geared to traditional corporate welfare for the province’s petro-chemical sector. And about $140 million, two per cent, was for subsidies for other types of industries, such as micro-breweries.
For the record: Corporate welfare spent for green justifications suffers from the same flaw spotted in traditional excuses: to pick a potential winner among many losers is a casino-like guessing game at taxpayers’ expense. It’s also a transfer of someone else’s wealth, among other reasons to avoid the practice.

Worryingly, the most expensive corporate welfare cheques have yet to be written and cashed. In Ontario, the auditor general forecasts “excess payments to generators over the market price” will total $133 billion between 2015 and 2032, this to further green Ontario’s electricity grid. That compares with an estimated $913 million in more “traditional” corporate welfare expected to be spent by 2026.
In Alberta, the biggest future corporate welfare risk is not green but stems from the province’s guaranteed toll payments to the North West refinery (near Edmonton). Dating from commitments made by the previous government, the province—as former Alberta Finance Minister Ted Morton described it, is “on the hook” for decades’ worth of toll payments.
The Alberta-North West deal is complicated but the government committed taxpayers to $25.1 billion in outlays for decades (including an initial $324 million loan). The province hopes to recoup all that and more in the sale of refined, government-owned bitumen. It’s a risky bet on future oil prices.
Overall, on corporate welfare, governments are finding new reasons to separate taxpayers from their wealth. Government interference in the marketplace is growing with green energy rationalizations.

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