Report

Update on the energy sector and agriculture: federal revenue forgone from tax provisions

Jun 15, 2023

This report is a supplement to the PBO’s report entitled “Energy sector and agriculture: federal revenue forgone from tax provisions.” It examines the cost of tax provisions specific to fossil fuel development and the lost revenue from exemptions to the carbon levy for agriculture.

Highlights

Oil, gas and coal mining corporations have reduced exploration and development activities– new annual expenses averaged $19 billion from 2015 to 2021 compared to $32 billion from 2005 to 2014. Beginning in 2020, new annual resource-related expenses declined significantly, dropping to $9.8 billion in 2020 and $13.3 billion in 2021.
Our prior report indicated that resource specific expense claims by oil, gas and coal mining corporations reduced their annual federal tax revenue by $1.9 billion, on average, from 2015 to 2019. Total resource-related deductions for 2020 and 2021 were $1.9 billion and $1.8 billion, respectively.
Carbon levy exemption for agriculture is estimated to be worth $595 million in 2023 as the levy reaches $65 per ton of CO2 equivalent. This will rise dramatically as the levy increases to $170 per tonne. In the absence of substitution effects, the exemption is estimated to rise to $1.6 billion by 2030. Compared to our previous report, the estimated value of the carbon levy exemption for agriculture is marginally higher by 2030.
Since 2015, Export Development Canada invested more than $75 billion in business facilitated in the oil and gas sector. Of this investment, $15.4 billion was in international business facilitated for the oil and gas sector.
Lending to Canadian oil and gas producers represents approximately 1% of Business Development Bank of Canada's (BDC) total portfolio. This translates to approximately $2.4 billion in lending from 2015 to 2022. BDC’s support in the international unabated fossil fuel energy sector is effectively zero.