PBO analysis shows windfall tax on fossil fuel companies could generate $4 billion
With their high greenhouse gas emissions and record profits, oil and gas companies are facing new pressure across party lines on Parliament Hill.
That pressure includes accusations of price "gouging" and of profiting off climate chaos. It also includes a growing number of demands for a tax on the companies' "excess" profits.
Those calls for a new tax enjoy some cross-party support among Liberals, the Bloc Quebécois, New Democrats and the Greens.
"It's by gouging Canadians that these companies are making record-breaking profits," said Green Party MP Mike Morrice.
The Liberal government already has introduced an excess profits tax on banks and life insurance firms whose revenues grew during the pandemic. The Canada Recovery Dividend applies a 15 per cent one-time tax on average taxable income above $1 billion in 2020 and 2021.
"We're now saying let's apply this to oil and gas," said Morrice, who is calling on other MPs to support his House of Commons motion to apply the tax on banks to fossil fuel companies.
Oilsands companies made $38 billion in profit in 2022
Motions such as these are non-binding and might never come to a vote (the timing of votes on such motions is decided by a lottery). Morrice said he hopes his motion generates momentum ahead of Finance Minister Chrystia Freeland's fall economic statement, and convinces her to impose an excess profits tax on oil and gas companies.
The Pembina Institute, an energy think-tank, said in a September analysis document that oilsands companies are on track to earn more than $10 billion in the first six months of this year, even as they made no new investments in reducing emissions. The institute said the companies' profits this year are expected to be second only to 2021, when they made over $38 billion.
Absolute emissions from the oilsands did not increase in 2022. Preliminary figures indicate oilsands production increased to 3.1 million barrels per day in 2022, but emissions remained at 81 million metric tons of carbon dioxide. Still, oilsands emissions remain at their highest level in over a decade.
Another analysis document from the independent Parliamentary Budget Officer on Thursday concluded that applying the Canada Recovery Dividend to fossil fuel companies in 2022 would "generate $4.2 billion in revenue over the next five years."
MP Mike Morrice on his motion to apply windfall profits tax to oil and gas companies
4 days ago
Featured VideoKitchener Centre MP Mike Morrice has brought forward a motion to impose a windfall profits tax on fossil fuel companies. On Thursday, he reacted to a legislative costing note from the parliamentary budget officer that the one-time tax could result in $4.2 billion, which the Green MP says could help Canadians address climate change.
After the release of the PBO's report, Bloc Québécois environment critic Monique Pauzé said she supports an excess profits tax and the Green Party's motion.
"The oil companies have backed down very slowly (from their climate commitments)," Pauzé said in French. "And now what counts is profit … Politicians must be strong, must stand up and demand accountability and demand that companies invest more in renewable energy."
Morrice's motion singles out "price-gouging at the pump" — and not the hotly debated carbon tax — as a source of pain for households.
Liberal MP Mark Gerretsen, deputy government House leader, agreed that Canadians are seeing "price gouging" at the pump and "something needs to be done about it."
Applying the windfall tax to oil and gas companies, he said, is an idea worth considering.
"Naturally, it would make sound sense to do something similar, but I would really want to understand how that works first," Gerretsen said, adding there may be other options to achieve the same end.
New Democrats have said they want to see a windfall tax on oil companies announced in the coming fall economic statement. NDP finance critic Daniel Blaikie dismissed suggestions that such a tax would simply be passed on to consumers.
"What we've seen in today's economy especially is that when you cut taxes on Canadians, oil and gas companies, big box stores, banks raise their fees in order to … get that extra disposable income," Blaikie said. "So that's why I believe that broad-based tax cuts actually don't do the job because the market will raise its prices to capture that extra income."
Industry opposes windfall taxes
The Conservatives did not provide CBC with a response. A group representing oilsands producers — the Pathways Alliance — declined to comment.
The Canadian Association of Petroleum Producers (CAPP) said it opposes the idea of an excess profits tax on its members.
"These types of taxes are unnecessary here in Canada as they are already built into the royalty and tax frameworks," said Lisa Baiton, CAPP's president.
CAPP argues higher commodity prices translate into increased royalties collected by the provinces and higher income taxes, municipal taxes and corporate tax remittances.
CAPP said when oil prices hit historic lows in 2020, total combined government revenues from its upstream oil and natural gas industry were $4 billion. In 2022, a record profit year for the industry, government revenues from oil and gas hit $45 billion, CAPP said.
"This more than ten-fold rise in government taxes and royalties shows the system is working to the benefit of Canadians right across the country," Baiton said.
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