Canada will soon end 'inefficient' fossil fuel subsidies. But what does that mean?

Canada has for years forked over billions of dollars in subsidies to oil and gas companies — an approach that critics say flies in the face of the country's climate goals, and impinges on efforts to turn toward renewable energy sources.

Now, the federal government is preparing to release a new policy that will put an end to "inefficient fossil fuel subsidies," a commitment Canada made more than a decade ago.

A spokesperson for Environment Minister Steven Guilbeault said the new policy will be released in July.

But the strength of that commitment, environmental groups say, will hinge on how exactly the terms "inefficient" and "subsidy" are defined.

Julia Levin, associate director of national climate for the advocacy group Environmental Defence, said Canada has an opportunity to become a global leader in reducing fossil fuel subsidies if it's done right.

"If it's a strong assessment framework, it sets a great precedent. It kind of cements a bit of climate leadership for Canada," she said in an interview.

"If it's weak, it sets an incredibly dangerous precedent."

Canada has routinely ranked near or at the top of the developed world when it comes to subsidies for oil and gas, according to environmental groups. 

G20 countries, including Canada, committed to eliminating such subsidies in 2009, but did not give a firm timeline of when it would happen or what that commitment would include.

The Liberals later committed to a 2025 target and, in the last election campaign, moved that up to 2023.

The long-anticipated policy comes as the oil and gas industry racks up record profits. 

The five largest companies in Canada's oilsands made about $35 billion in profits in 2022.

The parliamentary committee on environment released a report last week laying out recommendations for the phase out of subsidies and public financing. 

The report included 21 recommendations, the first of which was for the government to "continue taking steps to eliminate subsidies and applicable public financing" by the end of the year, while at the same time giving "careful attention to and mitigation of any potential social and economic impacts."