Launching a Loss
An inventory of government support for British Columbia liquefied natural gas
Despite concerns about the liquefied natural gas (LNG) sector's economic viability and environmental cost, the governments of British Columbia (BC) and Canada have directed billions of dollars in public money toward expanding fossil fuel exports through this industry.
Key Messages
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BC LNG projects will have benefited from CAD 3.93 billion in public support by the end of 2030. LNG Canada Phase 1 alone is on track to receive at least CAD 1.36 billion in government support by then. The project benefits from CAD 103.35 million per year in support from the BC government.
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Polluters—not the public—should pay for emissions. LNG is a high emissions industry in part because it takes a lot of energy to liquefy natural gas. Reducing emissions in export facilities would require access to massive amounts of clean electricity, which the BC grid currently can't sustain.
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Government support for LNG lacks transparency, leaving the public without adequate oversight of the significant financial and environmental risks taken on its behalf.
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Government support de-risks private investment in LNG projects by shifting a portion of project costs, responsibilities, and liabilities onto the public. This makes private investors more likely to follow through with projects that would not go ahead on their own merit.
This report offers the most recent and comprehensive estimates of the extensive financial support for LNG exports provided by the Government of BC and the Government of Canada. It quantifies existing and forthcoming public financial support of LNG facilities and the pipelines directly feeding them. Because several annual subsidies apply only once projects are operational, the report includes a projection of cumulative financial support to the end of 2030. LNG sector support from the federal government includes CAD 1.62 billion in public finance and CAD 151.95 million in infrastructure funding. By 2031, the BC government will have provided around CAD 2.16 billion in support to the LNG sector through foregone revenue, reduced electricity rates, and enabling infrastructure.
Government support for LNG has been provided via public financing, direct transfers, favourable tax rules, preferential electricity rates, infrastructure development, carbon tax exemptions, and a project-specific waiver on anti-dumping steel tariffs meant to protect Canadian manufacturing. If current policies remain unchanged, by 2031, total federal and provincial support for the sector will amount to CAD 3.93 billion.
LNG development in BC was first proposed as a gateway to Asian energy markets to provide relief from declining U.S. demand and low North American prices. Current trade tensions have given new life to these arguments, but the actual public benefit of expanding LNG production demands greater scrutiny. A projected glut of LNG supply over the coming decade is expected to drive down global prices. Comparatively expensive Canadian LNG may struggle to compete, raising the risk of projects becoming unviable stranded assets. A closer look is vital due to the scale of government financial support, the uncertainty of LNG markets, and the questionable long-term economic viability of Canadian LNG in a world transitioning away from fossil fuels.
Key recommendations
- Implement the federal government's 2022 commitment to eliminate all domestic finance for fossil fuels and update the Inefficient Fossil Fuel Subsidies Framework to exclude funding for LNG infrastructure.
- Enforce the BC government's requirement for LNG facilities to be fully net-zero by 2030.
- Exclude LNG facilities from receiving funding under the Clean BC Industry Fund.
- Strengthen the provincial output-based pricing system, removing exemptions for new entrants and fugitive emissions.
- Charge LNG projects the full cost of grid electricity.
- All projects under consideration should undergo a robust economic analysis ensuring economic viability under provincial and federal climate policy-compliant scenarios.
- Phase out tax subsidies, including provincial sales tax deferrals on construction costs and the Natural Gas Tax Credit.
- Increase transparency of reporting on government funding to enable full accounting of the economic costs of LNG development.
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