Nature of risk
These measures increase public financial support for fossil fuel production at a time when Canada has committed to phasing out inefficient fossil fuel subsidies. By reducing the costs of oil and gas extraction and LNG development, the subsidies may encourage continued investment in carbon-intensive industries, prolong fossil fuel dependence, and lock in emissions for decades. They also risk diverting public resources away from renewable energy and other climate solutions needed to meet Canada’s emissions reduction targets.
Policy summary
What changed
In the Spring 2026 Economic Update, the federal government introduced two new fossil fuel subsidies aimed at supporting oil and gas production. Enhanced oil recovery projects became eligible for the Carbon Capture, Utilization and Storage (CCUS) Investment Tax Credit despite previously being excluded, and a new 50% Capital Cost Allowance was introduced for Liquefied Natural Gas (LNG) facilities.
Primary source