A windfall tax on Big Oil could haul in $4.2 billion for Canadians

Canada could rake in an additional $4.2 billion from major oil and gas companies over the next five years if it implemented a windfall tax on the fossil fuel industry’s record profits, according to a new analysis from the Parliamentary Budget Officer (PBO).

The analysis published Thursday assumed a one-time tax of 15 per cent on oil and gas companies making over $1 billion in taxable income, paid out in instalments of $833 million per year from 2024 to 2028. For the analysis, the PBO extended the Canada Recovery Dividend — a windfall tax Ottawa previously slapped on banks and insurance companies earlier this year — to fossil fuel companies.

The PBO report follows a motion from Green MP Mike Morrice, which was also supported by Green MP Elizabeth May and NDP MPs Laurel Collins and Richard Cannings, calling on the federal government to apply the Canada Recovery Dividend to fossil fuel companies and reallocate the money to address the climate crisis.

Explaining his motion, Morrice told reporters Canadian oil and gas companies were “gouging” the public and should be held accountable. In the face of the climate crisis, and massive swaths of the country burning this summer due to wildfires, “the oil and gas industry across the country continues to rake in record profits,” he said.

“Let’s simply approach oil and gas companies the same way the federal government already has [with] banks and life insurance companies in the midst of the pandemic, and that is introducing a windfall tax on their excess profits,” he said, calling it a “reasonable” solution to address affordability and the climate crisis.

The five largest oil and gas companies pumped $38 billion worth of profit in 2022, Morrice said.

Putting that in perspective, “our latest report shows just five of the largest Canadian oil and gas corporations paid over $200 billion to shareholders between 2000 and 2022,” said Katrina Miller, executive director of Canadians for Tax Fairness, in a statement. “Surely, they can afford to send some of their profits back to the public to help fund necessary investments to combat climate change.”

A windfall tax on oil and gas companies was an especially popular idea last year, with UN Secretary General António Guterres calling on countries to make polluters pay their fair share at the UN General Assembly. The United Kingdom introduced a windfall tax of 25 per cent and in Europe, there are many windfall taxes being imposed, including the Czech government taxing energy companies at 60 per cent and imposing revenue caps, a 50 per cent tax in Italy, and 33 per cent taxes in Germany and in the Netherlands, all of which are substantially higher than the PBO assumption of 15 per cent.

“This isn't some kind of red-eyed socialist idea here, you have conservatives in the United Kingdom [imposing] a windfall tax on the oil and gas sector,” said NDP finance critic Daniel Blaikie. “This is something other governments of various ideological persuasions in the world are doing because they recognize that consumers have been gouged badly by energy companies taking advantage of world events to jack up their prices.”

Finance Minister Chrystia Freeland did not immediately return a request for comment but has previously defended her government’s decision to not apply a windfall tax to fossil fuel companies. And in a 2022 year-end interview with the CBC Prime Minister Justin Trudeau similarly dismissed a windfall tax, calling it “simplistic.”

In a statement, David Suzuki Foundation senior climate policy adviser Tom Green said oil and gas companies' windfall profits are due to skyrocketing energy prices caused by Russia’s invasion of Ukraine.

“By taxing these profits, the federal government will have more money for proven solutions like public transit and building retrofits, which both reduce the cost of living and help the climate,” he said.

“The fossil fuel industry is trying to have it both ways: raking in huge profits off the backs of people in Canada while saying it can’t pay for emissions reductions,” he added. “These corporations have been taking care of their shareholders rather than cleaning up their pollution.

“That’s why — among other things — we need a cap on oil and gas emissions by the end of this year.”