Volatile global oil and gas prices among key drivers of cost of living rise
Canada’s policymakers should help households move away from fossil fuels to boost energy affordability, according to a leading sustainability think tank.
The Winnipeg headquartered International Institute for Sustainable Development (IISD) says that reliance on fossil fuels “keeps consumers stuck on an energy price rollercoaster and exposes Canada to energy price-driven inflation.”
A recent report found that more than half of Canadians want fuel taxes paused amid the currently elevated cost of living.
Its new report states that a major share of Canada’s primary energy and around 18% of electricity is provide by fossil fuels and that energy prices contributed to 33% of Canada’s overall inflation between February 2021 and June 2022.
But the direct energy costs are not the full story because it also notes that up to 25% of non-energy items included in the Consumer price Index are sensitive to energy prices. These include food and housing costs.
“The impact of spiking oil and gas prices goes beyond the price at the pump and our heating bills,” says Jessica Kelly, senior policy advisor at IISD and author of the report. “It impacts the cost of everyday needs such as food, clothing, furniture, restaurant meals, and even the buildings we live in, whether rented or owned.”
The financing of fossil fuel companies by Canada’s big banks continues to be a thorny topic. Recently the leaders of RBC, TD Bank Group, BMO Financial Group, Scotiabank, and CIBC highlighted their dedication to assisting clients through the transition rather than withdrawing support from the oil and gas industry.
“Just stop is just not an option for us,” RBC CEO Dave McKay told a parliamentary committee hearing last month. “It’s important that we do this in an orderly fashion, or we risk the entire journey. We have to protect jobs along the way.”
Move to renewables
The IISD report titled How Fossil Fuels Drive Inflation and Make Life Less Affordable for Canadians calls on governments to support the move to renewable energy which it says have seen falling costs over the last decade and would benefit affordability for Canadian households.
IISD analysis for the report estimates that moving the Canadian electricity grids to net zero by 2050 would save $15 billion a year with the average household’s energy bills falling $1,500. It would also free the economy from the volatility of international energy markets, which the report notes is likely to be exacerbated by climate change and declining global demand.
“Recognizing energy's crucial role in price stability, governments can and should champion policies to discourage fossil fuel use,” says Kelly. “This includes maintaining current actions such as carbon pricing, fuel taxation, and fossil fuel subsidy reform. But these efforts must be balanced with policies that drive energy efficiency, fuel switching, and renewable energy measures. Supporting consumers in adopting alternatives to fossil fuels will help lower their cost of living while speeding up the transition to more affordable, reliable, efficient and clean energy for Canada.”
