The Canadian government's financial backing for the oil and gas sector has drawn criticism from environmental advocates, who argue it undermines a 2023 commitment to phase out fossil fuel subsidies.

Despite pledging to eliminate 'inefficient' support for fossil fuels, Prime Minister Mark Carney's administration introduced new tax breaks for oil extraction and reinstated incentives for natural gas.

These measures come amid rising oil prices driven by geopolitical tensions in the Red Sea, with critics accusing the government of backsliding on climate policy.

Environmental groups highlight that the expanded carbon capture tax credit now includes enhanced oil recovery techniques, which they view as a form of subsidy.

Federal spending on fossil fuel projects reached over $10 billion in 2025, down from $29 billion in 2024, but critics argue the government continues to allocate significant public funds to climate-harming infrastructure.

Export Development Canada's support for the sector has also faced scrutiny, with environmentalists noting that loans provided by public bodies are classified as subsidies under World Trade Organization rules.