Transforming Canada’s energy system and broader economy to net zero requires unprecedented investment in innovation, infrastructure and industrial processes. There will be billions of dollars invested in the coming years to ensure that large emission reductions are achieved through CCS. In fact, Canada’s current federal emissions reduction plan expects national carbon capture and storage (CCS/CCUS) capacity to more than triple, adding facilities to capture and store at least 15 million tonnes per year by 2030.
To date, Canada has been a leader in the first generation of global CCS development, with five of the 30 commercial CCS projects in the world which have safely stored more than 44 million tonnes of CO2 - the equivalent of taking more than 9.4 million cars off the road. Now, we are at a time where we hope to witness the “rebirth” of CCS. Using CCS provides an opportunity to abate emissions in almost every sector across the country, including power generation, cement, steel and fertilizer manufacturing, mining, petrochemical processing, and oil and gas production.
One crucial step for implementation of CCS is collaboration between industry, governments, academia, community, and Indigenous partners. To drive this collaboration, the Knowledge Centre is excited to work with the Government of Alberta to create a national CCS knowledge sharing hub – an open-source repository of knowledge and information about the development of CCS/CCUS projects.
The mandate of the CCS knowledge sharing hub will be to collect and curate best practices and lessons learned from Canadian CCS projects past, present and future – drawing on knowledge from as many projects as possible from initial planning and feasibility studies, through to construction, ongoing operations and optimization – to enhance the success of CCS projects and promote continuous learning and improvement in CCS technology. Establishing the hub through a $3 million foundational investment was a key action item included in Alberta’s Emissions Reduction and Energy Development Plan that was released April 19 and stated the province’s goal of reaching net-zero greenhouse gas emissions by 2050.
Another important step to enable certainty for public sector investments in the country is development of policies that complement the rapid deployment of this technology.
As the International Energy Agency and the UN’s Intergovernmental Panel on Climate Change (IPCC) have concluded, a massive investment in large-scale CCS is required to achieve the emissions reductions needed to meet the Paris Agreement goal of limiting global warming to 2ºC. Indeed, the IPCC has estimated the cost of achieving this goal would more than double without using CCS.
The Government of Canada recognizes the importance of deploying CCS within this decade, most recently with the March 28 federal budget that contained additional measures to support the development of large-scale projects. In the primer the Knowledge Centre delivered which aggregates information over the last three budget cycles the CCUS Investment Tax Credit (ITC), we outlined how the CCUS ITC is the government’s centrepiece for incentivizing heavy industries to build CCS projects by covering 50 per cent of the capital cost of CO2 capture projects between 2022 and 2030. The tax credit is higher (60 per cent) for projects that capture CO2 directly from the atmosphere (direct air capture) and it also covers 37.5 per cent of the cost for facilities required to transport, utilization and permanent storage of CO2.
We still await clarity on some elements of the CCUS ITC and we are also paying close attention to when Canada will look to provide assurances on the cost of carbon emissions through promised carbon contracts for difference. Many have pointed to the policies in the United States by comparison where a straightforward production tax credit sees the government provide companies up to $85 per tonne (a price that hits its peak with various labour inclusions). Competitiveness can be viewed as a concern; however, the two countries use different levers. The US has carrots, while Canada has carrots, sticks, and hoops to jump through. The ITC and the production tax credit cannot be compared one-to-one given the array of other regulatory measures Canadians are anticipating.
The Knowledge Centre is encouraged by Canadian government’s commitment to move the CCUS ITC over the line quickly. But until then we still push for decisions on long-term certainty on carbon pricing, along with a clear timeline for when the CCUS ITC and other policy tools will be legislated. Setting clear policy is critical to ensuring Canada remains an attractive location to undertake these multi-billion-dollar projects.
The major players in Canada’s heavy-emitting industries – which provide major contributions to national GDP and government revenues, employ millions of people, and include firms that are at the core of most Canadians’ pension plans and investment portfolios – are committed to achieving net zero by 2050, and they are set to invest billions on CCS in Canada.
Capital Power announced last December a limited notice to proceed for its Genesee CCS project. Heidelberg Materials continues to advance the world’s first CCS project on a cement plant in Edmonton. And the oil sands industry is already spending tens of millions of dollars on the environmental assessments, early-stage engineering work and stakeholder engagement that is necessary to receive permits for construction for one of the world’s largest CCS projects known as the Pathways Alliance.
Canada is uniquely suited to capture enormous value from the CCS boom on the horizon. With close to 400 billion tonnes of capacity to safely store CO2 deep underground and the technical experience from building and operating many of the world’s first CCS facilities Canada is poised to continue its global leadership in the CCS space and substantially reduce emissions in the near term.
This article was originally published by Law360 Canada (www.law360.ca) a division of LexisNexis Canada.