As we await further detail on support for carbon capture and storage (CCS) projects in the upcoming federal budget, there are almost daily reports expressing concern that Canada is losing ground to the United States and other competitors when it comes to breaking ground on large-scale CCS facilities.

It is true that Canada and the European Union are scrambling to craft policies promoting private-sector investment in CCS following the landmark incentives put in place in the U.S. late last year. The United Kingdom has also doubled down with last week’s announcement of a CAD $33-billion  investment in CCS for the next 20 years. Getting the right framework built, and quickly, is critical as the clock is ticking on Canada’s commitment to reach net-zero greenhouse gas emissions by 2050. Meeting this goal will rely heavily on implementing CCS in heavy industries across the country, including power generation; cement, steel and fertilizer manufacturing, mining, petrochemical processing, and oil and gas production.

While much attention is on the hefty upfront price tag for building large-scale CCS infrastructure, what is often lost in the debates over how to create the right conditions for investment in CCS are the longer-term costs to our society if we do not proceed on pace with the massive build-out that is required if we hope to meet our Paris Agreement commitments.

At the highest level, the world can’t afford to ignore CCS as a key tool in fighting climate change. The International Energy Agency estimates that CCS will be required for as much as one-quarter of the GHG reductions necessary by 2050, while the UN’s Intergovernmental Panel on Climate Change forecasts that the cost of climate mitigation could more than double without the application of CCS technologies.

It is also important to look beyond the direct cost of building a CCS facility, and consider how the cost of CCS impacts end users of the products we all rely on for daily life. A new study by Norwegian and Dutch experts concluded that implementing CCS on large-scale industrial projects yields significant CO2 reductions at minimal cost to the public over the long term. The researchers concluded that CCS is a relatively cheap emissions reduction solution for the end users of the commodities that heavy-emitting industries provide. After all, the average person does not tend to buy a lot of steel, cement, fertilizer or crude oil, but we do rely on these inputs for our homes, buildings, roads, clothing, food, pharmaceuticals and electronic devices. It turns out the overall cost for mitigating CO2 emissions from these products with CCS is marginal and well within the normal range of variation we see in market prices for such goods.

Focusing on the situation in Canada, our current federal emissions reduction plan calls for more than tripling Canada’s current CCS capacity by 2030. Adding the capture facilities, pipelines and underground storage systems needed for keeping at least another 15 million tonnes of CO2 per year from entering the atmosphere by the end of the decade is a massive undertaking that will require enormous political will, public confidence, and collaboration between industry, government, academia, Indigenous communities, and other partners.

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.

All heavy emitters are awaiting key details to be released in the March 28 budget for how the Government of Canada will create a competitive regulatory environment with co-financing models allowing for multi-decade investments that will be tenable through the volatile cash flows that can define industry, especially the oil and gas sector.

Canada’s federal government has already lined up significant support for CCS projects through a proposed investment tax credit, new capital cost allowance classes for CCS projects, a federal price on carbon emissions, and several federal and provincial carbon credit systems that will allow companies to monetize the emissions they permanently send underground. When taken together, these incentives provide a promising basis for CCS investment in Canada.

The focus now needs to be on ensuring these programs move from proposals to reality, and for the government to provide long-term certainty on its carbon pricing regime so that industry can be confident its economic models won’t collapse due to the shifting winds of climate politics in the decades to come.

In the meantime, the risk that capital available for CCS development will move south of the border continues to grow. The U.S. Inflation Reduction Act contained straightforward incentives for CCS, including a production tax credit that provides $85 for every tonne of CO2 captured – a juicy carrot analysts believe will cover two-thirds of a project’s lifetime capital and operating costs.

As the world’s good intentions for addressing climate change become concrete plans with dollar figures attached, some argue that funding for the energy transition be directed towards renewable power and other emissions reduction technologies, but not CCS. This is an unrealistic approach considering the magnitude of the challenge ahead.

To be clear, global decarbonization requires using all the tools we have at our disposal. CCS is the only proven solution we have today that can dramatically cut CO2 emissions from heavy industries that are the pillars of our economy.  It is worth pointing out that investment in this emission reduction pathway has been virtually non-existent compared to the trillions of dollars that have been spent on wind turbines, solar panels, electric vehicles and energy efficiency programs so far this century – during which time greenhouse gas emissions have continued to climb and the share of fossil fuels in the world’s energy mix has only budged marginally from 87 per cent in 2000 to 84 per cent by 2020.  

It’s time to bring CCS to life, and Canada is uniquely suited to capture enormous value from the CCS boom on the horizon. With the right geology for safely storing CO2 deep underground, the technical experience from building and operating many of the world’s first CCS facilities, and the desire to fight climate change in a just and sustainable manner, Canada is poised to continue its global leadership in the CCS space.

Let’s make sure we don’t miss out on this once-in-a-generation opportunity. Our children are counting on us.

This column was originally published by the Calgary Herald on March 24, 2023.