Incentivizing Large-Scale CCS

Globally: Necessity of Incentives for Large-scale CCS

For countries to achieve ambitious emissions reduction goals, there needs to be accelerated progress in the commercial-scale deployment of carbon capture, utilization, and storage (CCUS/CCS) across a wide variety of applications. CCS incentives are a key answer to this challenge. Government mechanisms are needed to enable commercial CCS which could include a range of complimentary options such as certainty in CO2 value, a level playing field with alternative low-carbon technologies, and front-end development support to drive down costs and make capital investment competitive.

Already governments around the world are employing a range of policy tools and incentives including tax credits and direct government grants to address roadblocks and challenges to promote CCS projects. In the US, the expanded 45Q tax credit is regarded by many as a game-changer and is the primary reason for the significant increase in CCS deployment; while the European Union focuses more on direct government grants, including preferential loans rather than tax credits. In Canada avenues such as tax incentives, value streams, and business cases to support successful deployment are all being considered.

Implementing Canada's Tax Incentives Policy

As the year 2022 draws near, there are expectations from industry players and organizations towards the implementation of Canada’s investment tax credit (ITC). With the conclusion of the consultation process by the federal government ending a few months ago, large emissions stakeholders are waiting to see how the ITC will support their carbon capture, utilization, and storage (CCUS/CCS) projects. 

The federal government had pointed out in April 2021 that it would introduce an investment tax credit for capital invested in CCUS projects to reduce emissions by at least 15 megatonnes of CO2 annually. This effort of the ITC is expected to support technological advancement, lower CCS cost and make Canada stay ahead of the curve in the global market of CCS. 

While Canadians wait for the implementation of the ITC in 2022, stakeholders are hopeful that all CCS projects would be eligible for the ITC. They are also desirous that immediate attention be given to fast-track projects that are in an early mover stage, as this would provide an injection of operational benefits for the economy.

A strong and reliable ITC in Canada will provide greater certainty, increase value, and reduce risk in CCS projects.