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

The federal government of Canada  had pointed out in April 2021 that it would introduce an investment tax credit (ITC) 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. 

A strong and reliable ITC in Canada will provide greater certainty, increase value, and reduce risk in CCS projects. Which is why the International CCS Knowledge Centre has responded quickly to a January 20, 2022 letter by academics to Canada's Deputy Prime Minster & Minister of Finance, Chrystia Freeland, countering the ITC for CCUS.

Our response letter to Chrystia Freeland, Deputy Prime Minister & Minister of Finance. This letter was also posted publically and through social media as a statement

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