as published in the Sep/Oct 2021 issue of Carbon Capture Journal
Canada, one of the first countries to throw support behind large-scale carbon capture, utilization, and storage (CCUS/CCS), had been relatively silent over the last number of years - though recently the country signaled a renewed focus on the technology to help meet its global commitment to target emissions reductions 40-45% below 2005 levels by 2030 .
September saw a wrap up of a broad reaching consultation process conducted by the federal government – asking for input in Canada’s proposed investment tax credit (ITC) for capital invested in CCUS. The country pointed to the need for the ITC to support technological advancement, lower its costs, and make sure Canada stays ahead of the curve in the global market for CCUS. Interest is keen with a declared access to the ITC to start as early as 2022.
While the results of the consultation process and its translation into policy have yet to be released, the International CCS Knowledge Centre, based in Saskatchewan, Canada (home of the famed Boundary Dam 3 CCS Facility) worked closely with industry, governments, and other organizations to provide input into the process.
“We are big supporters of CCS as one of major contributors to see significant emissions reductions and so we are encouraged by the signals in Canada to see funds allocated to bridge the gap from concept to operation,” says Beth (Hardy) Valiaho, VP Strategy & Stakeholder Relations at the International CCS Knowledge Centre.
For context, for Canada to reach their net zero targets, 7.2 million tonnes (Mt) of carbon dioxide (CO2) would need to be captured and permanently stored by the year 2030 with an acceleration to 127 Mt by 2040 and then to 309 Mt by 2050 .
With still only a few commercial iterations of large-scale CCUS in operation, costs remain a hurdle. A market barrier exists currently between the price of carbon and the price of a CCS facility. Canada’s ITC could act as a bridge by offsetting the large upfront capital costs required to get projects off the ground. “It’s important that funds from the ITC be first awarded to entities outlaying the capital for the CO2 capture facility at the front end where emissions are captured,” says Valiaho. Canada has existing mechanisms, such as through the Canadian Infrastructure Bank or its Strategic Innovation Fund that could also be considered for CO2 transportation and storage stages of a full chain CCS program; and if these mechanisms are not available, then the ITC could be relied upon as a backstop program.
The US’s 45Q – which is a production tax credit -is associated solely with the sequestration and final phase of CCS – once the CO2 is permanently stored in the ground. With 80 percent of the cost of full-chain CCS taking place with the capital intense capture process – and 10 percent to each transport and storage, industry in Canada is seeking the removal of the barrier at the front end. “It is essential to maximize emissions reduction potential in step with available dollars,” says Valiaho.
A critically important element in supporting an entity to get to a final investment decision is the front-end engineering and design (FEED) study. This key piece is a comprehensive evaluation and analysis that provides certainty and minimizes risk. FEEDs can cost up to 5% of a project and need to be completed in advance of a final investment decision. “Essentially a FEED enables the go / no-go decision to deploy a large-scale project,” says Valiaho, “We’d like for governments to recognize this and consider supporting project advancement with funds for FEED-based work.”
Additionally, industry wants to ensure that there won’t be a cap on either the dollars to support carbon capture or on the goal of number of emissions to be captured (striving past the federal government’s proposed 15 Mt floor to 70 Mt or beyond). It’s a lesson from the US’s 45Q - once the cap was reached, organizations stopped applying.
In an accelerated timeline, it would take six years for large-scale CCUS projects to get from concept to operation and into maintenance and future optimization. “While all projects should be eligible for the ITC, immediate attention ought to be given to fast-track those projects that are in an early mover stage,” says Valiaho. “This would provide both an injection of operational benefits for the economy as well as momentum toward having large reductions of emissions by 2030 – we can’t see the delays we saw in the US for 45Q.”
Essentially a three tracked approach is an ideal way to deploy CCS in Canada before 2030, and out to 2050, with the incentive boost from the ITC. Fast tracking early movers could coincide with support for two other tracks to see Canada establish an enriched CCUS program. These include seeing the tax credit assigned for projects with final investment decisions by the year 2030 in order to incent projects to occur in the nearer term, as well as support for ongoing research and development for Canadian grown technology to take hold in the further term, as the third track.
“We are hopeful that a strong and reliable ITC in Canada will provide greater certainty, increase value, and reduce risk in projects,” says Valiaho, “With these in place they’ll act to leverage greater private investment, increase future deployment, and most critically, aim to reduce even more emissions.”
Download this article among others focused on CCUS in Canada from the CCJ, here.
iEnvironment Climate Change Canada, (July 2021) “Canada’s Climate Actions for a Healthy Environment and a Healthy Economy”. https://www.canada.ca/en/services/environment/weather/climatechange/climate-plan/climate-plan-overview/actions-healthy-environment-economy.html
iiNavius Research, (February 2021) “Achieving net zero emissions by 2050 in Canada”. https://www.naviusresearch.com/publications/climate-choices-net-zero/