Knowledge Centre releases detailed review of draft rules for the CCUS investment tax credit – the pillar of Canadian CCUS policy

Regina, Saskatchewan – The Government of Canada’s proposed regulations for an investment tax credit for carbon capture, utilization and storage (CCS/CCUS) projects include strong provisions to support jobs for skilled tradespeople, apprentices and construction workers as part of the government’s effort to promote the development of large-scale CCS infrastructure across the country.

With one week left in the government’s public consultation period, the International CCS Knowledge Centre has published a detailed review of the draft legislation for the CCUS investment tax credit (CCUS-ITC) that was released on August 4. The Knowledge Centre found that in order to receive the largest possible tax credit on eligible CCS project expenditures, developers must meet two main labour requirements:

  • A prevailing wage requirement for workers involved in construction and installation of CCS property or equipment to be paid according to the equivalent collective agreements for such work, including benefits.
  • An apprenticeship requirement in which reasonable efforts must be made to ensure 10 per cent of labour in Red Seal trades are performed by apprentices.

“We are very pleased to see the government’s support for fair labour practices and wages in the CCS industry. We expect these provisions will provide a tremendous boost for those who are starting their careers in skilled trades, as well as for those who are highly experienced and will be in high demand as these large-scale capital projects ramp up in the years ahead,” said Beth (Hardy) Valiaho, the Knowledge Centre’s vice-president of policy, regulatory and stakeholder relations.

“CCS and other emissions reduction projects are some of the largest areas of growth for Canada’s heavy industries. Virtually all the country’s resource-based firms — from cement, steel and fertilizer manufacturers to mining, electricity, and oil and gas — are looking to add large-scale CCS to their operations. Each one of these projects represents the potential for thousands of high-quality jobs over several years of construction, economic partnerships with Indigenous groups and ongoing employment for running and maintaining these facilities, many of which are the lifeblood of local communities,” Valiaho added.

The Knowledge Centre encourages government and industry to make the necessary plans to ensure adequate qualified tradespeople and apprentices are available given the short timeframe of eligibility for the full CCUS-ITC prior to 2030.

“CCS projects must get started immediately if Canada is to achieve its ambitious goals for cutting greenhouse gas emissions at least 40 per cent from 2005 levels by 2030 and reaching net-zero emissions by 2050. It is clear many projects will have similar labour requirements, and filling all the jobs that will be available could be challenging given the remote location of some CCS projects,” Valiaho concluded.

The CCUS-ITC is the federal 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.

In addition to the labour requirements, the Knowledge Centre’s analysis of the draft legislation found that the CCUS-ITC applies to the full chain of CCS operations, from CO2 capture to transportation and certain forms of storage and/or utilization. The CCUS-ITC is applicable to projects in which captured CO2 is used and permanently stored in the manufacture of cement, but it is not applicable to CCUS projects where captured CO2 is utilized for enhanced oil recovery.

The Knowledge Centre’s briefing on the draft CCUS-ITC legislation provides an overview and key considerations for industry, along with guidance for CCS project developers on how to navigate the various provisions and federal departments involved in implementing the tax credit from a project’s planning stages through to the first 20 years of a facility’s operation.

Canada’s current emissions reduction plan expects national CCS capacity to more than triple, adding facilities to capture and store at least 15 million tonnes per year by 2030. The Canadian Energy Regulator’s latest long-term outlook found that for Canada to achieve net-zero emissions by 2050, national CCS capacity, including carbon utilization projects, needs to get to 60-80 million tonnes per year by 2050, compared to seven million tonnes per year currently.

In a 2020 economic analysis, the Knowledge Centre estimated that the construction and development of three new large-scale CCS projects in Canada would generate nearly $3 billion in gross domestic product and support more than 6,000 jobs through development and construction.

More recently, the Pathways Alliance – a partnership of the six largest oil sands companies – has announced plans to invest more than $24 billion in one of the world’s largest CCS projects and other emissions reduction technologies by the end of the decade. This is expected to generate 35,000 construction-related jobs, 1,000 permanent positions, and unlock more than $50 billion in GDP.

Capital Power’s Genesee CCS project is anticipated to provide roughly 580 full-time jobs on average during the 3.3-year construction period, and up to 1,000 during peak construction. Meanwhile, international cement producer Heidelberg Materials aims to build the world’s first full-scale CCS project on its Edmonton cement plant by 2026 — creating 800 full-time jobs and approximately 7,000 person-years of employment in the process.

The new briefing on the draft CCUS-ITC legislation also highlights how the tax credit alone may not be sufficient for private-sector developers to proceed with their projects, adding that it is critical for the government to finalize other CCS-related policy measures, including ‘carbon contracts for difference’ that protect investors from potential changes to federal carbon prices. The government announced its intention to introduce these contracts in its 2022 Fall Economic Statement and stated that it plans to launch consultations on these measures in the coming months.

Earlier this year, Natural Resources Canada solicited input on its proposal for CCS/CCUS projects with ITC-eligible expenses of $250 million or greater to be required to contribute to public knowledge sharing. To assist organizations in providing feedback, the Knowledge Centre produced a consultation document with analysis and background information about the draft knowledge sharing requirements.

About the International CCS Knowledge Centre

The International CCS Knowledge Centre is a non-profit organization founded in 2016 by BHP and SaskPower to advance large-scale carbon capture and storage (CCS) projects as a critical means of managing greenhouse gas emissions and achieving the world’s ambitious climate goals.

The Knowledge Centre provides independent, expert advisory services for CCS projects across heavy-emitting industries based on our team’s unique experience developing the world’s first fully integrated post-combustion CCS facility on a coal-fired power plant. We have a proven track record of helping our clients lower costs, reduce risk and improve the performance of CCS projects across industries and technology platforms using the latest knowledge and lessons learned from major projects across the globe. 

We also provide input to policy development and promote broad collaboration between stakeholders to enhance understanding of the critical role CCS plays in global decarbonization efforts and accelerate the deployment of new CCS projects around the world.

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Media Contact:

Grady Semmens

Director, Communications & Marketing

International CCS Knowledge Centre

Phone: +1.403.245.2667