Feds should not waste their $15-billion Canada Growth Fund on carbon capture for oil

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Laura Cameron is a senior policy adviser at the International Institute for Sustainable Development, specializing in the areas of fossil-fuel subsidies, just transition, and oil and gas policy in Canada. Angela Carter is a professor at the University of Waterloo and an energy transition specialist at the International Institute for Sustainable Development.

The $15-billion Canada Growth Fund, emphasized in the 2023 federal budget and aimed at accelerating decarbonization, is a landmark opportunity to align substantial climate action with a thriving national economy.

Achieving this potential rests in the hands of the Public Sector Pension Investment Board (PSP), responsible for independently managing the fund’s active investment strategy to boost Canada’s clean economy and attract global capital to it. As it currently develops its plan, the most fundamental question the PSP needs to answer is which initiatives and technologies it will back – which will deliver the greatest climate benefits over the investment horizon.

While that space is vast and growing, there is one investment PSP has every reason to take off the table: carbon capture and storage, known as CCS, in Canada’s oil and gas sector, of which the industry is a big booster.

For too long, Canada has entertained the myth that CCS for oil and gas is a silver-bullet solution in creating a globally competitive, low-carbon oil and gas sector. CCS for oil and gas has been promoted by industry as key to Canada’s competitive advantage in a decarbonizing world. Despite all the evidence to the contrary, this beguiling myth is perpetuated within industry and has pervaded the conversation around Canada’s energy transition.

Here are three reasons the pension board should not succumb to endorsing CCS for oil and gas:

• Despite half a century of global investment, CCS still does not deliver results at scale. Canada’s federal government has already committed $9.1-billion in support for the technology. The result? Canadian facilities capture less than 0.5 per cent of Canada’s emissions – a drop in the bucket compared to the reductions needed by the end of the decade, especially in the oil and gas sector. Also, CCS in the sector is used predominantly to enhance oil production, meaning CCS results in a net increase in emissions.
• CCS remains one of the most expensive ways to reduce carbon emissions. Research suggests that, rather than coming down in time, those costs are likely to go up as lower-cost applications are exhausted, leaving only more complex applications of the technology on the table. In comparison, renewable energies such as wind and solar have seen a substantial decline in the cost per unit this past decade – 85 per cent for wind energy and 55 per cent for solar – and have much higher potential for delivering the emission cuts we need.
• CCS solutions for oil and gas can’t meet the current time crunch Canada is facing to achieve its emission-reduction targets. Constructing CCS facilities takes between five and seven years because of the extensive infrastructure build-out required. The oil and gas industry itself acknowledged the time constraints of CCS but is asking Canadians to ignore the technology’s irrelevance to mid-term targets and think instead of what it could potentially achieve by 2050. That is an incredibly risky, not to mention hugely expensive, ask. The opportunity costs alone should give us pause.

The PSP can support the scale-up of numerous well-established technologies and innovations, winning returns for climate and Canada’s economy at the same time. Off-shore wind, solar, electric-vehicle battery production and energy efficiency measures are just a few. Undoubtedly, PSP’s investment strategy will also, by necessity, include calculated risks – especially as new technologies evolve. But CCS is not a new technology. It’s an old one that’s been tried, tested and remains unproven when it comes to cutting oil and gas emissions.

Canada’s clean economy investment strategy must be based on data, evidence and pragmatism, not informed by oil and gas advocacy for solutions that just don’t deliver. The Public Sector Pension Investment Board can play a lead role in scaling up the many effective and cost-efficient solutions available through judicious management of the Canada Growth Fund, setting an example for all clean economy spending in the country.