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It’s not a sure thing that carbon capture will be the main bridge across the vast expanse of the energy transition.
But there’s a lot riding on it becoming a key technology for reducing emissions. While it gets developed, it makes little sense to leave Canada’s biggest source of greenhouse gases – the oil and gas industry – out of government programs to try to advance it.
This is a ban that a group of 400 scientists and academics is calling for. In a letter sent to Deputy Prime Minister and Finance Minister Chrystia Freeland last week, the group said a proposed federal investment tax credit for carbon capture, utilization and storage, or CCUS, undermines efforts to reach the national target of net-zero emissions by 2050.
If the government is bent on pushing CCUS to halt emissions from industrial activities, the group said, it should provide the tax benefits to other sectors, such as cement and steelmaking. But fossil fuels? A CCUS tax credit amounts to a subsidy to keep producing the stuff and preventing quicker adoption of renewable technologies, the academics said.
But therein lies the problem. Today, oil and gas account for more than a quarter of Canadian emissions. That has to come way down if the country stands a chance of meeting its CO2 reduction target. But the transition to cleaner technology won’t happen overnight, and currently a massive portion of the Canadian economy and employment remains tied to traditional energy production and use.
The federal Liberals are faced with striking a balance between making the necessary shift to a low-carbon economy while preventing – or at least minimizing – economic disruption and job loss, especially in the West. They have made that calculation before, spending $4.5-billion to buy the Trans Mountain oil pipeline to prevent its expansion from being shelved.
Last year, the government announced the tax credit for CCUS, saying the technology is “an important tool for reducing emissions in high-emitting sectors” that could cut GHGs by 15 megatonnes a year. It would be available for a range of industrial sectors, and include technology such as direct-air capture and “blue” hydrogen, which is derived from natural gas.
It has spent more than six months consulting with various parties on how the benefit should be structured, and what activities should be covered. The final policy is expected to be part of the 2022 budget.
The program is being welcomed in the energy sector, where the capital investment for CCUS would run into the tens of billions of dollars. Some industry leaders have called for the credit to include enhanced oil recovery – where CO2 is injected into aging reservoirs to boost oil production. That’s a bridge too far. The credit is not intended for that, said Adrienne Vaupshas, spokeswoman for Ms. Freeland.
The oil sands is where it could have the biggest impact. In 2021, Suncor Energy Inc., Cenovus Energy Inc. and the other major oil sands producers announced that they had agreed to pool their efforts to get to net zero by 2050. There is skepticism among environmentalists over the initiative, which will require a series of large and small technological solutions.
As of today, the ability to capture and sequester carbon on a massive scale is crucial to their plan. Oil sands production and processing make up the largest share of oil and gas emissions, so getting that under control would have a meaningful impact.
So why prevent a possible solution for shifting the industry into the energy transition? Not applying the tax credit would limit options where they are needed most.
The fact is that CCUS, either by burying carbon or using it to make products, still needs to be proven at scale, both technologically and economically. There will have to be a high enough carbon price to justify the capital investment. That’s why tax relief can be an incentive, and why it helps reduce the risks without throwing major taxpayer dollars at the problem.
The scientists are correct that Canada needs to kick its addiction to fossil fuels to meet its net-zero commitment, but the transition is a nearly three-decade proposition. Carbon capture could come in handy until cleaner alternatives are readily available to everyone.
Jeffrey Jones writes about sustainable finance and the ESG sector for The Globe and Mail. E-mail him at firstname.lastname@example.org.
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