Climate scientists urge Ottawa to cancel proposed carbon-capture tax credit

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More than 400 Canadian climate and energy scientists and academics are urging the federal government to cancel the carbon-capture investment tax credit slated for release this year, arguing it does nothing to encourage Canada to wean itself off its fossil-fuel habit, which is crucial to meeting the country’s climate goals.

In a letter sent to Deputy Prime Minister and Finance Minister Chrystia Freeland on Wednesday, the group said Ottawa’s proposed tax credit undermines government efforts to reach net zero by 2050, and would contradict an election promise by the federal Liberals to eliminate fossil-fuel subsidies by 2023.

The group’s concerns underscore the fine line the federal government walks as it develops the tax credit, which will provide incentives to build carbon-capture projects and was first proposed as part of last year’s budget.

On one hand are the environmental and climate arguments, which centre around the fact that continuing to burn fossil fuels – even if they’re produced without emissions – will do little to help stop climate change. On the other, the oil and gas sector asserts that carbon capture is the only way to drastically cut emissions from an industry that accounts for nearly 10 per cent of Canada’s GDP.

Carbon capture, utilization and storage (CCUS) facilities force carbon-dioxide emissions deep into the ground to keep them out of the atmosphere. The technology can be used in various major industrial sectors, including fossil-fuel production, power generation and manufacturing. The International Energy Agency, a Paris-based organization that advises industrialized countries on energy policy, says CCUS will play a crucial role in global emissions reduction.

But the group that signed the letter to Ms. Freeland says a CCUS tax credit would be little more than a substantial new subsidy for the fossil-fuel industry.

“Relying on CCUS preserves status quo fossil-fuel development, which must be curtailed to meet global climate commitments,” the group wrote. “Introducing a tax credit for CCUS for the energy sector will lock in continued dependence on Canada’s largest and most rapidly growing source of greenhouse gas emissions.”

Letter signatory Christina Hoicka, Canada Research Chair in urban planning for climate change and an associate professor at the University of Victoria, said concentrating on CCUS also undermines other, cheaper emissions-reduction technologies.

“My concern is that we’re putting attention on a technology that’s not necessarily available on a time scale that we need, and we’re not really focusing on the technology that’s going to get us to our goals in the time scale that we need, which is by 2030,” she said in an interview.

Dr. Hoicka pointed to energy conservation measures and efficiency retrofits, for example, which can be deployed quickly to reduce emissions.

While the group would prefer Ottawa drop the tax credit altogether, it said that if the federal government must proceed, the credit should apply only to sectors for which there are few decarbonization options other than CCUS, such as cement or steel manufacturing. It does not want fossil fuel-based hydrogen, plastic or petrochemical production facilities to be eligible.

The group said the program should also include independent monitoring and reporting mechanisms, as well as accountability measures to mitigate harmful impacts on Indigenous and other communities.

It also urged the federal government to stick to its plan of disqualifying any projects aimed at enhanced oil recovery (EOR), a process in which the captured carbon is injected into mature oil wells to boost production. That’s how 16 of the 21 large-scale CCUS projects in operation in 2020 used captured carbon, according to the IEA.

The group says using CCUS to boost oil production results in more emissions, because it does nothing to address the pollution created when fuels such as gasoline and diesel are burned – which constitutes about 80 per cent of oil and gas emissions.

Oil companies have long argued that EOR makes CCUS the most economically viable option for cutting emissions, and have pushed Ottawa to include such projects in the tax credit, similar to a program in the United States.

Another signatory to the letter is Emily Eaton, an associate professor in the geography and environmental studies at the University of Regina. Even if emissions from oil production can be brought to zero, she said, the same can’t be said for consumption of the fuel.

“It doesn’t mean that carbon capture utilization and storage for all industries is off the table, but it means that in order to meet climate-change targets, we need to manage the decline of the fossil-fuel industry,” she said in an interview.

“Anything that we’re doing that allows them to continue producing is counter to our goal of getting to zero.”

But Ottawa has no intention of scrapping the credit. Adrienne Vaupshas, a spokesperson for Ms. Freeland, said in an e-mail that the new program will be available across different industrial subsectors, including concrete, plastics and fuels such as hydrogen.

“We continue to engage with stakeholders on the design of the investment tax credit for CCUS to ensure this is an effective policy that businesses and workers can benefit from while contributing to our goal of cutting greenhouse gas emissions,” she said.

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