Alberta allowed Shell to sell $203 million in ‘phantom’ emissions credits

The Alberta government reached a deal with Shell that allowed the tar sands company to sell $203 million worth of credits for greenhouse gas emissions reductions that never occurred, according to a new report from Greenpeace Canada. report reveals.

Alberta originally offered to pay 60 per cent of the capital and operating costs of Shell’s proposed Quest carbon capture project near Edmonton. That was not enough for Shell. During the 2008 negotiations, Shell pressured the provincial government to grant it additional carbon credits to sell to other companies. Shell asked the province for an agreement in which each tonne of CO2 captured by the Quest project would be counted as credits worth three tonnes.

The province ended up giving Shell a two-for-one deal, so the company sold credits for two tons of CO2 for every ton it actually captured. Alberta’s emissions credit database labels these credits as “additional.” Greenpeace calls them “phantom” credits because they do not correspond to any CO2 capture, explained Keith Stewart, senior energy strategist at Greenpeace Canada, in a telephone interview with Canadian National Observer.

Combining the value of these “ghost” credits plus $777 million in direct subsidies from the provincial and federal governments to date suggests taxpayers covered 93 per cent of the project costs, according to Greenpeace analysis.

Shell did not directly respond to a question from Canadian National Observer on the emissions credit agreement. A Shell spokesperson said carbon capture and storage and market incentives to encourage investment in the technology are key to achieving global climate goals and reiterated that Quest has captured nine million tonnes of CO2 to date. Alberta did not respond to requests for comment by deadline.

A graphic from the Greenpeace Canada report, I sell hot airpublished on May 6, 2024.

The report is based on documents Greenpeace Canada obtained through freedom of information requests, Alberta’s public emissions credit database and Shell reports submitted to the provincial government.

Currently, a consortium of Canada’s six largest oil sands companies, called Pathways Alliance, is seeking a deal similar to Quest “but at a much higher level,” Stewart said. Pathways Alliance has proposed a massive carbon capture and storage network estimated to cost $16.5 billion, but said it will need subsidies covering about two-thirds of the cost to be competitive with other jurisdictions.

“I think the lesson we should learn from this is, ‘If you cheat on me once, it’s your fault.’ If you fool me twice, it’s my fault,’” Stewart said.

The Alberta government reached a deal with Shell that allowed the tar sands company to sell $203 million worth of credits for greenhouse gas emissions reductions that never occurred, a new report from Greenpeace Canada reveals.

“If these companies are serious about their commitments, they should put up their own money instead of reaching out to you and me for that money,” he added, noting that companies are largely choosing to invest their record profits in expanding. oil and gas production.

“Through the Carbon Capture Investment Tax Credit, the federal government has committed to covering half of the capital costs of eligible carbon capture projects,” said Federal Energy and Natural Resources Minister Jonathan Wilkinson, in a statement emailed to Canadian National Observer. “This is more than four times the level of funding committed by the Government of Alberta.”

When it comes to financial support for controversial carbon capture technology, the federal government has more than done its part, according to Environment and Climate Change Minister Steven Guilbeault. Both ministers have made it clear that they expect tar sands companies to follow suit and put their money where their mouth is.

The federal government’s annual greenhouse gas emissions inventory shows that since 2005, production of crude bitumen and synthetic crude oil from the tar sands has grown 240 percent, representing an increase of 46 Mt over that period.

This National Inventory Report takes stock of the amount of greenhouse gas emissions that carbon capture projects have avoided and found that the vast majority of captured CO2 was pumped into old, depleted wells to force greater oil production. . As of January 2022, 6.6 times more captured CO2 has been used for enhanced oil recovery compared to the amount stored underground long-term.

While carbon capture technology will be essential in some sectors and circumstances, it cannot be used to “maintain the status quo” in the oil and gas sector, according to the International Energy Agency’s November 2023 report.

This support includes the CCUS investment tax credit and the offering of carbon contracts for difference offered through the Canada Growth Fund. The Pathways Alliance is currently in talks about carbon contracts for difference. Wilkinson also wants the group to get “shovels in the ground” for its flagship CCUS project and, for example, make good on its commitment by ordering pipes for the project. Pathways Alliance said its member companies have already spent $80 million on preliminary engineering, design and environmental work for the $16.5 billion CCUS project.

With the “current tug-of-war over what’s happening with the carbon price in this country,” Greenpeace wanted to expose Quest’s “ghost” credits in the hopes that loopholes like this can be avoided in the future, Stewart said.

Carbon pricing, particularly for industrial emitters, is “a very effective tool” to address climate change, but the $203 million loophole awarded to Shell undermines its effect, Stewart said.

Wilkinson said updates to the national carbon benchmark price in 2021 “put an end to processes that could have rewarded the industry for emissions reductions that are not real.” A key complementary policy is federal regulations to limit emissions from the oil and gas sector. The draft regulations are expected this fall.

Last Wednesday, Capital Power announced it will shelve its planned $2.4 billion carbon capture project at the Genesee Power Plant near Edmonton due to uncertainty about the economy; for example, how much Capital Power could earn from the carbon credits generated. In Saskatchewan, carbon capture technology installed in a turbine at the Boundary Dam coal-fired power plant captures only 57 per cent of the carbon dioxide, according to one study. recent analysis by the Institute of Energy Economics and Financial Analysis.

Canada’s oil and gas industry has spent many millions of dollars advertising and promoting the fantasy that carbon capture will allow the world to sustain the production and use of fossil fuels, Stewart said.

“We looked at Quest because it’s often considered a success story and… once you look under the hood, this is a little complicated when it comes to climate solutions. “We could do much better by investing in alternatives to fossil fuels,” he stated.

— With files from The Canadian Press

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