A pair of new analyzes from the Parliamentary Budget Office (PBO) find that the federal government intends to provide more than $11 billion to companies investing in carbon capture and hydrogen technologies.
The findings released Thursday are based on cost estimates for Ottawa’s Carbon Capture, Utilization and Storage (CCUS) Investment Tax Credit and its Clean Hydrogen Investment Tax Credit. The PBO estimated the The CCUS tax credit would cost $5.7 billion for six years, while the Clean Hydrogen Tax Credit Would Cost $5.7 Billion more than five years.
The latest figures could cost the public almost a billion dollars more than previously expected, according to the analysis. However, there is no upper limit for the CCUS investment tax credit as designed, meaning the public could be forced to receive even more.
The CCUS tax credit allows for rebates of 37.5 percent to 60 percent of carbon capture equipment, while the clean hydrogen tax credit allows for rebates ranging from 15 percent to 40 percent depending on the carbon intensity of hydrogen.
Both tax credits aim to attract private investment by reimbursing significant portions of the cost to companies. However, as previously reported Canadian National Observer, they are not direct investments. Canada is not taking an equity position in the companies it finances, meaning the federal government subsidizes the private sector’s profits by taking on some of the risks.
“The federal government is making more than $120 billion in historic investments to grow Canada’s clean economy, including unprecedented investment tax credits that support zero- and low-carbon projects,” the spokesperson said. Deputy Prime Minister and Minister of Finance, Chrystia Freeland, Katherine Cuplinskas. “Clean Hydrogen Investment Tax Credits and CCUS will be in place for more than a decade because we know Canada cannot afford to miss out on clean economy opportunities and we want to incentivize companies to reduce their emissions as soon as possible.” .
The tax credits were unveiled in last year’s federal budget. That budget was dominated by corporate subsidies, which one senior official called the “workhorse” of the government’s plan to get to a net-zero emissions economy, a confusing term generally understood to mean a decarbonized economy in which any emissions of greenhouse gases that warm the planet generated are offset.
However, environmental advocates warn that these investment tax credits undermine promised climate action. Canada has fiance eliminate “inefficient” fossil fuel subsidies, which some find difficult to square with billions of dollars being used to subsidize investments in carbon capture technology used in the oil and gas industry.
Finance Canada says carbon capture tax credit is not an ‘inefficient’ subsidy to fossil fuels based on its definitions.
“We need public money for projects that create good green jobs and support community-led renewable energy, not for dangerous distractions that offer a lifeline to a failing industry.” #cdnpoli
A 2022 study of the Institute for Energy Economics and Financial Analysis (IEEFA) examined 13 flagship carbon capture projects around the world and found that 10 of them failed or underperformed by wide margins compared to their designed capacity.
IEEFA also found that “nearly three-quarters” of the captured carbon dioxide was reinjected into oil and gas fields to enable even greater extraction; called “enhanced oil recovery”. These findings led the IEEFA to conclude that “the use of carbon capture as a green light to extend the life of fossil fuels [and] “Power plants pose a significant financial and technical risk.”
Finance Canada said carbon capture tax credits will not be allowed to be used to improve oil recovery.
“The oil and gas industry has been reaping windfall profits and polluting endlessly as Canadians struggle with the cost of living and climate impacts,” said Climate Action Network Canada executive director Caroline Brouillette. “Now, the Parliamentary Budget Office has found that these two tax credits put taxpayers on the hook for more than $11 billion, much of which will go to fossil fuel companies.
“We need public money for projects that create good green jobs and support community-led renewable energy, not for dangerous distractions that offer a lifeline to a failing industry.”
In a comprehensive report released last year, the Intergovernmental Panel on Climate Change, widely considered the gold standard of climate science, described carbon capture, utilization and storage as the most expensive and least effective option for reducing emissions.