Feds defend carbon capture even as Alberta project is canceled over cost

Canada’s Energy Minister defends carbon capture and storage technology as effective and affordable, after an Alberta power company abandoned a planned project and a study found another project got public subsidies to cover more than three-quarters of its costs.

“Carbon capture and sequestration technologies are improving and, over time, becoming less expensive, like any other technology that goes through the cycle,” Jonathan Wilkinson said Tuesday.

“To those who say the technology itself is unproven, I would simply say that’s not true. The technology, the basic technology, has been around for a long time. It’s a question of scale and cost. And those are two things that are really happening.

Carbon capture, utilization and storage, also known as CCUS, are systems that trap carbon emissions at their source and then funnel them back underground. They are expected to play a key role in Canada’s climate plan, which cannot meet its goals and continue producing the oil and gas that underpins a significant part of Canada’s economy.

The climate plan estimates that carbon capture will account for up to 16 million tonnes of emissions reductions by 2030, or about five percent of the additional emissions reductions needed to meet the next target in 2030.

The International Energy Agency expects CCUS will need to account for 15 percent of global emissions reductions by 2050 to achieve net zero, where all emissions are eliminated or captured.

“Increased use of CCUS features in combining all credible pathways to achieve net zero by 2050, including all 1.5 C pathways developed by the United Nations Intergovernmental Panel on Climate Change and the United Nations Energy International), reads Canada’s climate plan.

But in Canada, that increased use is proving difficult.

The latest national emissions report released last week shows that, as of 2022, Canada had captured and stored a total of 7.2 million tonnes of carbon dioxide since 2017, most of it at Shell Canada’s Quest CCS facilities in its Scotford breeder, north of Edmonton.

Feds defend carbon capture technology as #Alberta project is canceled over cost. #CDNPoli #CarbonCapture #CCS

Shell covered about three-quarters of Quest’s $1.1 billion capital and operating costs through provincial and federal subsidies, with the rest coming from the sale of carbon credits generated by capturing carbon emissions.

A Greenpeace study released this week found that to make ends meet, the company got permission from Alberta to sell twice as many credits as it actually earned.

A Shell spokesperson said in a statement to The Canadian Press on Wednesday that the additional credits were an “innovative mechanism to make investment in the Quest CCS project possible.”

However, Stephen Doolan said double carbon credits were only allowed until project costs broke even and any additional credits earned by Shell were used to meet its own emissions requirements in Alberta. They were not sold to any other company, Doolan said.

Quest has so far trapped a total of nine million tons of carbon, it said.

“Without the various incentives to make the project investable, this simply would not have happened,” he said.

Last week, Capital Power, an Edmonton electricity generator, scrapped a $2.4 billion carbon capture system planned for its Genesee generating station because the economics didn’t work out. A company statement in its May 1 quarterly earnings report said that while carbon capture is “technically viable,” the company did not believe the project was “economically viable.”

The decision comes even as the Alberta government promised to cover up to 12 per cent of the costs and the federal government up to half through a new tax credit.

Additional certainty was being tested with carbon contracts for difference under the new Canada Growth Fund. Such contracts help provide certainty that a carbon market will be robust for credits generated by technologies such as carbon capture and storage.

Uncertainty about whether future governments will maintain the federal carbon price undermines confidence that such markets will exist or that high enough prices for credits will be achieved. Investments only make sense if companies can be certain about the price at which they will be able to sell those credits.

Capital Power has not yet been able to negotiate a contract for difference.

Wilkinson said the cancellation should not be seen as a signal against carbon capture.

“There are several different paths for Capital Power to actually meet the requirements of the clean fuel or clean electricity regulations that will eventually come into effect,” he said.

“They’ve made the business decision that they can actually meet those requirements in a different way. But, as I say, there will be a lot of different approaches in different sectors that I think will use carbon capture technology.”

The Alberta government attributed Capital Power’s decision to the fact that Ottawa has not yet implemented the carbon capture tax credit.

The credit was first promised three years ago, but was several years in the making and was included in legislation to implement the fall economic statement in November.

That bill has not yet been approved. It’s up for debate again this week.

This report by The Canadian Press was first published May 8, 2024.

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