Freeland confident CO2 tax credit will lure large-scale investment

Freeland said the multi-billion dollar tax credit is key to attracting investment in costly carbon capture projects

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Finance Minister Chrystia Freeland is confident her government’s new carbon capture tax credit is going to succeed in luring large-scale investment in the technology in Canada. The response from potential investors when the credit was announced, she said, was almost immediate.

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“Within 24 hours of tabling the federal budget, I was hearing from major global investors, people who I know from my days at the Financial Times, who said, ‘we read your budget, we want to learn more,’” Freeland said on April 14 at a news conference in Calgary.

“So there is money there to be drawn in.”

Freeland was in her home province of Alberta to sell the Liberal’s 2022 budget and to promote new measures aimed at driving investment in carbon capture, utilization and storage (CCUS) technologies. The deputy prime minister toured a carbon capture research and development facility in Calgary alongside industry executives and provincial officials.

The refundable CCUS investment tax credit will cover half the cost of equipment to capture carbon dioxide, and 37.5 per cent of the capital costs for transportation, storage and use of CO2 emissions — a potentially massive assist to heavy-emitting sectors like oil and gas which are under increasing pressure to lower greenhouse gas emissions.

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The federal budget also included a 60-per-cent credit for investment in direct-air capture technologies to remove carbon from the atmosphere.

Justin Trudeau’s government has been criticized for relying too heavily on carbon capture technology in its plans to achieve emissions reductions over the next eight years. Opponents of the technology say it’s unproven and could fail to curb emissions enough to achieve Canada’s target of 40 to 45 per cent below 2005 levels by 2030.

The Liberal government, however, has sided with energy experts, including the International Energy Agency (IEA), who have argued that CCUS technology will be needed globally if industrial countries are to meet their net-zero emissions targets.

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Freeland said the multi-billion dollar tax credit is key to attracting investment in costly large-scale carbon capture projects.

“New stage technology is risky,” Freeland said. “I think at this moment, when these new technologies are being developed, this is the moment that we need governments to come in, to give that little push to provide that de-risking, to get these technologies adopted at scale quickly.

“We need to do that because we need to get our emissions down. And frankly, we need to to that because I want to seize a competitive advantage for Alberta and Canada.”

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Shell Canada president and country chair Susannah Pierce, who toured the Alberta Carbon Conversion Technology Centre with Freeland, agreed that the tax credit will make a difference.

“I think this is enough to build momentum,” Pierce said in an interview. “When you look at things like the investment tax credit, those are upfront incentives to really make you feel more comfortable that these projects can be economic.”

Once up and running, Pierce said, Shell’s proposed Atlas sequestration hub east of Edmonton could capture up to 10 million tonnes of CO2 per year. Atlas would be Shell’s second carbon capture facility in Alberta. The company’s Quest facility at the Shell-owned Scotford refinery and chemicals plant has been operational since late 2015.

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“My company looks at Canada as what we call a mature regime,” Pierce said. “The Quest project, which Shell has been operating for some years now has already captured around seven million tonnes. So CCS is in fact a proven technology.”

Atlas was one of six carbon capture proposals greenlit last month by the Alberta government for further evaluation and negotiations over pore space.

The province is currently under pressure from industry and the federal government to pony up more money to help accelerate the development of CCUS projects. Industry groups like the Canadian Association of Petroleum Producers (CAPP) had previously said they would like to see government support of up to 75 per cent for carbon capture.

“We do want to continue working with the province to find ways that we can be even more supportive,” Freeland said.

“A good step from our perspective would be to ensure that federal and provincial support can be stackable.”

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