According to a federal government document, Canada is trying to provide incentives for at least two additional big carbon capture projects by 2030, with almost a dozen oil and gas corporations currently requesting rights to store carbon dioxide in Alberta’s vast subterranean caverns.
The carbon collection sites would help Prime Minister Justin Trudeau achieve his objective of decreasing emissions by 40-45 percent from 2005 levels by 2030. With government and private investment, the global oil industry is wagering that carbon capture, utilization, and storage (CCUS) can become a multibillion-dollar worldwide company.
To encourage private investment in CCUS projects, Canada is counting on its carbon price, which is set to rise to C$170 per tonne of carbon by 2030 from C$40, a planned tax credit, and its Clean Fuel Regulation (CFR), which requires lower emissions intensity in fuel.
The cost of building the projects, and their locations, are not yet known.
The two carbon storage hubs would be planned or under construction by 2030, with Canada sequestering at least 15 million tonnes of carbon annually by that year in total, according to the Natural Resources Department’s draft CCUS strategy, obtained by Reuters after it was shared privately in July with industry stakeholders.
“The big takeaway is the federal government is pretty serious about CCUS,” a Calgary oil industry source said.
Canada’s four existing projects, representing 15 per cent of global facilities, currently capture 4 million tonnes per year, according to the Canadian government.
Canadians vote for a new federal government on Sept. 20. On Sunday, Trudeau said he would cut oil and gas sector emissions based on five-year targets starting in 2025. His Liberal party is in a tight race with the Conservatives, a party that also supports carbon capture and has promised to introduce a tax credit to encourage investment.
The Natural Resources Department is doubtful whether its incentives will be enough to stimulate widespread adoption.
“It is not yet clear whether this elevated pricing signal, combined with other federal policies yet to be implemented, such as the CFR and the investment tax credit announced, will be sufficient to drive widespread CCUS adoption,” the federal strategy said.
The government’s doubts highlight challenges such as high costs and complex technology required to capture carbon.
Natural Resources Minister Seamus O’Regan could not be immediately reached.
In September, Alberta is expected to call for expressions of interest to store carbon underground, with formal project selection next year, according to two sources familiar with the process.
Alberta already has received informal interest from at least 10 groups, including publicly announced projects involving Royal Dutch Shell, TC Energy and a consortium of the five biggest Canadian oil producers, said David Knight Legg, board advisor to economic development agency Invest Alberta.
Many global oil and gas producers see CCUS as a way to prolong their capacity to produce fossil fuels, by locking away their emissions.
A massive expansion of carbon sequestration facilities is vital if the world is to reach net-zero emissions by 2050, according to the International Energy Agency (IEA), from around 40 million tonnes a year currently to 7.6 billion tonnes.
Julia Levin, program manager at Environmental Defence, called CCUS a “dangerous distraction” from transitioning to cleaner sources of energy.
“It’s been five decades of huge amounts of resources, research, public and private investment and we have a global capacity to capture 0.1 per cent of emissions from the fossil fuel sector,” she said.
IEA research suggests storing carbon deep underground is safe and stable. However, the pipelines required to transport carbon to injection sites need to be monitored to mitigate the risk of ruptures.
One industry source said dozens of oil and gas companies are considering projects, awaiting details of Alberta’s competitive process.
Alberta’s energy minister’s spokesperson, Jennifer Henshaw, said the government is currently working on the competitive process.
Hubs, according to analysts, are the most cost-effective solution to store carbon. According to Neeraj Nandurdikar, global head of power and renewables consultancy at Wood Mackenzie, Alberta is a rare region with suitable geology, a cluster of high emitters, and government regulation.
According to Tim McKay, President of Canadian Natural Resources, Canada’s largest oil producer, hubs make sense since the more carbon they trap, the cheaper the costs will be.