CALGARY – By betting it could possibly solve its emissions problem with carbon capture and storage, Canada’s oil and gas industry risks saddling itself with expensive stranded assets, a recent report argues.
The report, released Thursday by the International Institute for Sustainable Development — a Winnipeg-based think-tank that focuses on climate and sustainable resource development — concludes carbon capture and storage technology costs an excessive amount of and takes too long to construct to have any hope of helping industry meet Canada’s 2030 emissions reductions goal.
Calling the technology “expensive, energy intensive (and) unproven at scale,” the report urges the federal government not to place any more public money into the oil and gas industry for carbon capture deployment.
“The appliance of CCS doesn’t align with the time scale or ambition mandatory for limiting global warming to 1.5 degrees C,” the report states.
“The chance cost of investing in CCS and the chance of stranded assets for Canada’s oil and gas sector will intensify as global climate ambition ratchets up and demand for oil and gas declines.”
Carbon capture and storage is a technology that captures greenhouse gas emissions from industrial sources and stores them deep in the bottom to forestall them from being released into the atmosphere.
The technology has existed for many years, however it’s expensive and has been slow to scale up. There are currently just seven CCS projects currently operating in Canada, mostly within the oil and gas sector, and only 30 commercial-scale CCS projects in operation globally.
Still, the oil and gas industry has high hopes for the technology, with plenty of recent projects within the starting stage in Canada. Most notably, the Pathways Alliance — a consortium of the country’s six largest oilsands firms — has proposed a significant carbon capture and storage transportation line that will capture CO2 from oilsands facilities and transport it to a storage facility near Cold Lake, Alta.
While a final investment decision has not been made, the project is estimated to cost $16.5 billion and is the centrepiece of the Pathways group’s total $24.1-billion pledge to scale back greenhouse gas emissions from oilsands production by 22 million tonnes by 2030.
“The oil sector in Canada has been identifying CCS as the foremost component of its plan to bring down emissions,” said Angela Carter, co-author of the IID report.
“Actually, some industry representatives, they frame CCS because the only choice to make the sort of large inroads which are needed to scale back emissions within the oil and gas sector. It’s very very similar to the industry is putting all of its eggs within the basket of CCS.”
In a recent op-ed, James Millar — president and CEO of the International CCS Knowledge Centre in Regina, Sask. — argued that carbon capture is a way for Canada to “have its environmental cake, and eat it too.”
Millar said the wide-scale deployment of carbon capture technology will allow for a transition to net-zero “while maintaining the viability of industries which have long sustained communities and workforces across the country.”
“To construct this capability, industry is in search of strong signals that investments in CCS and other emissions reduction technologies align with Canada’s low-carbon future,” Millar said.
“Wider investment in CCS requires clear policy providing long-term certainty on carbon pricing, together with other mechanisms that can ensure Canada stays a beautiful location (especially in comparison to the USA) to undertake multi-billion-dollar projects.”
Carter said this type of continued lobbying by industry for more government funding and regulatory support for carbon capture projects, above and beyond the investment tax credit announced in last 12 months’s federal budget, is problematic.
She identified the seven CCS projects currently operating in Canada capture just 0.5 per cent of national emissions, and that ramping that as much as significant levels by 2030 would require massive government subsidies.
“CCS has been over-promised and under-delivered,” she said, adding a cheaper use of public funds could be to encourage near-term emissions cuts through regulations, equivalent to the federal methane rules currently under development.
Government must also be specializing in energy efficiency and electrification, in addition to planning for a long-term decline in oil and gas production, Carter said.
In a report published last August, BMO Capital Markets argued that government can and must do more to get carbon capture projects up and running on this country.
The report said the Inflation Reduction Act south of the border ensures roughly two-thirds of carbon capture project costs (capital and operating costs) are covered by the U.S. government.
By comparison, the BMO report said, the investor tax credit announced by the Canadian federal government in 2022 would cover lower than 15 per cent of the proposed Pathways Alliance carbon capture project’s total costs by 2050.
“We consider the U.S. policy advancement further underscores the necessity for substantially more robust policy incentives to bolster Canada’s competitive position within the decarbonization race,” the BMO report stated.
This report by The Canadian Press was first published Feb. 9, 2023.