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Who should pay to reduce emissions from Canadian oil sands production? And, moreover, if that involves investment in carbon capture and storage (a proven technology but not yet scaled), who should bear the investment risk?
It depends on why you think the oil sands need to be decarbonized in the first place.
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For the past three years, oil sands industry group Pathways Alliance has touted the feasibility of a plan to rapidly deploy carbon capture at 12 oil sands facilities connected to a shared carbon pipeline to reach net zero. Ta. This is a major solution that oil sands companies want to leverage to contribute to Canada’s climate goals, and should be celebrated.
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The industry also recognizes that there is a strong business case for reducing emissions, allowing its products to compete in a global market that is increasingly focused on low-carbon energy. As our research shows, oil sands bitumen is one of the world’s most carbon-intensive materials to produce and refine. Investing in carbon capture is costly, but it is an investment in the future of oil sands companies’ business models.
So if emissions reduction is a business proposition, you need to think about carbon capture investments like any other large-scale capital investment. Management uses shareholder funds wisely based on what it currently knows about how the policy and economic environment will develop.
What do we know today? In recent years, we have learned that carbon capture investments are supported by a 50 percent investment tax credit from the federal government (with final action in Congress still weeks away) and a 12 percent investment tax credit. I was there. Percentage subsidy from the Government of Alberta.
Additionally, the increase in the price of a tonne of carbon is locked in until 2030, meaning companies know the trajectory on which their credit values will increase in Alberta’s TIER system, informing the economics of emissions reduction projects. To further strengthen these elements, the federal government is working on a cap-and-trade system for oil and gas emissions, which would provide greater long-term certainty about what emissions reductions are needed and on what timeline.
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This is a clever combination of subsidies and regulation, ensuring that taxpayers’ money is well spent and companies are not only encouraged to reduce their emissions, but also penalized if they don’t reduce their emissions. There is a possibility that you will receive it. Our research shows that what is being considered in Canada is generous, even compared to the 45Q tax credit enhanced by the U.S. Inflation Control Act (in the U.S., there is a (more funds available).
However, it is not up to governments or taxpayers to completely eliminate this risk. Any business owner will tell you there’s never a guarantee of a return on the money you spend. Given the momentum of the global energy transition, Alberta’s continued dependence on revenues from this sector that it urgently needs to future-proof, and the large role that oil sands plays in Canada’s overall emissions. It is therefore reasonable that this department should take on a part of this. the risks and costs of these investments;
In other words, it is time for oil sands companies to accept the significant support that is being offered.
It is therefore surprising to hear Pathways’ new executive chairman, Derek Evans, continue to suggest that Pathways is seeking further government support to get the project off the ground. . It’s even more surprising to hear him say that capturing low rates of post-combustion carbon dioxide poses challenges for governments.
Heavy industries such as oil and gas have been using carbon capture for decades. The proposed recovery process has previously been described by Pathways as proven and reliable, and is similar to technology already used in this field, for example to remove hydrogen sulfide in processing plants. ing.
Pathways has long argued that policy and regulatory certainty is needed before moving forward. Such statements at this late stage create uncertainty about the technologies and plans that oil sands companies have always said they have the expertise to implement right now, and call into question their net-zero commitment as a company. I’ll be throwing it.
MC Bouchard is the Oil and Gas Program Director at Pembina Research Institute.
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