Varcoe: Will Canada nab wanted funding for carbon seize initiatives?

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Will Canada win the race to draw decarbonization funding?

Vitality infrastructure big Enbridge says america is providing a extra compelling funding setting for carbon seize initiatives than Canada, as the corporate weighs developments on each side of the border.

The Calgary-based firm isn’t giving up on its plans for a proposed carbon storage hub in Alberta, regardless of one of many two anchor companions abandoning its carbon seize and storage (CCS) mission final week.

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However it exhibits the hurdles forward as Canada strives to develop an array of decarbonization initiatives, and rework proposals sketched out on paper into metal within the floor.

“It’s a good example of even in some of these new technologies, where there appears to be lots of government support, they are going to be highly competitive,” Enbridge CEO Greg Ebel stated Friday on an earnings name.

“The (net present value) of tax benefits in Canada versus the U.S. for CCS, it’s just more attractive down south.”

Ebel made the feedback after Capital Energy determined final week to halt its efforts to develop a mission to seize emissions at its Genesee Producing Station and have them buried underground on the open-access Wabamun storage hub operated by Enbridge.

The mission’s demise has led to finger-pointing between the Smith and Trudeau governments. Dozens of carbon seize and storage initiatives have been pitched to be inbuilt Alberta, though most proponents have but to make a ultimate funding determination (FID).

Vitality consultancy Wooden Mackenzie is monitoring 81 proposed carbon seize initiatives within the nation, with 61 based mostly within the province, together with seize, transportation and storage amenities, together with varied pilot initiatives.

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“You’ve got a lot of projects that are looking to make an FID in the next year or two, so it’s definitely a bit of a pivotal moment for CCS in the province,” Wooden Mackenzie analyst Jack Mageau stated Friday.

Each Alberta and the federal authorities have adopted net-zero emission targets by 2050, though Ottawa is pushing for a net-zero energy grid by 2035.

Capital Energy stated the $2.4-billion improvement wasn’t presently financial.

The Edmonton-based firm was in talks with a federal company about probably receiving carbon contracts for distinction (CCFDs) to lock sooner or later worth of carbon and supply extra long-term certainty for its funding, however no settlement was reached.

In an interview with the Herald, federal Pure Sources Minister Jonathan Wilkinson stated Capital Energy made a enterprise determination about the right way to greatest spend its capital.

Ottawa is shifting ahead with offering funding tax credit to cowl as much as half of the capital prices for carbon seize tools, greater than a 12 per cent grant that Alberta is providing such initiatives, he careworn.

“When people say that the CCUS incentives need to be more generous, it is the government of Canada that has actually stepped up to the plate,” Wilkinson added.

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The federal authorities’s lack of dedication to securing such incentives — the tax credit nonetheless aren’t accessible, regardless of being proposed in 2021 — is accountable for creating uncertainty, stated Alberta Surroundings Minister Rebecca Schulz.

Capital Energy’s mission was initially introduced in 2021, with Enbridge to function the transportation and storage service supplier. Capital Energy’s mission would seize CO₂ from its Genesee Producing Station close to Warburg to be saved on the hub.

Whereas Capital Energy’s mission is not within the image, one other anchor stays in place for the Wabamun hub — Heidelberg Supplies, which is contemplating a carbon seize and storage mission at its cement plant in northwest Edmonton.

“We are going to keep pursuing these,” Ebel stated of the Wabamun hub.

Enbridge additionally has two different carbon seize initiatives below improvement in america.

It’s working with Oxy Low Carbon Ventures — a subsidiary of Occidental — on a CO₂ pipeline and sequestration hub close to Corpus Christi, Texas.

Enbridge additionally has a carbon seize element to its proposed blue hydrogen mission with companion Yara Clear Ammonia. If authorised, it could be developed at Enbridge’s Ingleside Vitality Centre in Texas, with mission funding pegged at as much as US$2.9 billion.

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In April, Heidelberg Supplies North America introduced it had issued a front-end engineering design contract because it progresses work on its CCUS mission in Edmonton.

Its mission is billed because the world’s first full-scale software of CCUS within the cement business. A ultimate funding determination is anticipated later this 12 months.

Ebel has beforehand famous the competitors for attracting funding for decarbonization developments is fierce, notably with the U.S. Inflation Discount Act in place.

Handed in 2022, the act boosted an current U.S. tax credit score for carbon seize initiatives to $85 for every tonne of saved CO₂, up from $50.

Mageau stated with out Capital Energy’s mission continuing, the economics for the Wabamun hub will take successful, however it nonetheless has a big anchor companion and Enbridge shall be searching for extra CO2 volumes.

On the broader query of competitors for carbon seize and storage, the U.S. is solely providing incentives to kick-start such initiatives, whereas Canada has a mix of carrots and sticks for proponents — reminiscent of a nationwide carbon worth.

Canada might present extra certainty for buyers by legislating and clarifying its funding tax credit score and providing extra carbon contracts for distinction.

“The overall stack of incentives to do CCS in Canada outweighs the incentives to do CCS in the U.S. They’re just significantly more uncertain,” Mageau added.

“There’s big policy downside in Canada that doesn’t exist at the same extent in the U.S.”

Chris Varcoe is a Calgary Herald columnist.

cvarcoe@postmedia.com

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