Alberta’s ambitious carbon capture plans hang on Canada govt and shareholder support

CALGARY: Canada’s highest-polluting province Alberta is moving forward on building a broad carbon capture and storage (CCS) industry, but progress still hinges on government funding and heavy emitters being willing to invest in the costly technology.

If successful, Alberta’s CCS strategy could unlock billions of dollars in investment from global corporations aiming to hit net-zero emissions by 2050, like chemical maker Dow Inc and hydrogen producer Air Products.

The province last week picked six proposals from firms including Enbridge and Shell to explore developing open-access carbon storage hubs in the Edmonton region. The hubs would have capacity to store around 20% of oil-rich Alberta’s total emissions, according to National Bank analysts.

But developing carbon storage is just one part of the equation. Heavy industrial emitters also have to invest in the technology needed to capture carbon and transport it to storage sites, a costly process that does not make money for polluters.

Canada’s highest-emitting industry, the oil and gas sector, has been pushing for a federal tax credit to cover as much as 75% of the upfront costs, even as producers enjoy record free cash flow from surging crude prices.

“These are very large-scale, capital-intensive projects,” said Mark Demchuk, national director of the International CCS Knowledge Centre. “Operating sustainably is important to shareholders, but return on capital invested is a pretty critical component.” Demchuk estimated a typical project capturing one million tons of carbon a year would cost around C$1 billion ($803.7 million) to build.

In Canada, companies are calculating in the long-term investing in CCS will prove cheaper than paying rising federal carbon taxes, set to climb to C$170 a ton by 2030 from C$50 now.

The Canadian government is expected release details of a CCS tax credit in Thursday’s federal budget.

INVESTMENT BOOM Canada’s promise to cut emissions 40-45% below 2005 levels by 2030 also relies on CCS, though environmentalists warn it will prolong the life of the fossil fuel industry.

“The imperative on companies globally right now is reduce their carbon footprint using all means available,” said S&P Global analyst Kevin Birn. “CCS is an industrial emissions solution, even though a lot of people may dislike it.” The International Energy Agency says CCS is critical if the world is to hit net-zero emissions by 2050, and estimates carbon storage capacity needs to reach 7.6 billion tonnes, up from around 40 million tonnes currently.

Alberta’s push to build out CCS capacity has helped to attract billion of dollars worth of proposals for new industrial projects in the Edmonton region in the last year, including Dow’s net-zero ethylene plant. All the projects rely on CCS to lower their carbon footprint.

“Carbon capture is critical to the project, which is a key component of Dow’s commitment to reach carbon neutral by 2050,” Dow Canada president Tyler Edgington said in an email.

The company has not put a price tag on the project but Premier Jason Kenney said it would be the largest capital investment in Alberta in a decade. Spending on major projects in Alberta dried up after the last oil sands building boom faded following the 2014 oil price crash.

Pipeline operator Enbridge has partnered with Lehigh Cement and Capital Power to transport and store their emissions as part of its hub proposal, starting in 2025.

“We anticipate investing hundreds of millions of dollars in carbon transportation and storage infrastructure for the hub. In turn, that will unlock more significant investments in (Lehigh and Capital Power) capture projects that will be in the billions of dollars,” said Enbridge spokesman Jesse Semko.