Canadian budget offers restricted support to CCUS
Canada will provide tax-based incentives for the development of carbon capture utilisation and storage (CCUS) projects, but intends to bar schemes that use captured CO2 in enhanced oil recovery (EOR) operations from participating, federal finance minister Chrystia Freeland said in her budget address April 19.
Details of the investment tax credit, including its rate, will be worked out with stakeholders over the next 90 days and implemented starting in 2022.
Budget documents say the tax credit could lead to CO2 emission reductions of at least 15mn mt/yr and would be central to government estimates that suggest it and other budget measures will help reduce Canada’s total greenhouse gas emissions by 36% from 2005 levels by 2030, to 468mn mt from 730mn mt.
The tax credit will be available to direct air capture (DAC) projects, which Squamish-based Carbon Engineering CEO Steve Oldham has said in the past is a requisite for growth in the sector. Carbon Engineering is working with Occidental Petroleum to build a 1mn mt/yr DAC facility in the Permian basin, taking advantage of federal 45Q tax credits offered by the US government. The captured CO2 would be used by Occidental for EOR.
The tax credit will support blue hydrogen production, budget papers indicate, and during the consultation period consideration will be given to how equivalent tax support could be provided to producers of green hydrogen.
But it won’t be extended to EOR projects, despite recognition in budget documents of the success in Canada of the Alberta Carbon Trunk Line, which Ottawa helped fund and which moves captured CO2 to EOR fields in central Alberta.
“Alberta has been a leader in developing carbon capture utilisation and storage technology and we are encouraged to see more investments included in the budget,” Alberta finance minister Travis Toews said. “However, we have significant concerns about the details, specifically the exclusion of enhanced oil recovery projects with a net-zero carbon profile.”
Alongside the tax credit, the budget provides C$319mn (US$254mn) over seven years to support research, development, and demonstrations that would improve the commercial viability of CCUS technologies.
Other budget measures which the government said will advance its net zero by 2050 aspirations include a 50% reduction in the general corporate and small business income tax rate for businesses that manufacture zero-emission technologies and expanded ability for businesses to immediately write off the full cost of their investments in certain clean energy technologies.
But certain fossil-fuelled and low efficiency waste-fuelled electrical generation equipment will no longer be eligible after 2024, budget papers say.