Environmentalists call it a greenwashing strategy by Big Oil, but carbon capture utilization and storage (CCUS) technologies have been placed front and centre in the government’s most recent federal budget.
The 2022 budget contains the long-awaited CCUS tax credit.
“This budget continues Canada’s pattern of giving huge windfalls to industrial polluters with limited investment in creating the cleaner future we need,” said Tim Gray, Executive Director of Environmental Defence Canada.
Over a period of five years, the credit will cost $2.6 billion, with the eventual annual cost set at $1.5 billion until 2030. “CCUS technologies,” the budget states, “are an important tool for reducing emissions in high-emitting sectors where other pathways to reduce emissions may be limited or unavailable.” The Globe and Mail writes on April 4 that the “tax credit can boost carbon capture’s role in fighting climate change”.
Carbon capture technologies have gained in popularity over the last few years. Both Alberta and Saskatchewan have already implemented supports for CCUS projects. Natural Resources Canada says that “CCUS will be a key player in Canada’s economic and environmental future.” Worldwide, in 2021, 71 CCUS projects were developed — doubling the amount recorded in 2020.
In the United States, the Internal Revenue Code includes Section 45Q, a similar tax credit that aims to incentivize investments in carbon capture projects. Although it was implemented in 2008, it was enhanced in 2020 to encompass more projects under its umbrella.
In 2021, there were 27 operational carbon capture and storage facilities in the world, the majority of which were located in the United States. According to the Global CCS Institute, in total, these facilities are able to capture approximately 40 million metric tons of carbon dioxide per year. To contextualize, in 2021, the world released approximately 36.4 billion metric tons of carbon dioxide — so these technologies captured around 0.1 per cent of global emissions.
But what is carbon capture, and carbon capture and storage (CCS), and carbon capture utilization and sequestration? Then there’s also carbon dioxide removal, which is something different again. This is part of the problem — the language is complex, and the terms are often incorrectly conflated.
What does the IPCC say?
In short, carbon capture utilization and storage is a series of technologies that allows for the capture of CO2, which is then reused for various purposes or permanently stored underground. According to the International Energy Agency, CO2 can be captured either from the source or from the atmosphere — the latter of which is called carbon dioxide removal (CDR). The Intergovernmental Panel on Climate Change (IPCC) has specifically emphasized the need for carbon dioxide removal technologies in order for the world to avoid catastrophic warming.
Carbon Capture, Utilization, and Storage projects will be an important part of the economy, and I know that by working together—the federal and provincial governments; and cities and towns across Alberta—we can help build a cleaner and stronger economy for generations to come. pic.twitter.com/wto3QAHj4f— Chrystia Freeland (@cafreeland) April 15, 2022
But the picture isn’t so straightforward. There are a wide variety of CCUS technologies, and they are not all created equal. In Canada, some are calling the CCUS tax credit just another subsidy for oil and gas companies.
350.org called such technologies “ineffective,” stating that the tax credit “does little more than ensure Big Oil will continue to expand fossil fuel production.”
Senior Climate and Energy Program Manager of Environmental Defence Canada Julia Levin emphasized that the subsidy has been lobbied for by Big Oil, calling it an “unproven techno-fix.”
“Carbon capture is not a climate solution,” she said. “It’s a greenwashing strategy used to justify more fossil fuel production and get more taxpayer money into the pockets of executives and shareholders.”
Bruce Wilson, former General Manager of Engineering at Shell, warned that CCUS is a “complex, expensive technology that aims to maintain the status quo,” also implying the tax credit is partially the work of lobbyists and calling it “utterly misguided.”
In January, more than 400 climate scientists and scholars sent a letter to Finance Minister Chrystia Freeland, calling on her to not introduce the tax credit in the budget. Last year, after the federal government first outlined its plans to develop the tax credit in last year's budget, more than 500 organizations from across Canada and the United States called on governments to resist the oil and gas lobbying and reject CCUS.
Canada actually already has some on-the-ground experience with CCUS technologies. Shell’s Quest carbon capture and storage facility in Edmonton has been operational since 2015. The company claims to have captured over 6 million tons of CO2 produced from the creation of hydrogen since the opening of the facility. However, in that same period of time, the hydrogen producing activities at the facility created 7.5 million tons of greenhouse gas emissions during that same time period, London-based international watchdog group Global Witness found.
A "green" Shell plant with carbon capture technology emits more CO2 than it captures — and has the same carbon footprint as 1.2 million cars, says @Global_Witness.— AJ+ (@ajplus) January 21, 2022
The hydrogen plant in Canada captured less than 40% of greenhouse gases it emitted from 2015-2019, says the report. pic.twitter.com/lJdcps2RET
Recently, the House of Commons’ Standing Committee on Environment and Sustainable Development (ENVI) has been studying the issue of fossil fuel subsidies, in light of the federal government’s announcement in November 2021 that Canada would eliminate inefficient fossil fuel subsidies by the end of 2022.
At an April 5 meeting, Liberal MP Lloyd Longfield asked a research associate from the Trottier Climate Institute if he agreed that it was necessary for the government to support CCUS technologies, based on conclusions from the organization’s Horizon 2060 report. “I don’t, actually,” responded the research associate. He explained that the results of their report were nuanced, in that yes, carbon capture will be necessary long-term to reach carbon neutrality. However, he explained, it should be reserved for areas where it is impossible to avoid emissions, such as in the production of cement and steel. “If we use CCS,” he said, “it has to be used as a last-resort solution for any sector, after all possibilities for reducing greenhouse gas emissions through other means.” The Liberal member interrupted him at that point to confirm that the technologies were part of the toolbox for Canada to reach its climate goals. “Part of the toolbox in sectors where it’s impossible to do otherwise,” reiterated the research associate, “so that doesn’t include oil and gas.”
If the technologies are indeed expensive, inefficient, unproven, and a last-resort measure, why is the federal government going ahead with supporting these controversial technologies — especially considering their promise to eliminate inefficient fossil fuel subsidies?
Aggressive lobbying by the oil and gas industry
The influence of Big Oil on CCUS should not be overlooked. In February, the Business Council of Canada produced a submission to the federal government’s climate plan, where the Council called for the government to “aggressively pursue carbon capture opportunities, including industrial CCUS.” The submission was prepared by a representative from Shell Canada, along with 20 CEOs from a “range of sectors.” The Business Council’s board includes management from companies such as Suncor, Teck Resources, Enbridge, and Cenovus Energy, as well as CIBC and Royal Bank.
Meanwhile, according to the Office of the Commissioner of Lobbying of Canada, the federal government has been lobbied on the subject of CCUS in the last 12 months by representatives from Cenovus Energy, Imperial Oil, Suncor Energy, and the Canadian Association of Petroleum Producers (CAPP) — among others.
This chart was eye-opening for me too. Carbon capture is an expensive way to subsidize the oil & gas industry but it won’t do much for the rest of us. Cheaper not to produce the carbon in the first place #CCUS https://t.co/DxJShTlM30— Sarah Buchanan (@sbuchananTO) April 6, 2022
Disagreements on CCUS are not isolated to just Canada, either.
The completion of the IPCC’s most recent climate report, which was released on April 4, was actually delayed because of internal disagreements amongst policy makers and scientists regarding the inclusion and emphasis of carbon capture technologies in the report. Doreen Stabinsky, one of the IPCC’s contributing authors, told media that politics were being brought into the report process, with national interests leaking into the creation of its contents.
Canadian oil and gas companies can begin to claim the CCUS tax credit for this fiscal year. And with inefficient subsidies for oil and gas pegged to end in Canada by the end of 2022, it is unclear how the federal government aims to reconcile these two seemingly contradictory positions.