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Canada considers how to keep its carbon capture competitive in the wake of US incentives

Canada considers how to keep its carbon capture competitive in the wake of US incentives

Canada considers how to keep its carbon capture competitive in the wake of US incentives

The federal government is considering how it can change its carbon capture bids to make Canada’s energy industry competitive as the United States moves forward with a more aggressive plan to green its economy.

The US is investing $369 trillion in energy security and climate change programs over the next decade through the Inflation Reduction Act (IRA).

This legislation also dramatically increases the tax credits available to facilities that capture and store carbon emissions. Carbon capture, use and storage (CCUS) has been the driving force of governments and industry as many countries work to decarbonize energy production.

“We want to ensure that Canadian businesses remain competitive and that international investors coming to our jurisdiction can take advantage of tax credits,” Associate Minister of Finance and Tourism Randy Boissonnault told CBC News.

Narrowing the gap

“Our government is very aware of this issue of the Anti-Inflation Act and how to make sure we don’t have a huge gap between our two countries.”

The Treasury Department is reviewing the U.S. legislation and consulting with industry to determine next steps, Boissonnault said.

Last week, Deputy Prime Minister Chrystia Freeland said she would respond to the IRA in her autumn economic statement and said more in the next budget.

“We definitely want a solution that’s done with industry, that makes sense for industry, because the good paying jobs in the future can be here in Canada and we want them to be here in Canada. So we’re going to continue to work,” Boissonnault said.

Federal funding

Canada’s budget this spring promised immediate and long-term financial support for CCUS, and a tax credit expected to be worth $1.5 billion annually starting in 2026.

The federal government is committed to covering 60 percent of equipment used in direct air capture projects and 50 percent for other types of CCUS projects. The tax credit covers 37.5 percent of other eligible equipment used to transport and store carbon dioxide.

He also reminded industry not to drag its feet in reducing emissions: incentives will be halved from 2031 to 2040.

At the time, Canada’s plan was comparable to the US’s Q45 carbon capture incentive

The new IRA has changed that.

Liberal MP Randy Boissonnault says he wants Canadian businesses to remain competitive and international investors coming to the jurisdiction to take advantage of tax credits. (Adrian Wyld/The Canadian Press)

“Canada is really in the middle of nowhere [U.S. program] It’s subject to the SCA,” said Mark Cameron, vice president of external affairs for the Pathways Alliance, a group that represents 95 percent of oil sands producers.

Cameron added that they have asked the federal government to add to existing CCUS programs, including an investment tax credit to cover operating costs or a production tax credit. And they will be looking for a nod to those requests in the autumn economic update.

“If the government were to make changes to the investment tax credit or complement it with some additional measures, that would put us much closer to making the final investment decisions on these projects,” he said.

“If we don’t get that certainty by the middle of next year, by 2030 those deadlines will be blurred.”

Clean energy initiatives are needed from the provinces

The federal government’s plan to cut emissions would require the oil and gas sector to cut 42 percent below 2019 levels by the end of the decade. It’s a feat the industry says is unrealistic. Pathways has committed participating companies to net zero emissions by 2050.

But Ottawa also wants the provinces to step up with their own clean energy incentives.

“It’s what we need [Alberta] to come to the table and be very clear about what they’re going to put on the table for carbon capture use and storage credit,” Boissonnault said.

CBC News has reached out to the Alberta government for comment.

The oil sector is enjoying its most profitable year on record, as high oil and natural gas prices have brought big profits to companies — an estimated $147 trillion after taxes, according to the ARC Energy Research Institute.

Boissonnault added that the government is also focusing on hydrogen and critical minerals strategies, as well as battery production and semiconductors.

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