Freeland confident CO2 tax credit will attract large-scale investment

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Freeland said the multi-billion dollar tax credit is key to attracting investment in expensive carbon capture projects

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Finance Minister Chrystia Freeland is confident that her government’s new carbon capture tax credit will succeed in attracting large-scale investment in technology to Canada. The response from potential investors when the credit was announced, she said, was almost immediate.

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“Within 24 hours of the federal budget being tabled, I heard from top global investors, people I know from my days at the Financial Times, saying, ‘we’re reading your budget, we want to know more'” , Freeland said on April 14 at a press conference in Calgary.

“So there is money to withdraw.

Ms. Freeland was in her home province of Alberta to sell the 2022 Liberal budget and push for new measures to spur investment in carbon capture, utilization and storage (CCUS) technologies. The Deputy Premier toured a carbon capture research and development facility in Calgary alongside industry leaders and provincial officials.

The refundable CCUS investment tax credit will cover half the cost of equipment to capture carbon dioxide and 37.5% of capital costs for transporting, storing and using CO2 emissions – potentially massive aid to high-emitting sectors like oil and gas that are under increasing pressure to reduce greenhouse gas emissions.

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The federal budget also included a 60% credit for investing in direct air capture technologies to remove carbon from the atmosphere.

Justin Trudeau’s government has been criticized for relying too heavily on carbon capture technology in its plans to cut emissions over the next eight years. Opponents of the technology say it is unproven and may not reduce emissions enough to meet Canada’s target of 40-45% below 2005 levels by 2030.

The Liberal government, however, has sided with energy experts, including the International Energy Agency (IEA), who have argued that CCUS technology will be needed globally if industrial nations want to meet their net zero emissions targets.

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Freeland said the multi-billion dollar tax credit is key to attracting investment in expensive large-scale carbon capture projects.

  1. The refundable investment tax credit for carbon capture, use and storage (CCUS) will cover half the cost of carbon dioxide capture equipment and 37.5% of capital costs for transportation , storage and use of CO2 emissions.

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  3. Prime Minister Jason Kenney speaks during a press conference at the STARS hangar on March 25, 2022.

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“New stage technology is risky,” Freeland said. “I think right now when these new technologies are being developed, that’s the time we need governments to step in, to give that little nudge to provide that risk reduction, to get these technologies quickly widely adopted.

“We have to do this because we have to reduce our emissions. And frankly, we have to do this because I want to seize a competitive advantage for Alberta and Canada.

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Susannah Pierce, President of Shell Canada and National President, who visited the Alberta Carbon Conversion Technology Center with Freeland, agreed that the tax credit will make a difference.

“I think that’s enough to build momentum,” Pierce said in an interview. “When you look at things like the investment tax credit, those are initial incentives to really make you feel more comfortable that these projects can be economical.”

Once operational, Pierce said, Shell’s proposed Atlas sequestration center east of Edmonton could capture up to 10 million tonnes of CO2 per year. Atlas would be Shell’s second carbon capture facility in Alberta. The company’s Quest facility at the Shell-owned Scotford Refinery and Chemicals Plant has been operational since late 2015.

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“My company sees Canada as what we call a mature regime,” Pierce said. “The Quest project, which Shell has been operating for a few years now, has already captured around seven million tonnes. So CCS is actually a proven technology.

Atlas was one of six carbon capture proposals approved last month by the Alberta government for further evaluation and pore space negotiations.

The province is currently under pressure from industry and the federal government for more money to help accelerate the development of CCUS projects. Industry groups like the Canadian Association of Petroleum Producers (CAPP) have previously said they would like to see government support of up to 75% for carbon capture.

“We want to continue to work with the province to find ways to be even more supportive,” Freeland said.

“A good step from our point of view would be to ensure that federal and provincial support can be combined.

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