Canada’s Budget 2022: Carbon Capture Tax Relief Postponed

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Proponents of the technology say it offers a realistic path to weaning Canada off fossil fuels without sinking the economy. Critics say it’s not proven on a large scale.

The Canadian federal government has unveiled a $7.1 billion refundable tax credit program to help the country’s oil and gas industry pursue technology to eliminate greenhouse gas emissions from its operations.

The announcement, which is part of the 2022 federal budget, aims to provide incentives for the development of nascent carbon capture and storage technology through 2030. Tax breaks for the fossil fuel industry are expected to cost $2.6 billion to taxpayers in the first five years, and $1.5 billion per year thereafter through 2030.

The response from environmental groups, policy experts and climate scientists was swift.

“We know the technology is too risky,” said Temitope Onifade, researcher at the Canadian Climate Law Initiative. “We don’t know yet if it works well.”

“I don’t know where the government gets this science.”

According to the budget, the tax relief will apply to direct air capture (DAC), which aims to pull carbon directly from the atmosphere. This carbon can then be used to produce net zero jet fuel in an industry that is hard to decarbonize.

Tax breaks will also be given to stimulate investment in equipment that eliminates carbon emissions from oil and gas production facilities, power plants or heavy industry. The budget says they are intended to spur investment in equipment to transport captured carbon and store it underground before it escapes into the atmosphere.

The tax credit does not apply to Carbon Capture, Utilization and Storage (CCUS) technology which pumps captured carbon underground to force oil to the surface – a technique known as of “enhanced oil recovery”.

Proponents of the technology say it offers a realistic path to weaning Canada off fossil fuels without sinking the economy.

“By reducing the carbon footprint of Canada’s traditional energy producers, the credit aims to ensure that they are a stable source of cleaner energy both at home and abroad,” the Liberal budget says. .

Mark Zacharias, special adviser to Simon Fraser University’s Clean Energy Canada research group, said the organization recognizes that CCUS is “a tool within a toolbox to get Canada to net zero emissions,” but that the size of the tax credits was a surprise.

“$2.6 billion [over the first five years] is very generous to the industry,” he said. “Ideally, however, we would like to see that level of support go to renewables.”

Critics say the technology is unproven at scale. At best, they say, it paves the way for “greenwashing,” a social license for the fossil fuel industry to maintain production. At worst, they say, it might not deliver on its promises.

“What a bad week for the climate,” Greenpeace climate and energy campaigner Patrick Bonin said, pointing to the tax credit. “This budget is just another act in the tragically bad game the Trudeau government is trying to play as a climate leader.”

In a written statement Thursday, the David Suzuki Foundation’s senior climate policy adviser, Tom Green, said: ‘There is no reason for taxpayers to foot the bill for fossil fuel companies’ belated efforts to clean up their act while they are awash in excess profits.”

“Contrary to what the oil and gas lobby would have us believe, carbon capture is a ‘generic’ technology which, according to the recent IPCC report, is expensive and will provide little climate benefit.”

Or as Onifade said, “If we rely on it too much, it puts us in a very precarious position. We will be locked into a carbon-intensive economy for a long time.

Onifade was among more than 400 Canadian climate scientists and other academics who in January sent a letter to the federal government asking it to scrap a proposed tax credit.

Describing the tax credit as “a substantial new fossil fuel subsidy,” the group said it undermines the Liberal government’s election promise to eliminate fossil fuel subsidies by 2023.

“Despite decades of research, CCUS is neither economically viable nor proven on a large scale, with a terrible track record and limited potential to reduce emissions significantly and cost-effectively,” the letter says, pointing to a facility in Saskatchewan. who failed to achieve their goals. targets.

Instead of funding “generic” technologies, Onifade said Canada should be pumping money into proven technologies like solar farms and wind turbines.

“Why not renewable energies – the ones we know are very cheap? Why don’t we put money into it? I am very confused,” he said. “We just hope that the innovation will bring us something. But we just don’t have enough time to experiment with this technology.

Onifade recognizes that CCUS offers a viable solution in industries that are particularly difficult to decarbonise, such as metals and cement production.

The amount of money set aside for CCUS tax relief could also go a long way in insuring people against the rising costs of climate disasters. In other cases, it could help vulnerable communities adapt, from Indigenous communities in Canada’s melting north to cities in British Columbia struggling with wildfires, floods and heat waves, said Onifade.

“I’m not against industries trying to find out more about the CCU. What I am against is taxpayers’ money being spent on carbon capture and storage when we have nothing to prove,” he said.

In her speech to the House of Commons on Thursday, Finance Minister Chrystia Freeland said climate action was no longer a topic of political debate.

“It’s an existential challenge,” she said, pointing to the green transition as a “pillar of growth.”

“The global economy is going green,” she said. “Canada can be at the forefront, or we can be left behind. This is of course not the choice at all, which is why our government is urgently investing in this change.

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