Carbon capture and storage in Canada
Will government investment lead to commercial viability?
As of early 2009, combined federal and provincial government investment in Canadian carbon capture and storage (CCS) technology and infrastructure stands at some $3.4 billion. This includes Alberta’s $2 billion announced in July 2008, and a combined total of $1.4 billion from the federal government’s 2008 and 2009 budgets. And more is surely coming, provided these resources prove viable.
The Alberta plan is designed to see three to five large-scale integrated CCS facilities come online in the province by 2015 to sequester up to 5 million tons of carbon dioxide (CO2) per year for at least 10 years. The plan’s announcement came just as Deloitte completed the second phase of its Producers’ Dilemma study, which recommends that both the provincial and federal governments invest in CCS infrastructure — specifically in the oil sands — as a necessary first step to encourage industry to do the same.
The 2009 federal budget, announced on January 27, provides $1 billion in funding over five years for clean energy technologies, including $150 million for research and $850 million for development and demonstration of promising technologies, including large-scale CCS. This funding follows on $250 million announced in the 2008 budget for a full-scale CCS facility in Saskatchewan and CCS feasibility research in Nova Scotia, as well as an unspecified $125 million under the ecoENERGY Technology Initiative of Natural Resources Canada. The 2009 federal budget also provides accelerated capital costs allowances for CCS assets.
Unlike Alberta’s plan, the federal funding is framed not in terms of CO2 reduction, but rather in terms of accumulative investment. In other words, the federal government expects its initiative to generate at least $2.5 billion in total clean technology investment over the five-year funding term. “This is a good start,” says Valerie Chort, national leader of Deloitte’s national Corporate Responsibility & Sustainability (CR&S) practice. “Nobody thinks these initial investments will be sufficient to build CCS infrastructure on the scale ultimately required for a growing resource-based economy. But this funding will constitute a critical contribution to the evolution of the technology from pilot to full-scale implementation.”
It also remains to be seen whether the size of the current investment will be sufficient to meet the objectives for mitigating greenhouse gas emissions as declared. But one additional objective worth considering is whether the combined effort will reveal the final, long-term viability of the technology itself in Canada. Carbon capture and storage technology is not yet commercially proven, but it does appear to be promising. Ultimately, questions about its viability can only be answered through continued research and development.
Not only does carbon capture and storage promise a production-side component to the CO2 reduction objective; if it works, it also promises a shift in the discussion of responsibility to the demand side, where, again in terms of the oil sands, about 70% of emissions occur.
“It’s true that oil sands are carbon-intensive, but it’s also true that this is one component of the lifecycle of fuel products, and that end-use by the consumer also results in significant emissions,” says Jamie Ross, leader of Deloitte’s CR&S practice in Calgary. “It’s not a one-sided challenge. While companies across industrial sectors have plenty of opportunities to more fully integrate sustainability principles into their day-to-day operations, consumers also have a part to play. We can all be greener.”
It is also worth noting that an important driver toward realizing the commercial viability of CCS is a cap-and-trade program. Pat Concessi, Global Lead for Climate Change and Sustainable Resources, describes the importance of putting a price on carbon: “Emitting companies who are able to reduce their greenhouse gas (GHG) emissions through carbon capture and storage would reduce the number of carbon allowances they would be required to purchase,” she says. “Alternatively, a CCS facility might be structured as an offset project – the project owner would receive credits for emissions reductions. These two mechanisms would create revenue streams for the CCS facility, improving commercial viability.”
From fuel efficiencies across the supply and value chains to encouraging reduction in consumer demand, opportunities abound both to reduce and to mitigate emissions. As we argued in Producers’ Dilemma II: “There is no doubt that public concern over the oil sands has increased, that pressures continue to mount rather than abate and that, in a world of finite resources (of all kinds), we are bound to our natural limits. Technological solutions to environmental challenges aren’t yet perfect but they’re improving; alternative energy solutions to diminishing petroleum reserves aren’t yet perfect but they’re improving. Progress, in other words, is real.”
Despite the current downturn and its largely deflationary pressure on alternative and renewable energy companies, this statement remains true. The big question now is one of time. How long will it take the global financial markets to recover? And when they do, how long for renewed intensity in CCS investment? For now, investment in carbon capture and storage is set to go ahead, despite economic woes. That’s nothing but good news.