Carbon Capture + Spin

Big hype – and billions in public subsidies – for failing tech

by Mitchell Beer

After a half-century of research and development, carbon capture and storage (CCS) projects are far more likely to fail than to succeed, and nearly three-quarters of the carbon dioxide they manage to capture each year is sold off to fossil companies and used to extract more oil, according to a sweeping industry assessment released in September by the Institute for Energy Economics and Financial Analysis (IEEFA).

The report landed just as analysts in the United States were warning of major verification problems with a CCS tax credit that received a boost in the Biden administration’s new climate action plan, and as Canadian fossils lobby for more tax relief to match what’s becoming available in the US.

One of the case studies in the 79-page IEEFA report concludes that the troubled Boundary Dam CCS project in Saskatchewan has missed its carbon capture target by about 50%. The 13 “flagship, large-scale” projects in the analysis account for about 55% of the world’s current carbon capture capacity, the institute says.

Those 13 projects captured a grand total of 39 million tonnes of CO2 per year, the report found, about one one-thousandth of the 36.3 billion tonnes that emitters spewed into the atmosphere in 2021.

“CCS technology has been going for 50 years and many projects have failed and continued to fail, with only a handful working,” said report co-author Bruce Robertson, a veteran investment analyst and fund manager now serving as IEEFA’s energy finance analyst for gas and LNG. The report, co-authored by energy analyst Milad Mousavian, concludes that seven of the 13 projects underperformed, two failed outright, and one was mothballed.

“Many international bodies and national governments are relying on carbon capture in the fossil fuel sector to get to net-zero, and it simply won’t work,” Robertson said in the release. Though there is “some indication it might have a role to play in hard-to-abate sectors such as cement, fertilizers, and steel, overall results indicate a financial, technical, and emissions reduction framework that continues to overstate and underperform.”

Seven of the thirteen projects underperformed, two failed outright, and one was mothballed.

Natural gas production

When CCS or carbon capture, utilization and storage (CCUS) projects did succeed, it was usually in the natural gas processing sector, where CO2 has to be removed to deliver a marketable product, IEEFA explains. But that’s often the CO2 that is handed off for Enhanced Oil Recovery (EOR), a process that involves injecting the gas into declining oil wells to boost their production. Canada’s new CCS tax credit excludes EOR projects, but IEEFA says 73% of the CO2 captured across the 13 projects in the study was used for that purpose.

“Producing the primary usable product (i.e. natural (methane) gas) is impossible without separating CO2,” the report states. “This explains why the sector has been using carbon capture technology for decades, not necessarily as a climate-friendly solution, but as an inevitability to produce the fossil fuel natural gas. On top of that, selling the captured CO2 primarily to oil producers for enhanced oil recovery improves the economic viability of gas development projects.”

But last year’s Net Zero by 2050 report by the International Energy Agency “explicitly expressed alarm about the danger of developing any new oil and gas projects globally,” the two authors add. “It emphasized not developing any new oil and gas projects if the world wants to reach net zero by 2050.”

Tail-end emissions omitted

The other “elephant in the room”, IEEFA says, is that CCS attached to a fossil gas project only applies to the carbon pollution released while a field is in production. It does nothing to reduce the 80% or more of total emissions that occur when the product reaches its final customer and is burned. That means it makes no sense to declare a carbon capture project attached to a new gas project climate-friendly.

The IEEFA analysis coincides with a furor over the tax credit for CCS operations in the United States that served as a reference point, if not a model, for the C$2.6-billion subsidy introduced in the Trudeau government’s 2022 budget. The US tax measure dates back to 2008, and “by 2021, 12 large projects were using 45Q federal tax credits to capture carbon dioxide from the smokestacks of industry and inject the gas into the ground,” Oil & Gas Watch reports, citing a report by the non-partisan US Congressional Research Service. The Inflation Reduction Act that US President Biden recently signed into law contains billions in new tax incentives for CCS.

But “about half of the carbon sequestration credits claimed by industry over the last decade were later revoked by the [US Internal Revenue Service] because the companies failed to monitor or verify their capture of the greenhouse gas” as required by the Environmental Protection Agency, Oil & Gas Watch says. Of the 10 companies that claimed the largest share of the more than $1 billion in CCS tax credits, seven had no monitoring, reporting, and verification plans.

But neither the shaky nature of the technology nor the growing controversy south of the border is stopping Canadian fossils from demanding more generous taxpayer backing for their own CCS ventures. Previously, Cenovus Energy CEO Alex Pourbaix told analysts that the new federal tax credit wasn’t rich enough to convince major tar sands/oil sands operators to invest their own money in CCS.

Environment and Climate Minister Steven Guilbeault countered that Canada’s big oil companies are making record profits this year and should invest some of that extra cash to curb their greenhouse gas emissions.


Mitchell Beer is publisher and editor of The Energy Mix. This article was originally published on www.theenergymix.com

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