5.8 billion in subsidies, only capturing 0.05% of carbon

Oil majors want another $10B in carbon capture subsidies

Mitchell Beer

Smokestack against sunny sky

One of the unanswered questions after Finance Minister Chrystia Freeland released her 2023 budget in late March is will fossil companies walk away with another subsidy for carbon capture and storage (CCS).

A budget filled with new tax credits for clean electricity and manufacturing also included provisions that could bring fossils some or all of the $10 billion they wanted for a massive CCS complex they’ve proposed in Alberta. But they weren’t at all pleased with what they saw in last month’s announcement. For the citizen-taxpayers who would end up footing the bill, it also comes down to whether this technology warrants another penny of government support.

The technology the companies want to develop and scale up is still largely experimental, with little or no evidence that it can deliver the emission reductions the country needs by 2030 or 2050. The need for CCS in a net-zero future is somewhere between urgent and imaginary, depending on how the shift off carbon is mapped out and how heavily it relies on fossil fuels.

The Pathways Alliance, whose six members account for 95% of Canadian oil sands production, has been touting a $24.1-million investment in a carbon capture hub and a cluster of smaller projects. But they say they won’t commit to the project without more “clarity” on project financing. That’s often industry code for taxpayer subsidies and bailouts, even at a moment when fossil companies are collecting record profits that are not expected to level off anytime soon.

The subsidy demands date back to summer 2021, when Alberta oil sands giants Cenovus Energy and Suncor Energy said it would cost Canadians a mere $50 billion to spur industry action on fossil companies’ chosen path to lower emissions.

“I don’t think any of us would ever be in a position to go at this on our own,” then-Cenovus CEO Alex Pourbaix declared at the time. “It’s just too significant an undertaking.”

Less than a day before the Intergovernmental Panel on Climate Change released a dire assessment of the global climate emergency in August 2021, Pourbaix let it be known – apparently without a hint of irony – that he expected Canadian taxpayers to shell out up to C$52.5 billion to help his industry get the carbon out of its operations. “It’s going to take tens of billions of dollars over 30 years to decarbonize [our oil] industry,” he said.

Even that level of effort would only cover the industry’s production emissions – not the 80% of the carbon in a barrel of oil that enters the atmosphere after the product reaches its end user and is burned as directed.

Days later, climate hawks came back with some better ideas for spending $50 billion in decarbonization funds, including investing in solar incentives, energy retrofits, and a tiered retail tax system.

Last year’s federal budget did include a $7.1-billion carbon capture tax credit, describing the new measure as “a key part of the government’s broader plan to work with industry towards the goal of decarbonization.” But that wasn’t enough to get the industry to dig into its own pockets: on an April 2022 conference call with industry analysts, Pourbaix said the companies would need “more help” to get CCS projects funded, just before announcing an almost eight-fold increase in the company’s quarterly profits compared to 2021.

If wind, solar, or energy efficiency companies tried to pitch their products with that kind of track record, they’d be laughed out of the room. And rightly so.

In late September 2022, a Pembina Institute analysis showed the industry failing to invest in carbon reduction efforts. By late October, Environment and Climate Minister Steven Guilbeault was scorching fossil companies for holding back funds for the technologies they say they want to develop, despite record profits.

But the bigger question is whether any amount of forced generosity from taxpayers will be enough to make carbon capture a realistic or timely option for getting Canada’s still-rising greenhouse gas emissions under control.

Any new technology takes time to move out of the lab and onto the front lines. But the carbon capture and storage systems that fossils want to bolt onto their production plants in Alberta’s oilpatch have been under development for half a century. The most highly-promoted projects in Canada still aren’t meeting their targets. And an analysis last summer that looked at 13 “flagship, large-scale” CCS projects, accounting for a combined 55% of global carbon capture capacity, found that seven of them underperformed, two failed outright, and one was mothballed.

If wind, solar, or energy efficiency companies tried to pitch their products with that kind of track record, they’d be laughed out of the room. And rightly so. “CCS technology has been going for 50 years and many projects have failed and continue to fail, with only a handful working,” said report co-author Bruce Robertson, an energy finance analyst at the Institute for Energy Economics and Financial Analysis.

As recently as January 2021, four-fifths of the carbon dioxide the industry successfully captured was being reinjected into depleted wells to force more oil – and more emissions – to the surface, through a process called Enhanced Oil Recovery.

Last fall, the Global CCS Institute’s annual survey showed an historic 153 new projects under construction, with the United States and Canada leading the way.

If all of those projects deliver as expected, they’ll capture a combined 244 million tonnes of carbon per year, less than 1% of the estimated 36 billion tonnes humanity emitted in 2021.

Those numbers didn’t deter CCS Institute CEO Jarad Daniels from hyping the technology as “the Swiss Army knife of climate mitigation,” ready to “play multiple, unique roles in decarbonizing the global economy.”

Iron & Earth Executive Director Luisa Da Silva was less forgiving in a mid-October presentation to the House of Commons Environment and Sustainable Development Committee in Ottawa. “Despite federal and provincial governments providing an estimated $5.8 billion for CCS projects since 2000, CCS only captures 0.05% of Canada’s greenhouse gases,” she said. Canada should “simultaneously improve worker well-being and community resiliency towards climate change through green housing initiatives, retrofits, community distributed energy projects, and zero-emission mobility.”

Mitchell Beer publishes The Energy Mix, a non-profit news site on climate and energy change.

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