[Economics] Fall Economic Statement Today Raises Spectre of New CCS Subsidy

[FazzNoth]

With Finance Minister Chrystia Freeland set to deliver her fall economic statement later today, climate and energy analysts are watching closely to see whether she sweetens the already lavish subsidies the Trudeau government extended to carbon capture and storage (CCS) in its 2022 budget.

The conversation and the concern have been picking up momentum in recent weeks, with the fossil lobby maintaining that a new infusion of taxpayers’ dollars is needed to match support for CCS in the Biden administration’s Inflation Reduction Act (IRA). But those demands land after Freeland already earmarked C$7.1 billion through 2030 to support CCS development. The industry is enjoying breakaway profits, and has never been keen to invest its own money in the carbon capture technology that it says will justify expanded oil and gas extraction in an era of climate disruption and emission reductions even though the production emissions they aim to reduce account for only about 20% of the carbon in a barrel of oil.

 

The push and the pressure began building up in the second half of October, with CBC reporting that Ottawa was looking into how to keep Canadian CCS competitive with the U.S. and Reuters detailing a spat between the federal and Alberta governments over who should cover the cost.

“We want to make sure that Canadian companies remain competitive and that international investors that come to our jurisdiction are able to take full advantage of the tax credits,” Associate Finance Minister Randy Boissonnault told CBC.

“Our government is very seized with this issue of the Inflation Reduction Act and how to make sure we don’t have a big gap between our two countries,” he added. “We definitely want a solution that is done with industry, that makes sense to industry, because the good paying jobs in the future can be had here in Canada and we want them to be here in Canada. So we’re going to continue to work on it.”

That message appeared to reflect what Ottawa has been hearing from the Pathways Alliance, a group that represents 95% of the country’s oilsands industry. The alliance’s VP of external relations, Mark Cameron, said the federal subsidies so far amount to about half of what’s now on offer in the U.S.

“If the government was to make changes to the investment tax credit or to supplement it with some additional measures, that would put us a lot closer to making final investment decisions on these projects,” Cameron told CBC. “If we don’t get that kind of certainty by the middle of next year, then those timelines for 2030 are going to slip.”

 

But parliamentarians are receiving a different message from a group that was literally born on the worker cafeterias of the Alberta oilsands industry and speaks for many of the people who still work there. CCS netted nearly four times as much funding as clean electricity initiatives in the 2022 federal budget, Iron & Earth Executive Director Luisa Da Silva told the House Environment and Sustainable Development Committee last month. The Biden administration only set aside 2.3% of the US$158-billion in clean energy initiatives in the IRA for CCS, compared to 48% for home energy efficiency and community resilience.

In Canada, by contrast, “despite federal and provincial governments providing an estimated C$5.8 billion for CCS projects since 2000, CCS only captures 0.05% of Canada’s greenhouse gases,” Da Silva told MPs. Rather than doubling down on an “old energy system” that is “too centralized and not community-focused,” 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,” beginning with training programs for a work force that already wants to make the switch to clean energy.

A day later, in a live interview with Bloomberg News climate specialist Akshat Rathi, Prime Minister Justin Trudeau said Canada can offer inducements that are more valuable than matching the CCS subsidies in the IRA, including a highly educated work force, the quality of life many families enjoy in Canadian cities, and the “resilience, stability, and predictability” of a long-term climate plan and carbon price.

 

But that mix of facts and arguments has done little to allay concerns that Ottawa will once again bow to the fossil industry’s subsidy demands, even after Environment and Climate Minister Steven Guilbeault vowed it wouldn’t happen. Environmental Defence was out on Instagram Monday with a Hallowe’en video that warned of the “true danger that lurks” during “spooky season”, in the form of false solutions to the climate crisis. The Re-Energizing Canada program at the International Institute for Sustainable Development published an article that pointed to “prolonged extraction and increased production” of oil and gas as the factor driving climate change, noting that “the industry has failed to take the necessary steps to reduce its emissions this decade” despite its promises to take action.

“The industry already receives significant government financial support, and the federal government has committed to ending this support by phasing out inefficient subsidies and public finance for the sector in the near term,” IISD wrote. “Further support to the sector comes with significant opportunity costs, will slow the energy transition, and entails economic risk, including public liabilities. Public dollars are more effectively spent supporting readily available and proven low-carbon technologies.”

“Under no circumstance should the government consider an even more generous carbon capture subsidy,” agreed Julia Levin, national climate program manager at Environmental Defence, in an email. “Carbon capture is not a climate solution it’s a greenwashing strategy used to justify more fossil fuel production and get more taxpayer money into the pockets of executives and shareholders. By relying on future unproven techno-fixes to cut emissions, the government is gambling with our lives. Instead, the government should use the fall economic update to announce new spending on proven climate solutions, including a generous tax credit for renewable energy and battery storage.”

https://www.theenergymix.com/2022/11/02/fall-economic-statement-today-raises-spectre-of-new-ccs-subsidy/