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For years now, the oil and gas industry has tried to push back against the well-documented suggestion its operations are subsidized by the public. But now, it seems, it’s trying a different strategy: begging for the biggest subsidies imaginable when it comes to carbon capture and storage technology.
In what looks like a co-ordinated campaign, the CEOs of Canada’s large oilsands companies have come out strongly in favour of federal support for investments in CCS projects. And while they haven’t been openly confrontational — Cenovus CEO Alex Pourbaix suggested Ottawa should “keep an open mind” about the idea — there’s an implicit threat looming just behind the gentler facade of their request: either the government gives them billions of dollars for carbon capture technology or it can forget about meeting its climate targets.
Jason Kenney, Alberta’s unofficial threatener-in-chief, clearly spelled it out at a recent press conference. “If the federal government wants to set these ambitious targets, the very first thing they need to do is support us with a $32-billion investment in carbon capture, utilization and storage.” And in a more recent tweet about Cenovus’s plan to invest in carbon capture technology, he suggested: “Alberta is ready. Where is Ottawa?”
Kenney is about the worst possible salesperson you could find when it comes to asking the Trudeau government for money. But despite his predictable truculence, the federal government is exploring the possibility of creating a tax credit similar to one in the United States that would encourage the development of large-scale carbon capture technology. Previous attempts to capture carbon have been more expensive science projects than cost-effective ways to reduce carbon dioxide emissions, but there’s an opportunity to thread an important needle here — one that Ottawa seems willing to at least entertain.
That opportunity doesn’t look anything like Kenney or the oilsands CEOs seem to think, though.
Carbon capture technology can’t be used as a licence to continue with business as usual, which means projects intended to enhance oil production — one of the industry’s priorities — should be off the table. Instead, any federal investment in carbon capture technology should be made with an eye towards using it as a pathway to a new business model, one in which carbon is a cost that’s attacked as aggressively as any other.
But here’s the good news for Kenney and the oil and gas industry, even though they don’t see it that way: there’s already an incentive in place for Alberta’s oil and gas companies to invest in carbon capture technology. It’s called the federal carbon tax, and as it rises towards the $170-per-tonne target by the end of the decade it will make the economics on carbon capture better with each passing year.
"If we look at the goals for 2030 and the carbon price, there is definitely a moment in the next decade when the economics work," Alison Cretney, managing director of the Energy Futures Lab, a non-profit research group, told Reuters earlier this year.
If Kenney wants to turbocharge those economics even more and attract more low-carbon capital to his province, he can restore the tax on large carbon polluters that the Alberta NDP implemented back in 2018. Under the NDP’s Carbon Competitiveness Incentive Regulation (CCIR), oilsands facilities were benchmarked against each other, which meant the best-performing ones received credits and the biggest polluters paid the biggest price. In the process, it created a race to the top — one where the best-performing facilities were encouraged to get even better, while the worst ones were penalized for lagging so far behind.
But when the UCP formed government and introduced the watered-down Technology Innovation and Emissions Reduction Regulation (TIER), it reversed that incentive structure — especially for new projects.
Opinion: When the federal government inevitably refuses Jason Kenney's demand for a blank cheque worth more than $30 billion, we’ll get the usual mixture of victimhood and grievance-mongering, writes columnist @maxfawcett. #ABpoli #Oil&Gas
“TIER makes emissions-reducing innovation less advantageous than it would be under CCIR, since the better performing your new facility is, the lower your emissions credits will be every year for as long as the policy remains in place,” University of Alberta professor and Climate Change Advisory Panel chair Andrew Leach wrote in 2019. “The signal is backwards.”
According to Leach, that shift from CCIR to TIER represents a transfer of “hundreds of millions of dollars per year” to the highest-emitting facilities in the province, thereby reducing the value of the kind of innovative technology the oil and gas industry says it wants to create. If Kenney wants to stimulate a genuine boom in the energy sector, one that will create new jobs and investment rather than simply filling the coffers of oil companies and the provincial treasury, he should reverse that shift and restore the CCIR.
But that would require him to acknowledge both the logic of carbon taxes and the good work the NDP government did in using it to drive innovation.
So, when the federal government inevitably refuses his demand for a blank cheque worth more than $30 billion, we’ll get the usual mixture of victimhood and grievance-mongering instead. If only there was a way to capture and store all of that under the ground somewhere.