Canadians shouldn’t foot the bill for Big Oil’s costly carbon capture 

The fossil fuel industry players are lining up at the carbon capture buffet, but they’ve left their wallets at home. Unfortunately, as the saying goes, there’s no such thing as a free lunch.

Oil and gas companies are looking for the public to foot the bill for carbon capture and storage (CCS) to allow the sector to reduce emissions while shirking the risk of the investment. And governments are buying in.

Federal and provincial governments have so far committed more than $12 billion to carbon capture, with Alberta poised to release a new incentive program for the technology in the coming months. With all those tax dollars flowing toward CCS, it's vital that we evaluate whether those funds are being well spent.

Canada's oil and gas sector bears responsibility for emitting over a quarter of the country's greenhouse gases. If we are to achieve our national target of reducing emissions by 40 to 45 per cent below 2005 levels within the next seven years, it is imperative this sector pulls its weight. Oil and gas companies are proposing that carbon capture and storage can do the heavy lifting — at the cost to the taxpayer — while enabling them to increase production.

But the track record of CCS does not indicate it’s up for the task.

CCS technology has been slow to develop. There are only 30 commercial carbon capture and storage projects operating globally, with the seven in Canada capturing less than two per cent of the sector’s emissions. In the majority of these projects, the carbon that is captured is injected into declining oilfields to actually increase oil production.

The technology has also faced stubbornly high costs. The costs vary widely for CCS in different sectors, but in the oil and gas sector, the technology is expensive and has seen limited cost reduction over decades of development and commercial use.

A major reason for the big price tag is the complexity of the technology. There are many different pieces that must work together, which makes innovation difficult. CCS also needs to be customized to the specific industrial process and geological conditions. So technical advances in CCS for a cement plant, for instance, will not necessarily be applicable to CCS development for an oilsands facility.

Oilsands producers in the Pathways Alliance claim the technology is nearing a turning point and with more public investment, it will become economical and scalable. But given the complexity, the need to tailor the technology and the relatively few potential CCS projects in the oilsands, it is unlikely that economies of scale could be reached that would allow costs to drop significantly.

On the other hand, renewable energy technologies such as solar PV, onshore wind, and batteries have seen significant cost reductions as the technologies have been developed and deployed at scale. Wind and solar are the cheapest sources of new electricity in history, and precipitous cost declines are expected to continue, particularly in light of the U.S. Inflation Reduction Act. While CCS is necessarily location-bound and tailored to the industrial facility, solar panels can be deployed in a wide range of contexts with very little customization.

Given the poor track record and high cost of CCS in the oil and gas sector to date, governments should think twice about their support for this technology. Funds spent on CCS come at the cost of investment in other low-carbon solutions. With finite public funds and an urgent need to curb emissions and adapt infrastructure, careful scrutiny of investments is needed to get the best bang for our public buck.

As it stands, we are setting the table for oil and gas companies to have their cake and eat it too when it comes to emissions reductions. The federal government has new guidelines to stop subsidizing the fossil fuel industry, but carved out exceptions to allow for continued support for CCS in the sector. This should be reconsidered until the technology has proven effective and cost-competitive.

Ultimately, oil and gas companies should be funding their own emissions reductions given their outsized contributions to, and profits from, the primary source of the climate crisis. Canada’s five biggest oil and gas companies made over $38 billion in profits last year, but are prioritizing returns to shareholders over investments in emissions reductions.

Regulations like a strong cap on oil and gas sector emissions can ensure companies own up to their fair share of reductions, via CCS or otherwise, without expecting taxpayers to pick up the tab.

Laura Cameron is a policy adviser for IISD’s energy team working in the areas of fossil fuel subsidies, just transition and oil and gas policy in Canada. With a master’s degree in Indigenous governance and a bachelor’s degree in biology, her interdisciplinary interests centre on environmental justice, participatory filmmaking and community-led climate action.