A controversial tax credit aimed at boosting carbon capture projects could cost $1 billion more than the federal government estimates, the independent parliamentary budget watchdog has said.
The Canadian Treasury anticipates that carbon capture, utilization and storage (CCUS) investment tax credits will be costly in several federal budgets. 4.6 billion from 2022 to 2028.Currently the parliamentary budget officer Estimate your CCUS investment tax credit The cost will be $5.7 billion.
Carbon capture has been proposed as a way for the oil and gas industry to continue production without causing climate change. Carbon capture is not mandated by the government for heavy industry, but it is used by emissions-intensive industries such as cement production as a way to maintain production while reducing emissions.
However, this technology is unproven to scale up to capture sufficient amounts of carbon emissions and is expensive.
Environmental Defense, a group that has criticized the CCUS tax credit, points out that it has no cap and could end up costing more than the PBO estimates.
“Carbon capture and storage is a dangerous distraction being promoted by the oil and gas industry to extend business as usual,” said Julia Levin, associate director for national climate at the Environmental Defense Agency.
“These tax credits are designed without a cap, which means the final cost to Canadian taxpayers could end up being much higher.”
A spokesperson for Finance Minister Chrystia Freeland defended what the government called a “historic investment” in Canada’s “clean economy.”
“Carbon capture, utilization and storage is essential to reducing Canada’s emissions,” said Katherine Kaplinskas, Freeland’s senior public affairs advisor and spokesperson. She added: “We know Canada cannot afford to miss out on this economic opportunity, and we want to encourage businesses to reduce their emissions as quickly as possible.”
The CCUS Credit Program provides investors with tax credits of 37.5% to 60% on investments in direct air capture equipment and carbon transport, storage, and use equipment. Investors are eligible for the credit in his three jurisdictions: Alberta, Saskatchewan and British Columbia.
Oil sands companies have banded together to propose a $16.5 billion carbon capture and storage project in northern Alberta that they say will help reach net-zero emissions in production by 2050.
Although announced in Budget 2021, the Carbon Capture Investment Tax Credit is not yet in effect. It comes into effect when Congress passes the enabling bill. The plan is to apply it retroactively until 2022.
Canada is investing heavily in carbon capture and storage as a means to combat climate change. Research is currently underway to determine whether the storage facility could cause earthquakes.
The PBO relied on confidential Natural Resources Canada (NRCan) and Treasury Department of Canada data based on anonymized current and proposed projects.
The PBO also released cost estimates for Ottawa’s Clean Hydrogen Investment Tax Credit. PBO Projects subject to tax credits $5.7 billion to the federal government. The government estimated it would cost $5.5 billion in its 2023 budget.
According to Natural Resources Canada, there are eight commercial carbon capture facilities in Canada. The facility will capture only about 0.5 percent of the country’s total annual emissions, according to the company. International Institute for Sustainable Development.
