Tax credit for carbon capture - the wrong horse to back in a race against time
This article is adapted from Bruce Wilson’s Op-ED, published in the Hill Times April 7 2022:
In 1986, scarcely a year into my first job with now defunct Britoil, I lost my job like many others as oil prices crashed - my first experience of the oil & gas boom-bust cycle. Young and optimistic, I went to Africa and applied my skills to building a dam. Eventually, I returned to the oil and gas sector, building a 30-year career, half of those years with Shell.
In my latter years with Shell, I became increasingly aware of the impact of our emissions on global temperatures, and resolved to leave the industry to take direct action on climate change. Now via multiple avenues, including my start-up, Thor Hydrogen and not-for-profits CIRES and Iron & Earth, I am working with many committed colleagues to create pathways for others to bring their skills to the energy transition.
Canada’s energy workers should be justifiably proud of their technical expertise and for powering our economy for decades. Many now agree with the need to push toward a net-zero economy but need help to bring their skills to these new technologies, including transitional support from federal and provincial governments. However, we believe that the Federal government’s announcement of a massive tax credit for Carbon Capture Utilization and Storage (CCUS) is utterly misguided and ultimately unhelpful for workers, for Canada, or for the planet.
The refundable investment tax credit for businesses will cover 50 per cent of the cost of equipment to capture CO2 through CCUS projects beginning in 2022, and is expected to cost taxpayers $2.6 billion in the first five years of the program — reaching up to $8.6 billion by 2030.
But subsidizing CCUS won’t prevent layoffs as global oil and gas demand drops, as the world pivots away from high carbon fuels. Europe’s current energy crisis doesn’t change that trajectory. Following Russia's invasion of Ukraine, European countries announced plans to fast-track the phase out of fossil fuels and accelerate scaling up renewables. That’s because it’s faster, and cheaper to scale renewables than to build more fossil fuel infrastructure.
Despite what some lobbyists claim, CCUS is not the most effective, scalable tool for cutting our emissions. For all the headlines and dollars poured into CCUS, the Global Institute for Carbon Capture’s 2021 report identifies around only 31 facilities worldwide that are either operational or in construction, collectively accounting for a mere 39.7 Million tonnes per annum, less than 0.1% of annual global emissions. That’s assuming they function at nameplate capacity, which is an open question. A report about Shell’s Quest plant found the plant emitted more than it sequestered.
We don’t have time for industry to spend decades getting CCUS technology right. As Canadians experience heatwaves, floods and forest fires, the clock is ticking. Climate impacts are being felt worldwide. The IPCC says we need to cut emissions significantly by 2030.
As the Climate Change Committee, an independent body that advises the UK government notes, “A net-zero target requires deep reductions in emissions, with any remaining sources offset by removals of CO₂ from the atmosphere”. The key is “any remaining sources”. We must start with deep reductions and reserve ‘negative emissions technologies’ for aspects of our economy for which there is no clear zero or low carbon alternative. For oil and gas, the alternatives are clear.
At best, CCUS is a complex, expensive technology that aims to maintain the status quo. But our climate can’t afford for us to continue powering up with oil and gas for decades to come. Car companies see the writing on the wall - it’s why GM, Volvo, and Volkswagen, are committing to going electric. Yet in Canada, some oil and gas CEOs prefer to imagine that change isn’t coming. If oil and gas executives want to invest in CCUS they are welcome to. But taxpayer dollars must not be squandered on CCUS when more viable, affordable, scalable solutions exist.
There are better horses to back, ones that will take us faster to where we need to get. As our remaining carbon budget runs out, we must switch rapidly to zero emissions forms of energy, wind, solar, geothermal, employing electricity and green hydrogen for energy storage and for powering mobility. We have the solutions, and they are all shovel-ready – unlike CCUS, which is far from proven, requires billions to set up and risks stranding assets when global oil demand declines.
Government dollars are needed to scale up renewables, including geothermal. For long-term energy storage and high-grade heat applications, green hydrogen - zero emissions at both source and point of use - is the right horse to back. Allied with battery electric vehicles, hydrogen fuel cells can effectively displace diesel to power heavy transport. Its high heat of combustion makes it a viable alternative to fire steelmaking, and cement manufacturing. Yet, no tax credits for these technologies are on the table.
This is technology available now, scaling fast to meet the challenges and creating jobs. Looking to Europe, the investment in green hydrogen is massive and the growth of electrolysis Gigafactories is testament to that growing demand. Here in Canada, we ignore this at our peril - this is where the jobs will be, where competitiveness lies, and where the race will be won.
Where vested interests are being economical with the truth about CCUS, it is workers who will suffer. CCUS is a distraction from the reliable, and proven renewable technologies that can cut emissions and create jobs for energy workers. By investing in wind, solar, geothermal and green hydrogen we can make a thriving net-zero economy a reality – not the mirage held up by those who would maintain the status quo.