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Canadian CCS proposal gives power plants incentive to emit more carbon

March 24, 2021

The Energy Mix:

A new federal incentive, modelled on a U.S. tax credit for carbon capture, utilization and storage, would be tailor-made to drive higher greenhouse gas emissions and could produce unexpected surprises for private investors if it’s included in Finance Minister Chrystia Freeland’s April 19 budget, a veteran U.S. energy consultant and attorney has told The Energy Mix.

The fossil industry and its allies have been intensifying their push for carbon capture (CCUS) subsidies, with Alberta Premier Jason Kenney calling for C$30 billion in federal largesse over 10 years. In an email Tuesday, Ian Cameron, press secretary to Natural Resources Minister Seamus O’Regan, said carbon capture technology “creates jobs, lowers emissions, and increases our competitiveness. It’s an important part of our government’s plan to get to net-zero emissions by 2050 and we are working with all provinces, including Alberta, to keep Canada at the forefront of this promising technology.”

But the signature tax measure that is generating much of the hype, the Section 45Q tax credit [pdf] named for the relevant section of the U.S. Internal Revenue Code, creates an incentive for power plant operators to emit more carbon, while giving investors a false picture of projects’ viability, said David Schlissel, a Massachusetts-based consultant associated with the Institute for Energy Economics and Financial Analysis (IEEFA).

“The oil industry and the coal industry see this as a way to keep their industries going,” Schlissel told The Mix. “So they green-wrap it as a way to save produced CO2.” But the economics of those failing power plants, coupled with a volume-based tax credit that pays up to US$50 per tonne for any carbon an operator can capture, turn Section 45Q into an incentive to burn and emit more carbon, not less. 

[Mitchell Beer]

More: Exclusive: New Carbon Capture Tax Credit Would Drive Higher Emissions, Could Mislead Investors

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