Uncertainty, in both the short- and long-term, are holding back carbon capture projects from reaching final investment decisions, a panel of experts and industry said Tuesday night in Calgary.
“We have all the ingredients that 90 per cent of the rest of the world doesn’t have — why are we not advancing faster on this imperative? It’s an imperative,” said Peter Tertzakian, Calgary-based energy economist and founder of ARC Energy Research Institute.
Though a number of carbon-capture projects have been finalized, including Shell Canada’s Polaris project which will capture 650,000 tonnes of carbon dioxide annually, Canada’s carbon markets — the trading systems where carbon credits are sold — remain in flux, members of the panel argued.
The key to settling that issue will be establishing what would be an incredibly costly yet effective floor on the price of carbon, called carbon contracts for difference. Calgary-based Entropy Inc. is the lone Canadian company has reached such an agreement with the federal government, a $200-million deal announced last year that guaranteed the sale of up to 185,000 tonnes per year of carbon credits for the price fo $86.50 a tonne over 15 years.
Since that announcement, however, there has been little news from the federal government on movement toward implementing a broader market. And the $15 billion set aside for the Canada Growth Fund, while significant, is not enough to pay for an entire market based around carbon contracts for difference, said Ian MacGregor, founder of Alberta’s Sturgeon Refinery and co-founder of North West Capital.
“The amount of money in the Canada Growth Fund … that’s not very much money in this world,” MacGregor said. “It gets soaked up in a couple projects because that’s the size of the number.”
Creating an industry-wide framework mimicking the details of that agreement are needed to ensure investments in carbon capture are assured and not vulnerable to the whims of changing governments, said Deborah Yedlin, president and CEO of the Calgary Chamber of Commerce.
“There’s been a lot of discussion in recent months about the importance of carbon markets globally and how we really need to harmonize the international carbon markets,” Yedlin said.
Tertzakian characterized carbon capture projects as a “waste disposal business.”
“It’s just that we still have to crack this nut, frankly, of how to create the economic conditions to be able to stimulate the investment required to catalyze this waste disposal business,” he said. Tertzakian argued current policy around carbon markets are unclear and not harmonized, which has made them “dysfunctional.” This has made it increasingly difficult for industry to comfortably sign off on final investment decisions, he said.
MacGregor, meanwhile, said that should a set floor on the price of carbon be determined, companies will need assurances from governments that it will endure elections and changes in government.
“I also think it has to be durable over multiple election cycles. It’s not just one cycle — these are 20 to 30 year projects. I don’t even know what the carbon tax is going to be over 30 years, not over four years,” MacGregor said.
Ultimately, Tertzakian argued, the majority of emissions from the oil and gas industry come from how those fossil fuels are used, both by industry and consumers.
“Net zero is also overwhelmingly not achievable until people who make decisions about burning fossil fuels change their attitude … the first order of business is to stop burning because that’s the decision we make every day, and switch to a renewable source or maybe become more efficient.”