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On Tuesday, Federal Liberal Finance Minister Chrystia Freeland released a fall economic statement that included a timeline for launching the long-promised carbon capture utilization and storage (CCUS) incentives retroactively to Jan. 1, 2022, — pending legislation set to be introduced before the end of the year. “Our economic plan is focused on building an economy that works for everyone with good jobs that people can count on,” Freeland said in a speech to the House of Commons. Ottawa also offered some details about carbon contracts for differences, which will offer insurance against future changes to the price on carbon, protecting investors if the price goes down, noting the Canada Growth Fund is already working to negotiate contracts with proponents. The Canada Growth Fund is set to allocate, “on a priority basis,” up to $7 billion of its current $15 billion in capital to issue all forms of contracts for differences and offtake agreements, the document said. “The federal government has made this commitment in the previous three budgets — we need a more robust entry into carbon contracts with industry to spur real investment,” Jean said. The CCUS tax credits will also come with labour strings attached, including the requirement to pay “prevailing union wages.”
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Prime Minister Justin Trudeau’s government has previously said the new investment tax credits would be set at 50 per cent for spending on equipment that is needed to capture CO2, while a 37.5 per cent credit would be provided for investments in equipment used in related transportation and storage. Other green technology tax credits like those for clean hydrogen and clean electricity are expected to become available in late March.
It’s all part of Ottawa’s plan to reach net-zero emissions by 2050. The Alberta government and industry groups have lobbied for Trudeau’s government to present an answer to the U.S. Inflation Reduction Act, which offered massive incentives for decarbonization.
Kendall Dilling, president of the Pathways Alliance, said in a statement Tuesday the group of six major oilsands companies is pleased Ottawa intends to legislate the tax credit before the end of the year, saying clear policy and legislation to support government investment are essential to remaining competitive.
“We’re encouraged the government has allocated more resources for carbon contracts for differences, and we look forward to working with the government and the Canada Growth Fund to see how they may be implemented for carbon capture and storage projects,” Dilling stated.
Kathleen Ganley, Alberta NDP Opposition energy and climate critic, spoke to reporters in the legislature Tuesday before the release of the federal economic plan, and emphasized the importance of carbon contracts for difference and investments in CCUS infrastructure.
“The investment should be what is necessary to ensure that we can move forward with these projects,” said Ganley, adding that industry needs certainty in order to make investment decisions as soon as possible.
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Premier Danielle Smith has previously said she expected to roll out her government’s incentive package for CCUS before she attends the COP28 climate summit, which begins next Thursday.
That program, Smith has signalled, will be designed to mirror the existing Alberta petrochemicals incentive program, which offers grants worth 12 per cent of a project’s eligible capital costs.
Freeland’s economic statement Tuesday also projected higher future deficits, and confirmed initiatives meant to address the country’s housing crisis, including $15 billion in loans for apartment construction, cracking down on short-term rentals, and new mortgage rules directed at banks.
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— With files from Chris Varcoe
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