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Taxpayers should not foot the bill for carbon capture
20/03/22
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As long as Canada continues to underwrite the oil and gas industry, it cannot make meaningful progress on the economic transformation needed to address climate change. This week, Liberal ministers Jonathan Wilkinson and Steven Guilbeault doubled down on their proposed investment tax credit in carbon capture, utilization and storage (CCUS), yet another example of how Canada is failing to act at the scale and on the timeline of the climate emergency in front of us.
We are three of the more than 400 Canadian climate scientists and academics who called for the government to scrap the proposed tax credit in January, pointing out that it would provide a boost to the oil and gas industry instead of implementing a real strategy for its managed decline. We accompanied our letter with a request to meet with Minister Chrystia Freeland about the tax credit, so far with no result. As Canada continues to suffer the effects of climate change, a carbon capture tax credit is a short-sighted approach that sticks Canadians with the bill.
CCUS includes a number of different technologies, all of which capture carbon dioxide and either store it in the ground or use it for a variety of industrial and agricultural purposes. The Liberals’ proposal would provide tax credits to energy producers employing CCUS for high-emitting industrial processes like fossil fuel processing and concrete and plastics manufacturing.
Tax credits are a subsidy since they lower the price of a given activity. The Liberals’ proposal will pour more taxpayer money into the fossil fuel industry, despite the fact that Canada has committed to phasing out fossil fuel subsidies. Canadian governments have provided oil, gas and coal with an average of $14 billion per year over the last three years, which is more than any other country in the developed world.
By contrast, Canadian renewable energy has only received about $1 billion in public financial support. Given the reality of the climate crisis, governments should be acting decisively to wind down production of fossil fuels, so that we can achieve the goal of the Paris Agreement to limit warming to 1.5 C.
Supporters argue that CCS marginally reduces emissions in the short term, but this misses the big picture. “Carbon lock-in” means that decisions we make today about fossil fuel investments, use and infrastructure have long-term implications. A tax credit for CCUS will prolong, not shorten, our dependence on fossil fuels.
Betting on CCUS means building out a huge infrastructure of pipelines to transport the carbon. By making long-term investments in oil and gas infrastructure more economically beneficial, the proposed credit would effectively tip the balance toward continued fossil fuel extraction and use. In a world moving toward a decarbonized economy, investing in CCUS does not plan for the future; instead, Canada is kicking the can down the road.
Currently, CCUS capture capacity is only 0.1 per cent of global annual emissions. While optimists argue this figure can be scaled up with more investment, the Intergovernmental Panel on Climate Change points to uncertainty in the future deployment of CCUS and cautions against reliance on the technology.
A more expedient — and cheaper — solution would be to invest in renewables, which are now cost-competitive with fossil fuels. The Liberal government should focus support on climate solutions that will contribute the most to emissions reductions: increased electrification, wide-scale use of renewable energy and improving energy efficiency. Funding CCUS diverts resources from these proven and more cost-effective solutions.
Opinion: A tax credit for #CCUS will prolong, not shorten, our dependence on fossil fuels, write Jessica Green @greenprofgreen, Laura Tozer @LMTozer & Emily Eaton @emi_eaton. #ElectrifyEverything #GreenHydrogen #FossilFuels #JustTransition
Canada cannot continue to play both sides. It cannot continue to invest in short-term solutions that promote more efficient use of fossil fuels while planning to decarbonize the economy. The same International Energy Agency report cited by the ministers clearly states that no new fossil fuel infrastructure should be built if we want to have a hope of reaching net-zero by 2050.
If CCUS is critical for oil and gas companies to reduce their emissions as decarbonization moves ahead, then they should foot the bill. Indeed, there is no reason that oil and gas companies, now flush with cash, shouldn’t pay for these investments themselves. At a time when Canadians are struggling with the effects of the pandemic and rising inflation and interest rates, the government should not be giving handouts to the fossil fuel industry.
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