The future of Canadian emission reductions hinges on an aggressive CCS policy overhaul
Carbon capture and storage (CCS) is critical for the Canadian oil sands sector to meet its 2030 and 2050 emission reduction targets.
While the concept of CCS is not new – it has been discussed for decades as a potential solution to reduce greenhouse gas emissions – its implementation has been slow due to high costs and technical challenges. Over the past few years, both federal and provincial governments have introduced various investment tax credits (ITCs) and incentives to promote CCS.
But are these measures enough to achieve the ambitious targets?
Canada’s oil sands industry, primarily located in Alberta, has long been a significant contributor to the country’s economy. However, it is also one of the largest sources of carbon emissions in the nation. Recognizing the urgent need to combat climate change, Canada has set ambitious targets to reduce its greenhouse gas emissions by 2030 and achieve net-zero emissions by 2050.
 The Quest Carbon Capture and Storage facility near Edmonton. |
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In response to these commitments, the federal government has introduced various policies and incentives to encourage the adoption of CCS technology, which is seen as a crucial tool for reducing the environmental impact of the oil sands sector.
Navius Research, an independent and respected consulting firm, used its advanced gTech-IESD model to simulate three different climate change policy scenarios and assess their impact on CCS adoption in the Canadian oil sands sector. This model is one of the most comprehensive private-sector climate change models in Canada.
Navius introduced three different technology cost scenarios to ensure a thorough analysis: pessimistic, intermediate (reference case), and optimistic. These scenarios help us understand how changes in technology costs affect CCS adoption.
Legislated Policies Scenario (Reference Case):
- 2030: CCS adoption ranges from 1 Mt (pessimistic and intermediate) to 2 Mt (optimistic).
- 2050: CCS adoption ranges from 1 Mt (pessimistic and intermediate) to 3 Mt (optimistic).
- Conclusion: Current policies, including ITCs, are insufficient to meet the 2030 and 2050 targets.
Alternative Rollback Policy Scenario:
- 2030: CCS adoption ranges from 0 Mt (pessimistic), 1 Mt (intermediate) to 3 Mt (optimistic).
- 2050: CCS adoption ranges from 1 Mt (pessimistic and intermediate) to 3 Mt (optimistic).
- Conclusion: Policies under this scenario also fall short in driving the necessary CCS adoption.
ERP Policy (More Stringent) Scenario:
- 2030: CCS adoption ranges from 7 Mt (pessimistic), 9 Mt (intermediate) to 12 Mt (optimistic).
- 2050: CCS adoption ranges from 7 Mt (pessimistic), 8 Mt (intermediate) to 12 Mt (optimistic).
- Conclusion: This scenario shows higher CCS uptake but still does not fully meet the 2030 and 2050 targets.
Our analysis reveals that current and proposed climate policies, including ITCs, are not enough to drive the CCS adoption needed for the Canadian oil sands sector to meet its 2030 and 2050 targets. Therefore, additional federal and provincial policies are necessary to promote CCS adoption and achieve significant emission reductions.
A key strategy should involve governments partnering with the industry to lower CCS technology costs. This could be achieved through enhanced ITCs and mechanisms like contracts for differences (CfDs). These partnerships can help drive innovation and reduce the financial burden on individual companies, making CCS more feasible and widespread.
Lower technology costs lead to higher CCS adoption rates. Thus, it is crucial for governments to implement policies that reduce technology costs and further encourage CCS use, ensuring the achievement of the 2030 and 2050 emission targets for the Canadian oil sands sector.
Without these targeted efforts, Canada risks falling short of its climate commitments, making it imperative to act decisively and collaboratively to drive down emissions and meet the set targets.
Lennie Kaplan spent over two decades in the public service of Alberta, including as a senior manager in the Fiscal and Economic Policy Division of the Ministry of Treasury Board and Finance, where he worked on cross-ministry initiatives evaluating the fiscal and economic impacts of federal and provincial climate change policies.
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