The carbon capture tax credit in Canada that is proposed in the next federal budget, could fund at least 50% of the carbon capture technology to boost its wide deployment. According to the Business Council of Canada, 50% tax credit is the “the minimum that would be needed” and 75% “would certainly increase the incentive”.
The Trudeau government is expected to announce early in April its plan for how Canada will cut emissions to achieve its net zero targets by 2050. Details on the tax credit will also be included in the federal budget in April.
The tax credit would aim to support carbon capture projects in their development but will not include carbon capture utilization and storage activities designed for enhanced oil recovery (EOR). In that instance, the credit differs from the 45Q tax credit in the US that offers $35 per ton of CO2 sequestered including EOR initiatives.
Using public tax money for funding carbon utilization projects enhancing petroleum production has been criticized by environmental groups and scientists.
Angela Carter, an associate professor at the Department of Political Science at the University of Waterloo is one of 400 scientists and academics who sent a letter to Finance Minister Chrystia Freeland in January 2021 pleading rejection of the tax credit asked by industry players. They claim it would put in place a new “fossil fuel subsidy.”
Carter makes another point saying oil companies don’t need financial incentives from governments to adopt low carbon technologies, especially with the high energy prices which drive higher revenue.
“Once you see carbon capture technology for what it is, it makes sense then why oil and gas firms want it because it serves their interests, which is continuing on that fossil fuel extraction business. Which of course right now is extremely lucrative for companies,” she added.
On the other hand, international and unbiased bodies like the Intergovernmental Panel on Climate Change, have produced reports about climate change recommending carbon capture as an essential tool for the world to reduce emissions.
The implementation of a carbon capture tax credit is one of the pillars in Canada for achieving emissions reductions. The government is committed to reaching net zero emissions by 2050 in an effort to avert the worst impacts of climate change and this goal will require support and engagement from all parts of society and companies willing to continue operations and progress under the changing business climate.