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Canada’s CCS evolution could guide UK model thinking

The UK set out its vision for the evolution of carbon capture and storage (CCS) models in late 2023. Canada has already made progress down the track and is in the process of shifting away from its initial model of grant funding.

  • Political certainty is crucial to giving companies the required support for major investments.
  • A carbon price helps, but a long-term contract is superior – at least for the time being.

Canada is a leading light of the CCS world. The country started up the Boundary Dam CCS project in 2014, in Saskatchewan, and Shell Quest in 2015.

Government plans have been at the heart of CCS growth in Canada, with a target of reaching 15 million tonnes per year of capture by 2030. Thus far, the industry in Canada has stored around 40mn tonnes.

By comparison, the UK is aiming for 20-30mn tpy by 2030 and does not yet have any commercial projects in operation.

Support transition

“Success comes from our vision of over two decades of operations,” Beth Hardy Valiaho, vice president of policy at Canada’s International CCS Knowledge Centre said.

Those two projects, and the Alberta Carbon Trunk Line (ACTL) benefited from government funding, she explained.

“Initial support from government really drove those projects. What we’re seeing now is a transition … to try and incentivise many projects, although there’s still going to be some grant-type funding from smaller pots of money.” The first slew of projects cashed in on “hundreds of millions” of dollars of government support.

Beth Hardy Valiaho talks CCS at COP28
Beth Hardy Valiaho talks CCS at COP28. Photo from the International CCS Knowledge Centre

Canada’s federal budget has begun providing an investment tax credit, which Valiaho’s agency was involved in designing. This comes in addition to provincial support. The Alberta Carbon Capture Incentive Program (ACCIP) started up, in November 2023, to drive projects forward.

Companies are incentivised to begin work as soon as possible. Valiaho said that combining federal and Alberta support could see 62% of capital returned to companies – if they accomplish their plans before the end of 2030.

“There’s a lot of carrots and a lot of sticks in Canada’s regulatory regime. This is probably why it’s one of the most successful locations for CCS investment – but that doesn’t mean it’s easy,” she continued.

CCfD for certainty

If projects come after the 2030 cut-off, that incentive halves. “That’s driving a lot of work in the near term, in addition to the sticks of things like the Clean Electricity Regulations.” These are part of Canada’s plans to reach a zero-carbon emission grid by 2035. The UK is targeting the same year.

Setting the target of 2030 is no mistake. Canada’s federal government has proposed that by that point, the carbon price will be C$170 per tonne. However, Valiaho noted, it has not legislated this.

That question of political certainty provides some scope for CCS as an industry, with the centre official noting cross-party support. “There’s absolutely beautiful sequestration opportunities, with almost 400 billion tonnes of opportunity in Alberta and Saskatchewan alone.”

However, Conservative Party Leader Pierre Poilievre has repeatedly set out his criticism of the carbon tax, repeatedly setting out his aim to “axe the tax”.

Valiaho said that companies were “looking for certainty and clarity on that for operating costs. Will that [price increase happen] if there’s a change in federal government?”

As part of its efforts to beef up storage, the federal government launched a carbon contracts for difference (CCfD) offering in its 2023 budget. Of the total C$15 billion in the Canada Growth Fund, it allocates C$7bn for these CCfDs.

The CfD in the UK has been a major success story. In Canada, progress is moving slowly with only one CfD signed. This provides a 15-year agreement pricing carbon at C$86.5 per tonne.

Valiaho said that discussions on additional CCfDs have proved challenging, which has had an impact on project planning.  

Hubs and clusters

Alberta has an active plan for CCS, picking 25 projects with potential capacity to store up to 60mn tpy. The government has licensed the pore space, triggering alliances between companies capturing carbon and those working on storing it.

“It’s an open competitive bidding process. As part of that, you have to identify different sources of emission to link up with,” the official said. She described it as the inverse of the cluster model, used in the UK, where major groups of emitters were identified and then plans set out to capture their carbon.

CCS pipe plans at Pathways Alliance
Credit: Pathways Alliance

One of the major sources of emissions in Alberta – and Canada – are the oil sands. A major project, the Pathways Alliance, teams up the six largest oil sands producers and with the aim of storing liquid CO2 near the Cold Lake region. The plan suggests capturing 22mn tpy.

Valiaho noted that all projects faced challenges. The Canada Growth Fund, which issues the CCfDs has “noted the Pathways project is quite large and [the fund] only has so much in the way of funds it can distribute. That’s one instance where there’s more work to be done.” One solution would be to boost the amount of funds available in the CCfD pot.

However, oil sands may not be best suited as first candidates for CCS. “There are different costs for capture, it depends on your access to the CO2 and the concentration in the waste stream. Something like a fertiliser plant, or a refinery, which are putting CO2 straight into the air are what we would consider low-hanging fruit.”

Market transition

Canada has made progress in its CCS ambitions by securing political and community support for projects, by demonstrating their safety. While the political parties may back CCS, the question of the carbon price looms large.

As a lesson to the UK, certainty over the future remains critical. The UK also has substantial storage capacity but its targets are at risk of being overly ambitious. London has set out a plan for a regulated asset base model in CCS, which will run to 2035. After that, the UK will shift to a “self-sustaining” model.

As Canada carries out its own transition, to CCfDs, mapping this evolution – and judging what does and does not work – should provide a valuable guide.

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