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The single biggest climate item in Budget 2022 is the controversial carbon capture investment tax credit, followed by funding for electric vehicles and charging infrastructure.
The carbon capture utilization and storage (CCUS) investment tax credit is expected to cost $2.6 billion over five years and will be available for projects that permanently store captured carbon dioxide (CO2) in concrete or inject it into rock formations deep underground. The budget says enhanced oil recovery — using captured carbon to extract more oil — is not an eligible use of captured CO2.
The move is a “political compromise,” said David Macdonald, a senior economist with the Canadian Centre for Policy Alternatives (CCPA).
“At the same time as (the federal government is) trying to move towards a zero-carbon future, they're trying to go full steam ahead on oil and gas development,” said Macdonald. “You can't do both… You can make political compromises, but you can't make compromises with the climate.”
Up until 2030, the investment credit rates are set at 60 per cent for direct air capture technology, which sucks carbon dioxide out of the air, 50 per cent for other CCUS projects, including the capture of emissions from oil and gas production and hard-to-decarbonize industries like steel, and 37.5 per cent for storage, transportation and use. To encourage industry to act immediately, these rates will fall by 50 per cent in 2031.
The tax credit was created to reduce emissions by 15 megatonnes by 2030 based on financial modelling from CCUS projects. It will cost just under $1.5 billion in its fifth year and then an estimated $1.5 billion per year until 2030.
Over 30,000 Canadians and more than 400 academics oppose the tax credit and have sent letters calling on the federal government and Finance Minister Chrystia Freeland to scrap it.
Macdonald says the oil and gas sector needs to be wound down in the long term, not made more energy-efficient, as the federal government plans.
“I'm not sure how much the sector needs a tax break,” said MacDonald. “The sector made $22 billion in 2021.”
The federal government has levied a surtax against banks making record pandemic profits, but oil and gas companies escaped unscathed, despite raking in big profits from high oil prices, he said.
“This is a time for companies to reinvest, not with public money, but with their own money, to get off of oil and gas,” said Macdonald. “And that's not what this will do, unfortunately.”
Ahead of the budget’s release, a senior government official speaking on background about the budget said Ottawa is “looking forward to working with relevant provinces, certainly Alberta, as they step up to strengthen these incentives, because it's good for them.”
The federal government “expect(s) industry to do their share,” the official added.
“It is the right time to do this, and they have the profits to do it now, and we expect them to do it.”
The budget notes the expectation that “relevant provinces” — like Alberta — will “further strengthen financial incentives to accelerate the adoption of CCUS technologies.” But Macdonald notes provinces are not compelled to create any financial incentives.
Instead of using a tax credit to get companies to develop this technology, the government could simply regulate it and achieve the same goal without using public funds, Macdonald said.
The government’s new climate plan calls on the oil and gas sector to slash its greenhouse gas emissions by 31 per cent relative to 2005 levels by the end of the decade. CCUS is expected to contribute 13 per cent of those reductions.
Trying to meet these targets using an investment tax credit relies on doing “complex calculations in the hopes (it) will be sufficient,” whereas a regulatory approach is more predictable because it is set in advance and companies are forced to comply, said Macdonald.
The Intergovernmental Panel on Climate Change’s (IPCC) recent report found CCUS is one of the least effective and most expensive options available to reduce emissions through 2030.
Despite federal and provincial governments providing an estimated $5.8 billion for CCUS projects since 2000, they only capture 0.05 per cent of Canada’s greenhouse gas emissions, or around 3.55 million tonnes of carbon per year, according to a new report by Environmental Defence.
The budget includes very little spending to accelerate or improve the energy efficiency of buildings and homes, despite this being one of the most cost-effective ways to reduce greenhouse gas emissions, said Macdonald.
“Some of the programs that are the most efficient, we're skipping, and the programs that are the least efficient, we're putting the most money in, which is the opposite of what we should be doing now,” he said.
Another big-ticket item that is less cost-effective than energy efficiency measures but better than the CCUS tax credit is the federal commitment to expand electric vehicle incentives and charging infrastructure, he added.
The budget proposes $1.7 billion over five years to extend incentives for the zero-emissions vehicle program, $547.5 million over four years for Transport Canada to launch a new purchase incentive program for medium- and heavy-duty zero-emissions vehicles, and investments in charging infrastructure, $500 million of which comes from the Canada Infrastructure Bank for large-scale urban and commercial charging.
However, “(there) doesn't appear to be anything new on just transition” away from fossil fuels, said Macdonald.
The budget reiterates a previous commitment for a $2-billion “Futures Fund” for Alberta, Saskatchewan and Newfoundland and Labrador to “support local and regional economic diversification” and develop clean energy opportunities in the coming decade, but no update on the allocation of those funds was provided.
The budget also proposes broadening the role of the Canada Infrastructure Bank to invest in private sector-led infrastructure projects — such as small modular reactors, clean fuel production, hydrogen production, transportation and distribution and CCUS — to help transition to a low-carbon economy.
Macdonald says this is “potentially an actual positive use for the Canada Infrastructure Bank, which really hasn't managed to get much of its funding out the door and (has) been very limited in terms of what it's been able to do.”
A proposed $2.2 billion over seven years would also expand the Low Carbon Economy Fund, which helps provinces and territories reduce emissions and create jobs for communities by supporting the installation of technologies like wind power, solar power and electric heating in buildings.
Natasha Bulowski / Local Journalism Initiative / Canada’s National Observer
Comments
This is undeniably disappointing and entirely predictable from a government that has cravenly and dismally tried to have its oily cake and eat it too. CCUS is just another indirect subsidy to the extraction industry, and its a reprehensibly dangerous move to bank on it when study after study shows that it is not only inefficient and basically unscalable to the extent that we require, but it also is basically an admission of complete unwillingness to engage in the only real solution that we need: a Just Transition. To hell with them.
That said, this is just a wake-up call for those of us with the ability to make changes in our own little corners of the world to do so. If the ignorant in power won't leverage it for our good, fine. I for one will be trying to make it so that everyone who is currently 15-17 realizes how cavalier their government has been about the world that they will inherit and knows to show up to the voting booth in 2025.
Agreed. The problem with simply showing up at the voting booth though is to vote for which party? Our role as elders is to decouple voting from personal expression AND any cult of personality, framing it instead as vital, utilitarian and/or strategic, informed by the clear danger represented by climate- denying conservatives gaining power. So a new and urgent variation on learning their "ABC's."
Uniting the left has at least begun tentatively, so provides some hope. We're in a full-on culture war here. I see both the Liberals and NDP as at least being open to the upcoming, growing outrage from young people in particular, and capable of adjusting course and/or adapting. Conservatives couldn't care less about any of that so are DOA.
Conservatives cannot be blamed for the Liberals' failure on climate.
That failure lands squarely on the shoulders of Trudeau & Co.
The "clear danger" on climate is not confined to denialist Conservatives. The petro-progressive Liberals/NDP — denialists with a smile — deliver on Corporate Canada's agenda more effectively than the Conservatives ever could.
Unlike the Conservatives, the Liberals lead progressives astray, promoting the falsehood that we can expand fossil fuel production and still reduce emissions.
A vote for federal Conservatives or Liberals is a vote for failure.
A vote for Trudeau's Liberals rewards them for past failure — and guarantees future failure.
Hopes that the Liberals will change course are unfounded. Why would they change when progressives continue to vote for them?
I see this a bit differently. There is the reality that the economy of some of our provinces is heavily dependent on fossil fuel extraction and that the demand for such energy will last many more years, whether we wish it or not. We must all change, but it is very difficult to change quickly. I have been trying to buy an electric car for more than 2 years and the ones that I would be prepared to buy are simply not available.
The Federal is simply realistic: it cannot afford to kill the hen that lays the golden eggs, at least not at the moment..
Nothing "realistic" about ignoring IPCC reports and the best available science.
As U.N. Secretary-General Guterres put it, "Investing in new fossil fuels infrastructure is moral and economic madness."
Ask the residents of Lytton about golden eggs. Or farmers deluged in Abbotsford. Or Prairie farmers staring at parched fields. Or loggers when the mill is shut down due to mtn pine beetle devastatation. Or fishermen coming home empty. Or people in the Arctic facing melting ice roads, shifting buildings, and vanishing wildlife. Or ski resorts closing mid-season. Or coastal communities losing ground to the sea.
The only reason the O&G industry is viable is because it largely externalizes its health, environmental, and climate costs.
Wealth that degrades our life-support systems is illusory. The costs of climate change and fossil-fuel pollution are prohibitive. Hence, the need to shift away from fossil fuels ASAP.
How much are fossil fuel profits costing us? AB's oil & gas industry has barely started to fund its clean-up liabilities: upwards of $260 billion. Only a year or two back the industry was on life support.
Prof. Naomi Oreskes: "The costs of climate change are so great that they now threaten the very prosperity that economic growth is intended to generate. So we can say we're interested in fossil fuel development, gas pipelines, or fracking, or tarsands… because they're going to generate economic growth. But the reality is that the cost of those things will be many times greater than the economic value that they produce."
If all the wealth of Canada's fossil fuel industry was taken out of the economy, you'd still have 92% of the economy left to deal with climate change and fill on the void with cleaner endeavours.
Yes, we can afford to change. The first step would be to reject the rhetoric of the fossil lobby from the successive governments it has captured.
Details from NRCan:
In 2019 Canada's energy sector directly contributed 7.2% ($154 billion) to GDP.
Petroleum accounted for 5.3% ($114 billion). Crude oil a fraction of that. AB oilsands a fraction of that.
*
O&G numbers were even lower in 2020.
Subtract (astronomical) externalized environmental, climate change, and health costs. Subtract lost jobs in other industries, towns wiped off the map, billions of sea animals dead in a week. Subtract subsidies. The fossil fuel industry is killing us.
AB's oil & gas industry has barely started to fund its clean-up liabilities: north of $260 billion. How much of that bill will our "strategic" industry foist upon taxpayers?
From Simon Clark, a young scientist on the latest IPCC report:
"You cannot carbon capture your way out of carbon dependency."
"At the current pace the world is heading for 3.2 degrees warming. IF COP 26 goals were successful, 1.8 degrees."
"If government leaders claim climate change is a top priority and they're taking all the action needed to avoid disaster, they're lying."
https://www.youtube.com/watch?v=UOd-Jgly9Us
Within a 6-month period last year we in southern BC experienced Sahara temperatures that were just 0.4 degrees short of an even 50, a town that burned down in two hours, yet another year of record forest fires, another summer with weeks of continuous smoke, followed by record rainfall and flooding, and that's with just 1.2 degrees warming. It's unfathomable what 3.2 degrees would be like, but the children of today's newborns are going to find out.
By inverse comparison, the last ice age featuring three km of ice over the entire continent was just 5 degrees different than today, but in the other direction.