Report finds carbon capture’s ‘stubbornly high’ prices are likely here to stay

Canada’s oil and gas industry says costly technology it plans to use to reduce its climate footprint requires more investments from the federal government. If governments lend a hand now, the industry maintains the technology will become more affordable over time as more projects proceed, but a new analysis casts doubt on that claim.

“Carbon capture and storage is expensive, and the costs are not likely to come down in the timeframe needed to meet our climate targets,” said Laura Cameron, one of the report’s three authors and a policy adviser for the International Institute for Sustainable Development. The think tank’s new research draws on available data from about 30 currently operating commercial carbon capture facilities across the world, including a handful of projects in Canada.

Carbon capture and storage (CCS) technology is used to capture planet-warming CO2 emissions released during industrial processes or power generation at fossil-fuelled power plants. Cost varies greatly depending on the process type, specific technology and more, with capture costs projected to range from $27 to 150 per tonne of CO2. The actual cost of CCS projects in Canada indicates costs are in the upper range of what is predicted, according to the analysis.

“We see a couple of factors that are influencing the stubbornly high prices for CCS, the first being that the technology is really complex,” said Cameron. Secondly, she said, the technology “needs to be developed specifically for each application,” so even if there's an effective CCS project in the agriculture sector, for instance, it doesn't necessarily mean it's going to be applicable for the oil and gas sector.

Because of these factors, the institute’s analysis deems carbon capture technology “unlikely to capture the benefits of mass manufacturing” the way solar technology has, for example.

The institute’s findings run counter to the claims of the Pathways Alliance, a group of Canada’s six largest oilsands companies that aims to cut 22 million tonnes of carbon from upstream operations by 2030. The Pathways Alliance says about half the emissions cuts will come from its proposed CCS megaproject, which would collect carbon captured at more than a dozen oilsands facilities and transport it up to 400 kilometres through a pipeline to be permanently stored underground. The group announced it will invest $16.5 billion in the project by 2030 and is looking for investments from the federal government in addition to a forthcoming CCUS investment tax credit.

The Pathways Alliance did not respond to requests for comment by publication time.

Industry wants more generous government subsidies for the technology to keep Canada competitive with incentives offered through the U.S. Inflation Reduction Act. The Canadian Climate Institute and Pembina Institute evaluated the carbon capture supports being offered by Canada and the U.S., and concluded Canada is already on par with the U.S.

“Once you get that first wave of infrastructure in place, prices will come down, the market will take over and government won’t always have to be a player,” said Pathways Alliance president Kendall Dilling, as reported by Fort McMurray Today on July 5.

It is true investments often drive innovation and lower costs for many technologies, the institute said. However, “whether it applies to CCS is questionable,” given the persistently high cost and inherent complexity of CCS technology.

The analysis points out some commercial CCS technology has been around for decades, citing methods created to inject captured CO2 into depleted oil wells to stimulate more production.

“Ultimately, CCS in the oil and gas sector prolongs our reliance on fossil fuels and doesn't help us make the transition to renewable energy,” said Cameron. “Obviously, we do need to reduce emissions in that sector, and the oil and gas industry should be taking responsibility for that, but … in the longer term picture, it's not really taking us in the right direction.”

CCS’s potential use in other industries where it’s harder to reduce emissions — such as steel- and cement-making — should be evaluated separately from oil and gas applications, according to the analysis.

“The argument that if we build it for oil and gas, it'll be applicable for these other industries, I think really needs to be scrutinized more closely,” she said. “We're not seeing the evidence that that holds up.”

Operating CCS technology also uses a lot more energy, which, if generated by fossil fuels, creates additional emissions. Instead of counting the total amount of CO2 captured, the analysis argues a more accurate measure is how many CO2 emissions are avoided, taking into account the impact of using additional energy to run the CCS equipment.

In the energy sector, there are alternatives to oil and gas, including solar, wind, geothermal, hydroelectric, nuclear and battery storage, to name a few, whereas “we don't yet have feasible alternatives to materials like steel and cement that are going to be needed in decades to come,” said Cameron.

Alberta is subsidizing the development of carbon capture, utilization and storage to the tune of $408 million from 2021 to 2024. The province recently paused all approvals of renewable energy projects until March 2024.

Natasha Bulowski / Local Journalism Initiative / Canada’s National Observer