The Parliamentary Budget Office projects that the Liberals carbon capture tax credit could cost as much as $1 billion more than what the Trudeau government had initially estimated.
The independent watchdog said that the carbon capture, utilization and storage CCUS investment tax will likely cost $5.7 billion, despite Finance Canada claiming it would only cost $4.6 billion over the 2022-28 timeframe in several of its federal budget announcements.
The concept behind carbon capture is to curtail the effects of climate change by the oil and gas sector.
This is because the technology hasn’t proven to be effective when scaled up to that size and it comes with a heavy price tag.
Critics of the CCUS tax like Environmental Defence, an organization that works with the government on policy, say that the uncapped credit may cost even more than the recent estimates from the Parliamentary Budget Office.
“Carbon capture and storage is a dangerous distraction being promoted by the oil and gas industry to prolong business as usual,” Julia Levin, Environmental Defence’s national climate associate director told CBC News.
“These tax credits are being designed without a ceiling. That means the final cost for Canadian taxpayers could end up being much, much more significant.”
However, the Trudeau government is calling it a “historic investment” into a “clean economy” for the country.
“Carbon capture, utilization and storage is essential to reducing Canada’s emissions,” said Chrystia Freeland’s senior communications adviser and press secretary, Katherine Cuplinskas.
“We know that Canada cannot afford to miss out on this economic opportunity, and we want to incentivize businesses to reduce their emissions as soon as possible.”
The program offers investors a 37.5% to 60% tax credit on their investments in equipment designed for carbon transportation, storage, and direct air capture.
Investors in Alberta, Saskatchewan and British Columbia are all eligible for the credit, however, it is not yet active.
The credit will only take effect if and when the necessary legislation to enable it is passed in Parliament, at which point it will be made retroactive to 2022.
According to Natural Resources Canada, the country currently has eight commercial carbon capture facilities, which combined only capture about 0.5% of the country’s total emissions.
“Reducing emissions from Canada’s oil and gas production is a priority, yet it presents unique challenges,” reads a report from the International Institute for Sustainable Development.
“Industry representatives consider carbon capture and storage (CCS) to be the sector’s primary emission reduction solution, but there is a lack of evidence on the efficacy of this approach and its consistency with Canada’s net-zero commitment.”
