Researchers urge Canadian government to fend off oil and gas industry pressure for billions more carbon capture dollars, based on new analysis

February 9, 2023, Ottawa – Providing billions more in additional government support to capture emissions from Canada’s oil and gas production is not aligned with credible net-zero pathways and Canada’s near-term emissions reduction targets, according to new International Institute for Sustainable Development (IISD) research.

Limited Emissions Reduction

The new IISD analysis finds that the five carbon capture, utilization, and storage (CCUS) projects currently operating in Canada’s oil and gas sector capture about 2.7 million tonnes of CO₂ equivalent per year—only 1.3% of the sector’s pre-pandemic emissions.

“We need rapid and deep emission reductions in Canada’s oil and gas sector, but CCUS hardly makes a dent in the sector’s emissions, much less national emissions—even though it’s a technology that’s been around since the 1970s,” says Angela Carter, Energy Transition Specialist at IISD and co-author of the policy brief.

Expensive

According to the Intergovernmental Panel on Climate Change, CCUS is one of the most expensive emissions reduction measures due to its high energy needs and the infrastructure required. IISD finds that, to date, the Canadian government has committed at least CAD 9.2 billion in public support for CCUS in the oil and gas sector. This includes a 50% CCUS investment tax credit announced in 2022 projected to cost CAD 8.6 billion over the first eight years—double the financial support for CCUS offered by the U.S. Inflation Reduction Act.

The Pathways Alliance—six companies operating 95% of oilsands production—has asked the federal government to cover CAD 10.9 billion of a CAD 16.5 billion CCUS hub they’ve proposed. To fund this, the group has suggested dipping into the Canada Growth Fund, a CAD 15 billion pot of public money intended to spur private investment in clean technology, as well as other government funds. But Carter says, “If the goal is to cut Canada’s emissions, there are much more effective ways for the government to spend 15 billion dollars than on CCUS.”

Used to Increase Oil Production

IISD also notes that around 70% of the carbon captured in existing Canadian facilities is pumped into aging oil wells to extend their life by decades and extract additional oil.

The researchers say that whether the carbon is used to extract more oil or stored underground, publicly funding this technology contributes to higher emissions by prolonging existing fossil fuel production and supporting the sector’s stated ambition to grow by 30% over the next 10 years.

Conclusion: Carbon Capture, Utilization, and Storage Is not a Solution for Canada’s Oil and Gas Emissions

As Canada seeks to substantially lower its emissions by 2030 and reach net-zero by mid-century, its oil and gas sector—the country’s largest and fastest-growing source of emissions—faces the serious challenge of decarbonizing production.

“CCUS in the oil and gas sector is expensive, slow to build, and unproven at scale,” says Laura Cameron, co-author of the report and a policy analyst at IISD. “Applying CCUS to oil and gas production does not align with the timescale or ambition necessary to meet Canada’s climate commitments. The best thing the government can do is stop subsidizing CCUS, invest in industries with a better long-term outlook, and set a stringent oil and gas emissions cap.”