Investment Tax Credit for Carbon Capture, Utilization, and Storage
Current status: Closed
In Budget 2021, the government proposed the introduction of an investment tax credit for capital invested in carbon capture, utilization, and storage (CCUS) projects with the goal of reducing emissions by at least 15 megatonnes of CO2 annually.
The government intends for the new investment tax credit to be available for a broad range of CCUS applications across different industrial subsectors (e.g. concrete, plastics, fuels), including blue hydrogen projects and direct air capture projects, to the extent that captured CO2 is not used in enhanced oil recovery projects.
This engagement process gave stakeholders from all industrial subsectors, provincial and territorial governments, as well as other interested parties or members of the public, an opportunity to provide input on the design of the investment tax credit for CCUS. This included the rate of the incentive, to achieve the government’s goal. The consultation ran from June 7, 2021 to December 2, 2021. Thank you to everyone who participated.
The discussion questions that served as the basis for this consultation are outlined below. The government also requested information about potential CCUS project proposals from varying industrial subsectors that could contribute to the government’s goal of reducing emissions by at least 15 megatonnes of CO2 annually.
- What are the risks associated with investing in CCUS? How is this risk incorporated into the evaluation of prospective projects?
- What types of projects should be eligible for the investment tax credit?
- What are the main factors that contribute to the costs of adopting CCUS? Are there important variations in cost that can be identified by industrial subsector? Are there important differences in the efficiency of different CCUS technologies that impact cost of adoption? Do costs vary significantly by project, by technology type or by subsector of application?
- Given the environmental measures announced by the government, what level of tax support could achieve at least a 15 megatonne annual emission reduction? What barriers to CCUS deployment may remain?
- What are the limits to how rapidly CCUS can be deployed? With the right supports in place, how quickly could your company or sector contribute to the 15 megatonne emission reduction objective?
- In the case of industrial use projects (other than Enhanced Oil Recovery), how does the use of CO2 affect project economics? Are there additional revenue streams that can be generated? What types of usage projects are being considered and how would the permanent sequestration of CO2 be ensured?
- What environmental benefits, if any, can be produced through industrial use projects that may not lead to permanent sequestration?
Technical tax credit design considerations
- What CCUS capital investments should be eligible to receive tax support and why (e.g., CO2 capture and compression equipment, pipeline infrastructure, sequestration infrastructure, other)?
- Should greenfield and retrofit CCUS projects receive the same support on the same range of equipment?
- What financial risks are associated with pipelines to transport CO2? How do they differ from those of capture or sequestration projects?
- How would an investment tax credit help defray costs or share risks between a proponent and the government?
- What is the typical ownership and financing structure of a CCUS project in your industry and what type of players or partners are typically involved?
- Could the design of the tax credit encourage or ensure a certain performance standard? For example, the amount of sequestration per dollar invested?
- What key elements of the design of the tax credit would be most important to advancing a project in your industry?
- If CO2 is not permanently sequestered, or escapes back into the atmosphere, what circumstances could permit a recovery of tax support? Similarly, if a project changes to an ineligible project (e.g., to use Enhanced Oil Recovery) what consequences should be associated with such a change in use?
- Though projects may be required to capture and transport CO2 in accordance with the laws of Canada or a province or territory that regulates that capture in order to be eligible, what additional assurances could be provided that CO2 is permanently sequestered? What ongoing monitoring and validating actions could be undertaken?
CCUS project proposals
- Please identify potential CCUS projects that could help the Government of Canada meet its emission reduction goal of reducing GHG emissions by at least 15 million tonnes. Projects will be used to identify the potential for CCUS deployment in Canada.
- To submit a project proposal, please complete the project proposal template. Instructions are included in the booklet and completion of all relevant fields is requested. Completed templates or questions regarding submissions can be emailed to CCUS-CUSC@fin.gc.ca with "CCUS Project" in the title.
Input received through this consultation will be considered alongside the analysis departmental officials are conducting to help inform decisions on the design and rate of the investment tax credit for CCUS projects. Details on the design and rate of the investment tax credit for CCUS will be announced at a future date. The government intends to make the investment tax credit available starting in 2022.
While this formal consultation has now concluded, Canadians are welcome to share their ideas and comments with the Department of Finance at any time.
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