Investment Tax Credit for Carbon Capture, Utilization, and Storage
Join in: Open until September 7, 2021
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. Investment is needed to support research and development that will help to advance the technology, lower its costs, and make sure Canada stays ahead of the curve in the global market for CCUS.
The federal government intends for the new investment tax credit 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. The government is seeking input from all industrial subsectors, recognizing that various subsectors face different challenges in adopting CCUS. The consultation will include key provincial governments, as part of efforts to encourage complementary measures for CCUS projects in their respective jurisdictions.
The CCUS investment tax credit will be available starting in 2022. On the same timeline, the government will also determine how comparable tax support could be provided to producers of green hydrogen.
Key questions for consideration
This consultation seeks input from stakeholders on the design of the investment tax credit for CCUS, including the rate of the incentive, to achieve the government’s goal. Questions for discussion are outlined below. Additional comments or feedback relevant to the scope of this consultation are also welcome.
The government is also requesting 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.
Who is the focus of this consultation?
Through this consultation, we want to hear from all stakeholders, including environmental groups, advocacy groups, and industry (including all industrial subsectors, such as direct air capture, power generation, fertilizer, cement, refining, and oil sands). Interested tax practitioners and members of the public are also welcome to provide input.
In submitting your comments, please include:
- Full name of the official;
- Name of the organization;
- Telephone number, including area code; and
- Reply e-mail address.
The government will also be consulting with key provincial governments where there is the greatest potential for CCUS, encouraging them to create complementary measures for CCUS projects in their jurisdictions.
Participate through email
Due to COVID-19 public health considerations, email submissions are preferred. Send us your comments at CCUS-CUSC@fin.gc.ca with "CCUS Consultation" as the subject line. Should you wish to provide comments by mail, please direct your submission to the attention of the Tax Policy Branch.
Treatment of confidential information
- Input received as part of this consultation is subject to the Access to Information Act and the Privacy Act. We will protect the confidentiality of your information in accordance with these Acts.
- Confidential information contained in project proposals, including financial, commercial, scientific or technical information, that is treated consistently in a confidential manner by the third party, is exempt from disclosure under section 20 of the Access to Information Act.
- Reasonable efforts will be made to maintain the confidentiality of any confidential information provided to the Department. Please advise when providing your comments and project proposals whether you:
- consent to the disclosure of your comments and proposal information in whole or in part;
- request that your identity and any personal identifiers be removed prior to publication; or
- wish that any portions of your comments and proposal information be kept confidential (if so, clearly identify the confidential portions).
We'll be collecting feedback and will consider the input alongside the analysis of departmental officials to help inform decisions on the design and rate of the investment tax credit for CCUS projects.
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