Yahoo Finance Carbon capture 'not growing as quickly as Canada needs' for net-zero 2050: Scotiabank
High costs are preventing carbon capture and storage from scaling up at the pace Canada needs to achieve net-zero by 2050, according to Scotiabank Economics. The warning comes as research, politics, and cancelled projects signal mounting challenges for deployment of the emissions-sucking technology.
Carbon capture projects typically collect CO2 from large, industrial emission sources, and inject this material deep underground. The capturing can occur at the point of emission, like inside a steel plant, or directly from the air at a specific location.
Canada currently has the third-most operational projects globally, behind the U.S. and China. By 2030, the country is forecast to have roughly 30 million tonnes of installed capture capacity in place. According to the Canada Energy Regulator, that will need to grow up to six per cent annually between 2030 and 2050 to remain on track with net-zero scenarios. Direct air capture would also need to grow at roughly 30 per cent year-over-year in the same timeframe. Scotiabank says this technology is set to experience no growth in Canada from 2026 to 2030.
These projections assume all currently planned projects are operational by 2030.
“Even with planned projects and technical potential, carbon management is not growing as quickly as Canada needs to reach net-zero by 2050,” John McNally, a senior advisor on climate policy at Scotiabank Economics, wrote in research published on Tuesday. “A primary reason for slow growth thus far is high costs for capture solutions, which will have a material impact on the future outlook.”
Recent weeks have cast more uncertainty over that outlook.
In May, Edmonton-based Capital Power (CPX.TO) announced plans to pull the plug on a proposed $2.4 billion carbon capture and storage project capable of absorbing up to three million tonnes of emissions from its natural gas units.
Earlier this month, a Deloitte report commissioned by Alberta’s government predicted oil and gas companies will cut production, rather than invest in pricey carbon capture to abate emissions if a cap on the sector were imposed by Ottawa.
Last week, the group of six big oil sands producers behind Canada’s most ambitious carbon capture plan scrubbed content from its website and social media feeds in response to a federal bill aimed at combating so-called “greenwashing.”
The Pathways Alliance includes Canadian Natural Resources (CNQ.TO)(CNQ), Imperial Oil (IMO.TO)(IMO), MEG Energy (MEG.TO), Cenovus Energy (CVE.TO)(CVE), ConocoPhillips Canada, and Suncor Energy (SU.TO) (SU).
They’ve committed to reducing oil sands emissions by 22 million tonnes per year by 2030, mainly through carbon capture. If built, the group’s proposed $16.5 billion carbon capture network in Alberta would be among the largest in the world. Pathways has said it could begin injecting and storing CO2 by late 2026. However, the group has not made a firm investment decision on the project, citing uncertainty from the federal government over carbon prices.
'Huge uncertainty'
Meanwhile, Shell Canada announced a plan on Wednesday to deepen its investment in Canadian carbon capture. The company green-lit a final investment decision for its Polaris project in Alberta designed to capture up to 650,000 tonnes of carbon dioxide per year from its refinery and chemicals complex near Edmonton. The company expects operations to begin near the end of 2028, but did not disclose a dollar figure for the project. Shell’s Quest carbon capture facility in Alberta has been operational since 2015.
The actual dollars and cents behind the technology are tough to gauge, according to a recent Wood Mackenzie analysis of ExxonMobil’s (XOM) carbon capture portfolio.
“Project economics are subject to huge uncertainty with transport and storage fee tolls being some of the biggest variables,” researcher Tom Ellacott wrote in a June 21 report. “Delays, operational problems, [and] political and regulatory risks could also put double-digit returns in jeopardy.”
This is true, he says, despite ExxonMobil’s “clear lead” in the United States, a market he describes as the world’s most advantaged.
Scotiabank’s McNally suggests greater investment go to projects that actually use the carbon they capture, rather than permanently lock it underground. Plastics, concrete, and aviation fuel are among the possible uses.
McNally adds that Canada has the land, clean energy, and storage potential to become a global hub for carbon management. According to Wood Mackenzie, global carbon capture capacity will reach 440 million tonnes per year, and storage capacity will hit 664 million tonnes per year, requiring US$196 billion in total investment.
“Canada can try to reduce costs by itself, but effects from learning curves and economies of scale will be more significant if it partners with other countries,” McNally wrote.
“In particular, deeper partnerships with the U.S. could prove beneficial, given its larger market and global leadership role in advancing carbon management projects.”
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.
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