Capturing a Carbon OpportunityCarbon Management Working Group Paper - August 2021
The climate and economic challenge Canada faces is clear – and daunting. Meeting the stated federal objectives of a 40 to 45 percent reduction from 2005 GHG emissions levels by 2030 – on the way to a net zero future by 2050 – means removing at least 300 million tonnes of carbon from the economy in less than nine years. Ideally, this needs to be done in a way that not only maintains economic growth, but also generates additional growth and prosperity for Canadians. That’s no easy feat.
In this paper, we argue that an essential part of Canada’s climate and economic plan should be a national carbon management strategy that captures CO2 emissions from point sources and also removes carbon from the ambient air. If Canada plays its cards right, we could be home to a booming carbon capture and removal industry in the coming decades, one that both contributes to decarbonizing our economy and generating significant new opportunities.
Carbon management is any activity that captures carbon, stores carbon or connects the capture and storage of carbon. It includes a diverse range of engineered activities. They include carbon capture, utilization and sequestration (CCUS) from specific industrial sources, carbon dioxide removal through direct air capture or mineralization and the sequestration of carbon in building materials such as cement. Another form involves nature-based solutions, where the natural environment is used to reduce CO2 in the ambient air. This paper, a product of the Energy Future Forum’s Carbon Management Working Group, focuses its attention on engineered carbon management, as opposed to nature-based solutions.
Carbon management is only one part of a comprehensive decarbonization strategy (it is equally important to aggressively pursue other forms of mitigation), but it is a critical part of the climate toolkit. In its recent special report setting out a pathway to net zero by 2050, the International Energy Agency identifies carbon capture as one of five key pillars to decarbonization. The UN’s Intergovernmental Panel on Climate Change agrees, as does the National Academies of Science. Both state that CO2 removal is essential to all pathways that would limit global temperature increases to 1.5 degrees Celsius.
Carbon management is critical for at least three related reasons:
- First, carbon capture is key to reducing emissions from point sources, especially sources like cement production where few alternatives exist.
- Second, negative emissions through technologies like direct air capture will be important to offset non-point sources like agricultural emissions, which are difficult to tackle directly.
- Third, negative emissions will be key even after the world reaches net zero to help reduce atmospheric levels of carbon dioxide.
Canada has all the ingredients to establish its position as a major player in the carbon management space, but we cannot rest on our laurels. Among Canada’s assets are a world-leading collection of new and established companies with engineering expertise and capabilities, along with established regulations and a series of natural endowments. Look at most components of the future carbon management industry and you will see Canadian companies in leading global positions. Although Canada may have had an early start on CCUS, and shows great potential for future growth, bold policy moves in the United States and Europe mean our leadership position is at risk if more action does not come soon.
If carbon management is to meet its potential, it must become a climate solution that is also a business opportunity with a clear revenue stream. Today in Canada, carbon capture is too often seen only as a cost and not as an investment opportunity. In the pages that follow, we methodically describe the components of an emerging industry where costs are declining, revenue potential is emerging, and many players are entering a high-potential market.
As with most early-stage industries, public policy support will be critical, especially to generate early revenue streams that can accelerate scale up. Federal and provincial governments have taken encouraging steps in the right direction. Carbon pricing, for example, can act as a powerful incentive for businesses to invest in carbon management. The use of direct government financial support to help cover the upfront capital investment of carbon capture projects, which has been particularly evident in Europe and in some early Canadian projects, may also prove important as the Government of Canada advances on its proposed Investment Tax Credit for CCUS.
In the coming weeks, the Energy Future Forum’s Carbon Management Working Group will turn its attention to how Canada can adopt the right package of policies to enable the carbon management sector to reach its potential in helping Canada drive emissions reductions and economic growth.