OIES Podcast – CCS regulatory frameworks in Canada
David Ledesma discusses with Nnaziri Ihejirika the development of Carbon Capture, Usage and Storage (CCUS) in Canada and government regulation. To support the broad adoption of CCUS in Canada, the government has introduced two fiscal and regulatory levers – carbon pricing and an investment tax credit (ITC). Federal output-based pricing system (OBPS) for carbon, introduced in 2018, will see the cost of CO2 escalate from $65/tCO2e in 2023 to $170/tCO2e by 2030. On the other end of the carrot-stick dynamic, the ITC provides a rebate, approximately 20–30 per cent, of project costs associated with CCUS implementation. Supporting this, the Pathways Alliance – consisting of the country’s largest oilsands producers – seeks to share common costs like transportation and storage, reducing the risk for individual facilities and driving down the levelized cost of CCUS. While the ITC may not be as lucrative for investors as the 45Q tax credit in the United States, Canada’s regulatory approach offers long-term value to heavy emitters when avoided costs of carbon are considered. To support the carbon price signal, tightening rates and the expiry term for offsets and credits may need to be adjusted as required to balance supply and demand on a go-forward basis.