CEO Interview: IRA Put Canada Behind CCS Pace, Business Environment Needs Boost
Questions around the business environment connected to carbon capture and storage in Canada must be addressed, says the head of an organization that shares learnings about this technology.
James Millar, an industry veteran who has been president and chief executive officer of the International CCS Knowledge Centre for about half a year, said introduction of U.S. president Joe Biden’s Inflation Reduction Act (IRA) was a “seminal moment.”
“Canada went from a leadership role to a lagging role,” he told the DOB. “We were sprinting ahead of the pack and now we are following.
“We really need to do some catch-up there.”
The knowledge centre, which took root in 2016, works with government, offering insight and advice on policy and regulations, among other functions. This includes input into the CCS Investment Tax Credit, which was part of the recent Canadian federal budget.
“We are believer in: we can share knowledge — that’s one thing — but we also need to be an active voice at the table and that means putting our opinion forward on what we see as the best policy environment, regulatory environment, to get these projects done,” Millar said. “We are agnostic. Our focus is on sharing knowledge globally to build a greener future and that’s our purpose. But our mission is to ensure that there’s the right environment — primarily a business environment — in the construct of policy to get these projects done.”
That “right environment,” he added, right now, is not there. He drew a line to the 45Q tax credit, which was adjusted through the IRA. Changes included boosting the amount per tonne from CO2 captured and stored to $85 per tonne from $50 per tonne.
“When you do that straight comparison … I think it comes down to: what is the price on carbon?” Millar said. “What is the price you can count on for a number of years? And it’s one thing to say the price on carbon in Canada is going to be $170 by 2030, that is assuming that there’s a Liberal government. If there is a Conservative government, that could change on a dime.”
That uncertainty is a problem. But there are potential solutions, noted Millar.
“The Government of Canada did talk about carbon contracts for difference in the Emissions Reductions Plan that they introduced in the spring but nothing has been done there,” he added.
Millar cited an example of a hypothetical business case proposed to company decision-makers to illustrate the risk in taking that next step.
“You can go to your board and go to your senior management and say, ‘Hey, I’ve got a billion-dollar project, basically, it is not going to generate an internal rate of return, it is going to be a drag on cash flow, and it could increase operating costs,” he said. “Well, if you can’t present me with a business case where I might make some of that money back through a defined price on carbon, it is a catch 22 because you know you need to do something, and you are committed to it, but I think it is more a timing issue of: when do you actually make the decision to make a final investment decision for these large-scale projects?
“That is what everyone is looking for,” Millar continued. “Who is going to be first to step off the curb?”
The Paris Agreement international treaty on climate change came into force in November 2016. Millar reflected on progress since that point.
“If you really look at the landscape, what have we truly done from an emissions standpoint — tackling a 1.5 degree Celsius temperature increase?” he said. “Yes, emissions decreased during COVID-19, but that’s because everyone was home and consumption wasn’t there.
“We seem to talk a lot, but we need to get something done. The best way to do that is through carbon capture and storage.
“On a large-scale level, if you are talking a million tonnes and you can get up to 94, 96 per cent capture of that flue gas, then you have to do it at scale,” added Millar. “If we don’t do it at scale, we are not going to tackle the problem.”
Leveraging Boundary Dam know-how
The Knowledge Centre shares learnings acquired through the Boundary Dam 3 CCS Facility in Saskatchewan with a variety of interested parties, including those located outside of North America. Through this, the aim is to help companies lower risk and cost, and improve performance.
For companies looking to step into the CCS space, the conversation needs to start in the right place, said Millar.
“Sometimes, we’ll get asked what technology should we use,” Millar said. “We’ll say: ‘That’s probably question 9. Let’s go back eight questions to validate your thesis whether you need it.’
“We get calls from Canada or with the U.S., now with the IRA in place — even before but more so now — and globally, and we’ll get asked: What is CCS? Because companies globally are recognizing that they need to look at carbon capture if they want to do something on large scale and really control their emissions.
“In countries like Canada, where if they are going to have a carbon price of $170 a tonne, you are going to have to do something about your emissions or you may be out of business,” he added. “Companies are recognizing the need to do something, they have heard of CCS but (sometimes) that is where the knowledge ends.”
The Knowledge Centre’s head office is in Regina, but Millar said the group is looking into setting up office space in Calgary, as well.
“We need that,” he added. “Our Calgary contingent is growing.”
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