Canada’s 2022 Federal Budget strongly supports CCUS via an investment tax credit. The tax credit rate is 60 per cent for direct air capture projects, 50 per cent for all other carbon capture projects, and 37.5 per cent for transportation, storage, and use.
The US enacted the historic Inflation Reduction Act (US) of 2022, which includes enhancements to Internal Revenue Service section 45Q and US$369 billion in funding for climate and energy.
Infrastructure Investment and Jobs Act includes over US$12 billion to be spent on CCS over the next five years.
Brazil continues progressing toward its goal of injecting 40 million tonnes of CO2 by 2025.
In November 2021, the Province of Saskatchewan announced the eligibility of pipelines transporting CO2, whether for CCUS or enhanced oil recovery (EOR), for the provincial oil infrastructure investment program (OIIP) (1). The province of Alberta also announced in the fourth quarter of 2021 the Alberta Hydrogen Roadmap, outlining Alberta’s intention to become an international leader in clean hydrogen. CCUS is key in the roadmap (2). In the first quarter of 2022, the government of Canada released its 2030 Emissions Reduction Plan (3). Canada’s goal is to position its industries to be green and competitive, which includes developing a CCUS strategy to incentivise the development and adoption of this technology. The plan provides a roadmap for how Canada will meet its enhanced Paris Agreement nationally determined contributions (NDC) target to reduce greenhouse gas emissions to 40–45 per cent below 2005 levels by 2030 across the Canadian economy, and puts the country on a path to achieving net-zero emissions by 2050.
Figure 10: Carbon Pricing Across Canada
Following the release of the plan, Canada issued its 2022 federal budget, which strongly supports CCUS via an investment tax credit (4). The tax credit rate is 60 per cent for direct air capture projects, 50 per cent for all other carbon capture projects, and 37.5 per cent for transportation, storage, and use from 2022 through 2030. After that, from 2031 to 2040, the tax rates drop to 30 per cent, 25 per cent, and 18.75 per cent, respectively. The tax credit can be claimed by businesses that, beginning 1 January 2022, incur eligible expenses related to purchasing and installing equipment used in a suitable new project that captures CO2 emissions. Companies can claim the tax credit only if they agree to abide by a validation and verification process, prove that the project meets CO2 storage requirements, and produce a climate-related financial disclosure report.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
In December 2021, Canada’s Prime Minister, Justin Trudeau, directed Cabinet ministers to move toward mandatory climate-related financial disclosures as part of Canada’s strategy to transition to net-zero by 2050 (5). The 2022 Budget included this mandatory reporting requirement across a broad spectrum of the Canadian economy, based on the international Task Force on Climate-related Financial Disclosures (TCFD) framework (6).
OTHER PROVINCES – ONTARIO
Hard-to-decarbonise sectors of Ontario’s economy, such as steelmaking and cement, do not have obvious paths to a carbon-neutral future. In these sectors, CCS likely provides the most viable decarbonisation option. Therefore, the government is evaluating CO2 storage as a decarbonisation option. The likely storage area will be in the western part of the province in saline aquifers. But existing laws prohibit storage, so the province must revise the governing statutes by narrowing the prohibition on the injection of CO2 into a well regulated under the Oil, Gas, and Salt Resources Act (Canada), and by enabling authorisation to store carbon on Crown land under the Mining Act (Canada) (7).
A large percentage of CCUS-specific action and strategy lies in the provinces of Alberta and Saskatchewan. Alberta is developing Canada’s first carbon storage hubs to help cut climate-warming emissions by permanently sequestering CO2 underground. In March 2022, the province selected six proposals to move forward with developing Canada’s first carbon storage hubs servicing Alberta’s industrial heartland region near Edmonton. The selected proposals came from: Enbridge Inc.; Shell Canada Limited; ATCO Energy Solutions Ltd; Suncor Energy Inc.; Wolf Carbons Solutions; Bison Low Carbon Ventures; Enhance Energy; and a joint-venture project from TC Energy and Pembina Pipeline Corp. (8,9). Alberta’s abundance of geological formations for CO2 storage makes it an ideal location to develop a series of CCUS hubs (10).
Entropy Inc. announced that it has begun commissioning its first post-combustion CCS project at the Glacier Gas Plant in Alberta. Permanent geologic carbon injection will likely start during the summer of 2022. The project is considered to be the world’s first commercial project to capture and store carbon dioxide from the combustion of natural gas (11).
The government of Saskatchewan’s Ministry of Energy and Resources and others will support a study, developed by the Transition Accelerator and the Saskatchewan Research Council, to provide investors with an analysis of commercial-scale hydrogen opportunities and synergies with CCUS infrastructure in Saskatchewan.
The national climate goals of 100 per cent clean electricity by 2035 and achieving a net-zero emissions economy by 2050 involve significant reliance on CCS. Through enacted legislation in late 2021 and during 2022, the US committed to record investments into carbon capture technologies, while also addressing environmental justice concerns.
In November 2021, the US enacted the Infrastructure Investment and Jobs Act (IIJA) (US), which included over US$12 billion to be spent on CCS over the next five years. The legislation includes funding for CCUS research, development, and demonstration, CO2 transport and storage infrastructure, carbon utilisation market development and four regional direct air capture with carbon storage (DACCS) hubs, and DAC Technology Competition (12).
The US enacted the bipartisan Creating Helpful Incentives to Produce Semiconductors for America fund in 2022, or the CHIPS Act (US). CHIPS provides funding for increased carbon removal research, development and demonstration (13).
The US also enacted the historic Inflation Reduction Act (US) of 2022, which includes enhancements to Internal Revenue Service section 45Q. The Act increases the credit amount per tonne for entities satisfying prevailing wage and apprentice requirements (14,15). The legislation also extends the start of construction timing to the end of 2032; lowering capture thresholds, including direct pay; and expanding transferability.
POLICY GUIDANCE AND ANNOUNCEMENTS
The Council on Environmental Quality (CEQ) issued guidance to promote the responsible development and permitting of CCUS projects. Guidance elements include facilitating federal decision making on CCUS projects and CO2 pipelines, public engagement, understanding of environmental impacts, and carbon dioxide removal (16).
The Department of Energy Office of Fossil Energy and Carbon Management (FECM) published its strategy for advancing CCS. The Strategic Vision establishes a framework for making informed carbon management decisions regarding deep decarbonisation and addressing legacy emissions. FECM prioritises justice, labour and engagement; carbon management approaches toward deep decarbonisation; and technologies that lead to sustainable energy (17).
The Pipeline and Hazardous Materials Safety Administration (PHMSA) announced new safety measures for CO2 pipelines and initiated new rulemaking. PHMSA also issued an updated advisory bulletin addressing issues resulting from geological hazards (18).
The Bureau of Land Management (BLM) issued guidance for CO2 storage in line with the Federal Land Management Policy Act (US). BLM’s instruction memorandum addressed carbon storage on public lands, including pore space managed by BLM (19).
The IIJA legislation amends the Outer Continental Shelf Lands Act (US), directing the Department of Interior to develop regulations for establishing a permitting framework for offshore CO2 storage.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
The Securities and Exchange Commission proposed a rule addressing climate-related disclosures. The proposed rule would require company disclosure on how it plans to attain climate-related targets (such as investing in renewable energy or carbon capture technology). The proposal recognises that CCS will likely have a role to play in the governance of some companies regarding ESG (20).
The US Supreme Court issued its decision in West Virginia v United States Environmental Protection Agency (USEPA), a case challenging the 2015 Obama administration’s Clean Power Plan’s (CPP) rule. The court held that the USEPA exceeded its statutory authority under the Clean Air Act (US) in attempting to regulate the nation’s energy sector by adopting the CPP. The court ruled that the agency could not “force a nationwide transition away from the use of coal” (21). The decision limits the USEPA’s ability to regulate greenhouse gases. States will likely use their authority to regulate GHGs.
Several states are progressing carbon management policies. The California Air Resources Board (CARB) released its Draft 2022 Scoping Plan for comment. The Scoping Plan presents a path for carbon neutrality by 2045, while supporting economic, environmental, energy security, justice, and health priorities. The Scoping Plan calls for the deployment of CCS technology in sectors where non-combustion options are not technically or economically viable for meeting 2045 goals (22).
Several other states have enacted legislation or policies covering CO2 storage. These include Indiana, West Virginia, and Wyoming. States continue to face permitting concerns where only two states, Wyoming and North Dakota, have primacy for issuing permits under the Underground Injection Control Program, which covers injection wells for geologic storage of CO2. The existing permitting process can take years. The state of Louisiana has a primacy permit application pending. Texas, Arizona, and West Virginia are in the pre-application primacy application process.
DIVERSE PARTNERSHIPS PROMOTE CCS DEPLOYMENT
Significant momentum for CCS project developments and announcements in various sectors continues. The high level of activity related to CCS project developments is likely due to a number of reasons that include collaboration and partnerships between companies with differing capabilities and requirements in the CCS value chain; policy changes such as enhanced 45Q tax credits; and innovative pipeline service changes from natural gas to CO2 transport conversions. Examples of some of these innovative projects include:
- Talos Energy, Carbonvert, and Chevron announced an expanded joint venture to develop the Bayou Bend CCS hub, with Talos being the operator (23).
- NEXT Carbon Solutions and California Resources Corporation jointly announced an agreement to explore further the decarbonisation of CRC’s Elk Hills Power Plant. The companies seek to capture and utilise the emissions from the Elk Hills Power Plant for permanent storage in oil-producing reservoirs (24).
- Carbon America will finance and operate systems in Colorado ethanol plants to capture and store underground 95 per cent of CO2 emissions from two Colorado plants (25).
- Tallgrass plans to convert its Trailblazer natural gas pipeline to transport CO2 captured from a carbon capture project at an ADM corn processing complex in Nebraska. The 400 mile (644 km) pipeline expands the reach of its Eastern Wyoming Sequestration Hub (26).
- The Red Trail Energy CCS project at its ethanol facility near Richardton, North Dakota, is officially operating. The project is the first in the US to operate under a state-led regulatory authority for carbon storage. Red Trail is advancing the project utilising the 45Q tax credit (27).
- More companies announced support for the massive proposed carbon capture and storage hub in the Houston Ship Channel, bringing the number of companies in the project to 14 (28).
- Occidental will build 70 – 135 carbon capture facilities by 2035. The facilities are expected to each remove as much as 1 Mtpa of CO2 directly from the atmosphere (29).
DEVELOPMENTS IN BRAZIL
Brazil hosts an operating CCS facility in the Santos Basin where Petrobras continues progressing toward its goal of injecting 40 million tonnes of CO2 by 2025. Significant policy developments regarding CCS deployment occurred in 2021 and 2022 in Brazil. In addition to updating its NDC, significant legislation was introduced into Brazil’s legislature (30). Bill 1.425/2022 establishes a legal framework for the geological storage of carbon dioxide, addressing pore space property rights, long-term responsibilities and its transfer from private to public agent, the definition of regulatory agencies, and the period of monitoring. (31)
Additionally, Decreto 11.075/2022 establishes the procedures for the preparation of “Sectoral Plans for Mitigation of Climate Change” and sets the National System for the Reduction of Greenhouse Gas Emissions (31).
- Speer R. OIl Infrastructure to Support CC. 2021 [cited 2022 Aug 12]; Available from: https://www.saskatchewan.ca/government/news-and-media/2021/november/04/oil-infrastructure-program-expanded-to-support-carbon-capture
- Government of Alberta. Industrial Energy Efficiency, Carbon Capture Utilization and Storage [Internet]. [cited 2022 Aug 4]. Available from: https://www.alberta.ca/industrial-energy-efficiency-carbon-capture-utilization-and-storage.aspx
- Government of Canada. 2030 Emissions Reduction Plan. 2022 [cited 2022 Aug 12]; Available from: https://www.canada.ca/content/dam/eccc/documents/pdf/climate-change/erp/Canada-2030-Emissions-Reduction-Plan-eng.pdf
- International CCS Knowledge Centre. 2022 Federal Budget Signals Strong Support for Carbon Capture Technology in Canada. 2022 [cited 2022 Aug 12]; Available from: https://www.globenewswire.com/en/news-release/2022/04/07/2418981/0/en/2022-Federal-Budget-Signals-Strong-Support-for-Carbon-Capture-Technology-in-Canada.html
- Mark Segal. Canada Moves Towards Mandatory Climate Disclosure. 2021 [cited 2022 Aug 12]; Available from: 8. https://www.esgtoday.com/canada-moves-towards-mandatory-climate-disclosures/
- Government of Canada. 2022 Budget: A plan to grow our economy and make our life more affordable. 2022.
- Government of Canada. Discussion Paper: Geologic Carbon Storage in Ontario. 2022 [cited 2022 Aug 12]; Available from: https://prod-environmental-registry.s3.amazonaws.com/2022-01/Geologic%20Carbon%20Storage%20Discussion%20Paper%20-%20FinalENG%20-%202022-01-04_0.pdf
- Williams N. Alberta picks six proposal to develop Canada’s first carbon storage hubs. 2022 [cited 2022 Aug 12]; Available from: https://www.reuters.com/business/environment/enbridge-shell-among-projects-picked-explore-developing-canadas-first-carbon-2022-03-31/
- Cherniak-Kennedy A. The Government of Alberta and the federal government advance the potential development of carbon storage hubs. 2022 [cited 2022 Aug 12]; Available from: https://www.dentons.com/en/insights/articles/2022/april/11/the-government-of-alberta-and-the-federal-government-advance-the-potential
- Reuters. Factbox: Proposed capital projects relying on Alberta carbon capture and storage build-out. 2022 [cited 2022 Aug 13]; Available from: https://www.reuters.com/business/sustainable-business/proposed-capital-projects-relying-alberta-carbon-capture-storage-build-out-2022-04-05/
- Entropy Inc. Entropy Announces Commissioning of the First Phase of CCS Project. 2022 [cited 2022 Aug 13]; Available from: https://carboncapturemagazine.com/articles/263/entropy-announces-commissioning-of-the-first-phase-of-ccs-project#:~:text=ADVERTISEMENT-,Entropy%20Inc.,%2C%20effective%20June%2027%2C%202022.
- Clean Air Task Force. Carbon Management Provision in the Infrastructure Investment and Jobs Act. 2021 [Internet]. [cited 2022 Aug 13]; Available from: https://www.catf.us/resource/carbon-management-provisions-in-the-infrastructure-investments-and-jobs-act/
- US Congress. Creating Helpful Incentives to Produce Semiconductors for America fund, or the CHIPS Act, of 2022. [Internet]. 2022 [cited 2022 Aug 13]. Available from: https://science.house.gov/imo/media/doc/the_chips_and_science_act.pdf?mc_cid=d904691b73&mc_eid=10a5ff616d
- Riddle J. Schumer and Manchin’s Inflation Reduction Act Includes Significant Tax Incentives to Combat Climate Change [Internet]. 2022 [cited 2022 Aug 13]. Available from: https://www.kirkland.com/publications/kirkland-alert/2022/08/schumer-manchin-inflation-reduction-act-climate-investment
- US Senate. Inflation Reduction Act [Internet]. 2022 [cited 2022 Aug 12]. Available from: https://www.democrats.senate.gov/imo/media/doc/inflation_reduction_act_of_2022.pdf
- Council on Environmental Quality. Carbon Capture, Utilization, and Sequestration Guidance. 2022 [cited 2022 Aug 13]; Available from: https://www.federalregister.gov/documents/2022/02/16/2022-03205/carbon-capture-utilization-and-sequestration-guidance
- Office of Fossil Energy and Carbon Management. FECM’s Strategic Vision: Achieving Net-Zero Greenhouse Gas Emissions. 2022;
- U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA). PHMSA Announces New Safety Measures to Protect Americans From Carbon Dioxide Pipelines Failures After Satartia, MS Leak. 2022 [cited 2022 Aug 13]; Available from: 21. https://www.phmsa.dot.gov/news/phmsa-announces-new-safety-measures-protect-americans-carbon-dioxide-pipeline-failures
- U.S. Department of the Interior – Bureau of Land Management. National Policy for the Right-of-way Authorizations Necessary for Site Characterization, Capture, Transportation, Injection, and Permanent Geologic Sequestration of Carbon Dioxide in Connection with Carbon Sequestration Projects. 2022 [cited 2022 Aug 13]; Available from: 22. https://www.blm.gov/policy/im-2022-041
- Securities and Exchange Commission. SEC Proposes Rules to Enhance and Standardize Climate-Related Disclosures for Investors. 2022 [cited 2022 Aug 13]; Available from: https://www.sec.gov/news/press-release/2022-46
- King & Spaulding. West Virginia v. EPA: The Forecast is Cloudy for Environmental and Agency Regulation. 2022 [cited 2022 Aug 13]; Available from: https://www.kslaw.com/news-and-insights/west-virginia-v-epa-the-forecast-is-cloudy-for-environmental-and-agency-regulation
- California Air Resources Board. DRAFT 2022 SCOPING PLAN UPDATE MAY 10, 2022. 2022 [cited 2022 Aug 12]; Available from: 22. https://ww2.arb.ca.gov/sites/default/files/2022-05/2022-draft-sp.pdf
- Talos. TALOS, CARBONVERT AND CHEVRON ANNOUNCE CLOSING OF PREVIOUSLY ANNOUNCED JOINT VENTURE EXPANSION OF THE BAYOU BEND CCS PROJECT OFFSHORE JEFFERSON COUNTY, TEXAS. 2022 [cited 2022 Aug 12]; Available from: https://www.talosenergy.com/investor-relations/news/news-details/2022/TALOS-CARBONVERT-AND-CHEVRON-ANNOUNCE-CLOSING-OF-PREVIOUSLY-ANNOUNCED-JOINT-VENTURE-EXPANSION-OF-THE-BAYOU-BEND-CCS-PROJECT-OFFSHORE-JEFFERSON-COUNTY-TEXAS/
- NextDecade. NEXT Carbon Solutions and California Resources Corporation Agree to FEED Study. 2022 [cited 2022 Aug 12]; Available from: https://investors.next-decade.com/news-releases/news-release-details/next-carbon-solutions-and-california-resources-corporation-agree
- Sweet C, Kramer D. Carbon America to Construct, Own and Operate the First Two Commercial Carbon Capture and Sequestration Projects in Colorado. 2022 [cited 2022 Aug 12]; Available from: https://www.businesswire.com/news/home/20220512005336/en/Carbon-America-to-Construct-Own-and-Operate-the-First-Two-Commercial-Carbon-Capture-and-Sequestration-Projects-in-Colorado
- Reuters. Tallgrass Energy Plans to Convert Natgas Pipeline into CO2 Transport System. 2022 [cited 2022 Aug 12]; Available from: 29. https://pgjonline.com/news/2022/may/tallgrass-energy-plans-to-convert-natgas-pipeline-into-co2-transport-system
- Red Trail Energy LLC. Red Trail Energy begins carbon capture and storage. 2022 [cited 2022 Aug 12]; Available from: https://ethanolproducer.com/articles/19447/red-trail-energy-begins-carbon-capture-and-storage
- Klinge N. Proposed Houston CCS hub gains supermajor support. 2022 [cited 2022 Aug 12]; Available from: https://www.upstreamonline.com/energy-transition/proposed-houston-ccs-hub-gains-supermajor-support/2-1-1149392
- 1PointFive. 1PointFive and Carbon Engineering Announce Direct Air Capture Deployment Approach to Enable Global Build-Out of Plants. 2022; Available from: https://www.1pointfive.com/1pointfive-and-carbonengineering-announce-directaircapture-deployment-approach
- Government of Brazil. FEDERATIVE REPUBLIC OF BRAZIL Paris Agreement NATIONALLY DETERMINED CONTRIBUTION (NDC). 2022 [cited 2022 Aug 12]; Available from: https://unfccc.int/sites/default/files/NDC/2022-06/Updated%20-%20First%20NDC%20-%20%20FINAL%20-%20PDF.pdf
- Brazilian Senate. Bill No. 1425, of 2022. 2022 [cited 2022 Aug 12]; Available from: https://www25.senado.leg.br/web/atividade/materias/-/materia/153342