Ottawa's promising a tax credit for carbon capture but is the tech worth the money?

Carbon capture and storage (CCS) is a young technology but it's already a major flashpoint in the political argumentover how to approach climate change.

On the one hand, it's one of the only technologies out there withthe potential to reverse some of the damage already done to Earth's climate by (perhaps,one day)scrubbingcarbon directly from the atmosphere and rendering it harmless. (Trees do something like that already, of course.)

It alsocan clean up thehigh-emissions industrial processes such as cement manufacturing that the worldwill still needafter we all stop burning coal.

On the other hand, many environmentalists suspect that carbon capture is a distraction thrown up by energy companies desperate to avoid ending their dependence on fossil fuels. Some question its benefits and most reacted negatively to its inclusion in the recent federal budget.

Pleased with budget

The budget offersatax credit to companies that invest in CCS technologyand saysthe government will undertake a 90-day consultation process to designthe credit.

"We were instrumental in the budgetand we were very involved with the Alberta government in pushing for it," said Beth (Hardy) Valiaho of the International CCS Knowledge Centre in Regina.

Saskatchewan has the world's only functionalcarbon-capturing coal-fired power plant attheBoundary Dam 3 near Estevan. Last month, the projectannounced that it had removed four million tonnes of carbon dioxide from its emissions since it opened in 2014.

"That's roughly equivalent of taking a million cars off the road for a year," SaskPower spokespersonJoel Cherrytold CBC News.

There's a catch, however.The CO2from Boundary Dam 3 is piped away to an oil field, where it's injected underground to push out hard-to-recover oil from deep deposits. Although the carbon removed from coal emissions does remain underground, the CO2 is used to recover oil which, when consumed, produces more atmospheric carbon.

And according tothe federalbudget document, projects that useCO2to pump oil are not eligible forthe CCStax credit.

Carbon in, carbon out

The oil industry's useof CO2 is"certainly an important aspect of making carbon capture economically viable as a generation option," said Cherry. It's a big part of the reasonwhythe Alberta and Saskatchewan governments support carbon capture. It also helps to explainwhy many environmentalists distrust the technology.

Valiaho doesn't share their skepticism. "We're very happy to see carbon capture, utilization and storage put in the budget," she said.

But she acknowledgedthe energyindustry probably willuse the 90-day consultation period to argue that CCSprojects that use harvested CO2 to access oil depositsshould still be eligible for the tax credit.

"I think there's some room in the consultation period to try and make that bit be correct for the way Canada operates today," she said. Such "enhanced oil recovery" operations, she said, make upthe majority of the CCS projects that have moved forward. "And of course, that return has been important."

Critics say re-purposing the carbon to extract more oil underminesthe environmental logic of CCS projects.

"It ends up producing more oil, which in turn is then burned or used as an industrial feedstock, both of which emit CO2," saidDavid Schlissel of the Ohio-based Institute for Energy Economics and Financial Analysis. Heauthored a recent study of Boundary Dam 3's CCS operations.

"When SaskPower claims that they've saved four million metric tons of CO2 from being emitted into the atmosphere, technically that's true, but only if you apply it to the Boundary Dam plant.

"If you look at the full cycle, you need to take into account the extra CO2 that's produced from burning the new oil."

A transitional technology?

CCS proponents argue that oil recovered through injections of harvestedCO2wouldsimply be replaced by oil extracted elsewhere if it were taken off the market.

Valiaho said thatbecause Canada can'tstop using fossil fuels all at once, CCS can serve as a transitional technology,cutting emissions as economies switchto renewable forms of energy. She said oil harvested using captured CO2 accounts forabout 37 per centless carbon during itslife cycle than doesconventional oil.

"The fact that you can extract it even cleaner using an enhanced oil recovery process is only a benefit, as far as I can see," she said.

Schlissel questions that argument. "Proponents of carbon capture and using it for enhanced oil recovery say that a barrel of oil that's produced in Alberta displaces a barrel of oil that's produced somewhere else in the world. And there's no clear evidence that that's true," he said.

"It may happen to some degree, but I'm very confident that the net reduction in emissions at Boundary Dam 3 is not four million metric tonnes. It's a significantly lower number."

It works, with bugs

CCS technology is far from perfect, although those involved in the Boundary Dam 3 project say that they've worked out some of the bugs during its six years of operations.

SaskPower hasn't decided yetwhether it wants to bet on the technology for the future.

"We're continuing to find improvements," saidCherry. "We've achieved stable operations. We're still working to increase the efficiency of the project there, but we've passed some pretty significant milestones recently and we are getting more than a hundred megawatts of low carbon baseload power from that facility."

SaskPower has decided alreadyagainst expanding CCS to two more coal plants, BD4 and BD5,that are part of the Boundary Dam complex. It continues to study the option for two other plants,one of which isn't expected to reach the end of its life until 2047.

"It's going to depend on costs," saidCherry.

Carbon pricing changes the math

Valiahosaidthat oil recovery might make upa smaller part of cost-benefit calculations for CCS projectsin the futureas the cost of failing tocapturecarbon grows.

"When we now look at the carbon price in Canada going up to$170, this makes it a completely different economic case," she said.

The federal price on carbon emissionsmakes fossil fuelslike coal more expensive to use,even coupledwith carbon capture whichcanonly cutemissions, not eliminate them.Already, SaskPower has made a big commitment to natural gas generation and is looking at introducingsmall nuclear reactors in the 2030s.

And the company doesn't see any clear support for its own CCS program in the federal budget.

"Full details aren't going to be ironed out until after that 90-day consultation period," said Cherry.

"We're a Crown-owned provincial utility. We don't pay any tax. So with tax incentives, it's difficult to see what benefits we would get out of that."

Texas troubles

Other players in CCShave encountered cost issues.Last year, NRG Energy mothballed a billion-dollar carbon capture project attached to a coal-fired plant in Sugar Land, Texas.

The Petra Nova plant had been running for three years and had received $190 million from the U.S. government. In a report NRG prepared for the Department of Energy, it acknowledged that the plant had been left idle for many days due to technical issues and had fallen about 17 per cent short of its carbon capture goals although it cited the low price of oil as a factor in the decision not to proceed with the project.

But CCS is very far from dead. The CCS Knowledge Centre isinvolved in a feasibility study to install the technology at the Lehigh Cement Plant in Edmonton.Elon Musk has announced a $100 million prize for the best CCS technology.There is even a project afoot to capture and bury carbon from biofuels.

And now, ExxonMobil is floating a proposal for a vast $100billion carbon capture project in the refinery row area along the Houston Ship Channel.

"We believe the time is right for a large-scale collaboration in the United States between governments at every level, private industry, academia and local communities to create an 'Innovation Zone' approach to dramatically accelerate carbon capture and storage progress," Joe Blommaert, president of Exxon's low-carbon division, saidin a blog post last week.