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Varcoe: More carbon capture ping pong as finance ministers meet

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Chrystia Freeland, Canada’s Deputy Prime Minister and Treasury Secretary, speaks with provincial finance ministers during the finance ministers’ meeting in Toronto, Friday, Feb. 3, 2023. Photo by Nathan Denette/THE CANADIAN PRESS

Are Canadian governments finally ready to respond to the US Cut Inflation Act and its related stimulus measures for businesses to attract more decarbonization spending?

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Will the country avoid a recession in 2023?

So many questions – and so few answers – swirled Friday as provincial and territorial finance ministers met in Toronto with their federal counterpart, Chrystia Freeland.

As Alberta and the federal government prepare their upcoming 2023 budgets, Freeland urged all provinces to join the “global race” to mobilize investment in energy transition projects and zero emissions initiatives.

Over the past year, the United States has increased its assistance for clean energy and decarbonization developments, including carbon capture, utilization, and storage (CCUS) projects. .

Canadian governments are now scrambling to stay or lose.

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“We need the provinces and territories to be involved in our response to the Inflation Control Act and to work with the federal government,” Freeland told reporters.

“The starting signal has been given to build the clean economy of the 21st century.”

As the race begins, Canada continues to pull away from the blocks.

National and global energy companies have announced a number of projects in Alberta that potentially represent billions of dollars in planned investments in new hydrogen developments, petrochemical complexes and carbon capture plants.

Imperial’s new $720 million plan to build Canada’s largest renewable diesel facility near Edmonton is now moving forward and was given the green light last week.

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  1. Danielle Smith says Alberta is tired of being Ottawa’s ‘punching bag’ but will consider carbon capture aid

  2. Varcoe: Alberta PM open to carbon capture incentives

  3. Varcoe: As Trudeau trades blows with province, time is running out for billions in carbon capture projects

However, most proposals are still awaiting clarification from the provincial and federal governments on what level of support might be on the table.

In recent months, there has been a game of ping pong between the federal government and the state governments, with each side throwing the ball into the other government’s field.

Last year, Ottawa introduced a new federal investment tax credit for CCUS developments. It covers up to half of the cost of carbon capture equipment, which is less than what Canada’s oil sands producers were aiming for.

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The loan has since been overshadowed by larger stimulus measures included in the US $369 billion Inflation Reduction Act.

“It’s been a game-changer in the global competition for capital…so Canada has to be a part of it too,” Freeland said.

“When it comes to some very specific investment decisions and some very specific investments, they’re going to be good for the whole country. They will be particularly advantageous for the provinces where these investments are located.

The Trudeau government has pressed the UCP government to provide its own incentives or support for such projects. The Pathways Alliance, which represents the major oil sands producers, has also asked for the province’s help.

Treasury Secretary Travis Toews again resisted the idea that it was up to provincial taxpayers to help compete with the power of the huge US Treasury. He pointed out that Alberta has already spent nearly $2 billion on carbon capture and storage systems that are more than a decade old.

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“It’s time for the federal government to step in,” he told reporters.

In an interview, Toews said the province already offers grants through its petrochemical incentive program. It also offsets royalties paid by oil sands operators when they spend capital on major new developments, including CCUS.

“We really haven’t heard anything new from Minister Freeland,” he said.

“Federal authorities are really pointing the finger at Alberta in this case and are disproportionately asking us to get involved.”

Chrystia Freeland, right, speaks with provincial finance ministers during a meeting in Toronto, Friday, Feb. 3, 2023. Photo by Nathan Denette/THE CANADIAN PRESS

The meeting took place against a backdrop of slowing growth in the Canadian economy, concerns about a possible recession and the fallout from rising interest rates.

Bank of Canada Governor Tiff Macklem presented finance ministers with an economic update; Toews said he spoke of the possibility of a “shallow recession” in Canada in 2023.

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Earlier this week, the latest outlook from the International Monetary Fund estimated that the Canadian economy would grow only 1.5% this year, although it is expected to outperform the United States, Germany and the United Kingdom.

Mr Toews said the ministers also discussed the challenges Canada faces in building major infrastructure projects.

“Many tasks are about getting approvals and getting things done faster. There’s so much bureaucracy,” Ontario Finance Minister Peter Bethlenfalvy told reporters, noting the lead time required for mine development in the province’s Ring of Fire region.

“Capital will not wait forever.”

Major energy infrastructure projects in this country are also facing rising costs as inflation has soared.

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Earlier this week, TC Energy confirmed that the budget for its Coastal GasLink project had risen to $14.5 billion from the $11.2 billion budget announced last summer and a pre-pandemic estimate of $6.6 billion.

The Trans Mountain pipeline expansion grew more than 70% last year to $21.4 billion from a budget set in 2020, up from an original forecast of $5.4 billion in 2013, the height.

Treasury ministers must embrace a growth agenda, enact regulatory reforms and address the competitiveness challenges of decarbonizing the Canadian economy by delivering CCUS incentives, said Scott Crockatt of the Business Council of Alberta.

Although most of the heavy lifting to compete with the United States comes from the federal government, there must also be a provincial contribution, he said.

“The Anti-Inflation Act in the United States has essentially created an overloaded stimulus… Canada needs to respond,” Crockatt said.

“We have to do it right.”

Chris Varcoe is a columnist for the Calgary Herald.

[email protected]

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Source: edmontonjournal.com

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