The fate of a $400 million carbon capture facility in Edmonton hangs in the balance, as a recent carbon tax agreement between Alberta and the federal government threatens to derail the project. The deal, signed by Prime Minister Mark Carney and Alberta Premier Danielle Smith, sets a lower carbon price target of $130 per tonne by 2040, compared to the original plan of $170 per tonne by 2030. This change has put Varme Energy's waste-to-energy project in a precarious position, as the lower carbon price means the carbon credits generated by the facility would be worth less.
Varme Energy, a subsidiary of a Norwegian clean energy company, has already secured agreements with the City of Edmonton's landfill and provincial permits to produce electricity. The project has received funding from the Alberta government and support from the federal government's Canada Growth Fund to ensure the carbon credits are sold for at least $85 per tonne. However, the expected operating cost of the project is about $118 per tonne, which would have been financially viable under the previous carbon price plan.
Varme Energy CEO Sean Collins warns that without further government policy changes, the company may have to cancel the project. He describes the financial situation as 'very challenging' and calls for the federal government to address the revenue problem. The company's project aligns with the federal government's priorities of attracting foreign investment, reducing emissions, and producing clean electricity.
The carbon capture sector is facing similar challenges, with other companies pushing for additional support from both levels of government. Jamie Stephen, managing director of Torchlight, a bioenergy developer, says that the lower carbon price makes most carbon capture and storage projects in Canada unviable. The sector is hoping for policy changes that would allow companies to sell carbon credits in different markets to get a better price.
The agreement between Alberta and the federal government has broader implications for the oil and gas industry. A lower carbon price will result in less investment in emissions reductions, as noted by Ross Linden-Fraser, a researcher with the Canadian Climate Institute. This could have a significant impact on the industry's ability to remain competitive with counterparts in the United States, which do not have to pay a carbon tax.
As the new agreement is implemented, the carbon capture sector will be closely monitoring key details, including the calculation of carbon credits and the potential for polluters to use loopholes to reduce their carbon tax obligations. Time is running out for Varme Energy, and the company's fate will be decided in the coming months. The project's cancellation would be a significant setback for the industry and the broader goal of a landfill-free future for Canada.
