Exclusive-Canada oil sands carbon capture project struggles to get key contract

investing.com:

By Steve Scherer

OTTAWA (Reuters) — Canada is struggling to get a key tool in place for major carbon capture and storage (CCS) projects, said a representative of one of the largest such ventures, as the country seeks to launch incentives vital to cutting emissions from Alberta's oil sands.

A government fund has told the Pathways Alliance, comprised of the six largest oil and gas producers in Canada, that their project is too large and too risky for a contract for difference, a tool which would lock in future carbon credit prices, the representative told Reuters.

The mechanism gives investors in CCS certainty about their future revenue by setting a minimum price for their carbon credits. Oil companies in the country's highest-emitting sector are counting on CCS to help dramatically cut emissions while continuing to pump oil and gas.

Pathways is still in talks with the government to set up such a contract, though probably not through the C$15 billion ($11 billion) Canada Growth Fund — a body set up last year by the Finance Ministry to help attract private investment in clean tech by mitigating financing risks — the representative said.

«We sincerely do want to figure out a path to work with them,» said a finance ministry official who was not authorized to speak on the record.

Canada is the world's fourth-largest oil producer, and Prime Minister Justin Trudeau has made getting to net-zero by 2050 a guiding principle of his government in recent years.

However, Canada is lagging behind the U.S., which has offered massive incentives to clean tech companies under the U.S. Inflation Reduction Act (IRA) for more than a year now.

But Canada's system is more complex because, unlike the U.S., it has a carbon pricing system that