Getting to Final Investment Decisions Series

Part 1: The urgency for more FID on CCUS projects

In the pursuit of our climate goals, CCUS is a proven solution for cutting greenhouse gas emissions from hard-to-abate industries. CCUS projects are happening worldwide — with Canada as a leader in the developing space — thanks to its geological advantages, technical expertise and early government support. Already, we’ve safely stored more than 55 million tonnes of carbon dioxide (CO2) – that’s the equivalent to planting 2.3 billion trees!

Despite this success, the numbers show very few CCUS projects are reaching positive FID. Why is this happening and why does it matter?

Globally, the number of CCUS project announcements doesn’t match the number of actual projects being developed. As of February 2024, capture capacity already in operation or that has reached FID only accounts for 20% of the total announced capture capacity for 2030. In 2023, the International Energy Agency stated that, despite an increase in developing, under-construction, and operational projects, CCUS deployment is “not on track” to meet the agency’s Net Zero Emissions by 2050 Scenario.

In Canada, CCUS is an important tool in the energy mix as we progress towards Canada’s two climate targets: emissions reduction of 45-50% below 2005 levels by 2035 and net-zero emissions by 2050. In the Canada Energy Regulator’s Global Net Zero Scenario, Canada will need to capture and store upwards of 60-80 million tonnes of CO2 annually by 2050. But due to multiple factors, including trade and policy uncertainty, getting projects to FID is lagging.

In Alberta, government and industries are considered global leaders thanks to the successful launch of Canada’s first two commercial scale CCUS projects: the Alberta Carbon Trunk Line and the Quest CCS facility.

Alberta has developed an internationally recognized regulatory framework for CCUS projects, which helps ensure safe and effective practices. Along with the Canadian government, Alberta continues to invest in CCUS projects, reinforcing its leadership in emission reduction efforts.

Alberta is home to several smaller CCUS projects, research centres, organizations and post-secondary institutions with a CCUS focus. However, despite 49 capture projects being announced over the past 15 years, only four are operational (as of August 2024) and four are currently under construction.

Reaching FID is complex

Even with CCUS’s recognized importance, reaching FID is a complex process. While the private industrial sector plays a critical role in achieving climate goals, large-scale carbon capture projects often cost well over $1 billion, which requires substantial capital, labour and planning. Other complexities include:

• Multiple value chain investments: Projects have interdependent components from capture, transport, to storage or utilization. Decisions in one component affect the others.
• Feasibility studies and planning take time: It typically takes a minimum of four to five years to plan a CCUS project including design, engineering, permitting and construction.
• Business models are dependent on policy: CCUS projects are primarily funded through government investments including tax credits, grants and emission pricing programs. If a government decides to remove these policies, corporations will be responsible for project costs.

3 top reasons we need more FIDs in CCUS

The urgency is clear – we need to rapidly meet national and global climate targets. And in the energy transition mix, CCUS is an internationally recognized solution for good reasons:

• Decarbonize not deindustrialize: CCUS allows industries in hard-to-abate sectors such as steel, cement, oil and gas, power, chemical and fertilizer to reduce their emissions while maintaining production within regulatory requirements.
• Accelerate new technologies + reduce future costs: When companies commit to investing in CCUS, it drives research and development, leading to technological innovations, improvements and efficiencies. CCUS projects must be developed at scale. As they grow in response to demand, costs will decline with increased optimization and efficiency (i.e. economies of scale). By sharing knowledge about the challenges and potential solutions, the lessons learned can accelerate development and adoption of CCUS technologies, and ease uncertainties and costs for future projects.
• Economic benefits: CCUS projects attract investors and consumers, and creates jobs in engineering, construction and operations as infrastructure development needs rise. The ability to transport and store CO2 can be attractive for global investments in industrial areas. CCUS can also support the energy industry, primarily in rural areas with partially depleted oil and gas reservoirs, by using captured CO2 for enhanced oil recovery, which can provide further economic development benefits.

Bottom line is Canada accounts for approximately 15% of the world’s current CCS capacity, even though our nation contributes to less than 2% of global CO2 emissions. Western Canada is well positioned to accelerate CCUS projects, playing a vital role in global efforts towards a net-zero future. Its strategic advantage allows the region to support emissions reduction while maintaining or even increasing the production of essential products we bring to the world every day.