ARTICLE
29 December 2023

An Overview Of The Alberta Carbon Capture Incentive Program: Navigating Opportunities And Challenges

PL
Procido LLP

Contributor

Procido LLP logo
At Procido LLP, we know change is the only constant. Because of this, we continually innovate to provide forward-looking and unique solutions to complex challenges. We aim to maintain equality within our firm and seek out clients who share this core value. We believe diversity of experience provides us with a broader perspective to see further into the future for our clients. We never cease pursuing opportunities to gain more knowledge and new expertise to assist our clients in staying ahead of their competitors.
The ACCIP was introduced by the Government of Alberta on November 28, 2023 to incentivize the development and implementation of carbon capture technologies.
Canada Environment

Introduction

The Alberta Carbon Capture Incentive Program (ACCIP) introduced by the Government of Alberta stands as a pivotal initiative within the province's broader efforts to address climate change and reduce greenhouse gas emissions. As Alberta strives to balance its significant role in the energy sector with environmental sustainability, the ACCIP is a key instrument designed to encourage carbon capture, utilization and storage (CCUS) projects in the province. This article provides an overview of the ACCIP, exploring its key features, benefits, and potential challenges.

Background

The ACCIP was introduced by the Government of Alberta on November 28, 2023 to incentivize the development and implementation of carbon capture technologies. Its primary objective is to support projects that capture and store greenhouse gas emissions from industrial processes, preventing their release into the atmosphere. The initiative aligns with Alberta's commitment to achieving emission reduction targets outlined in Alberta's Climate Leadership Plan.

Key Features of the Alberta Carbon Capture Incentive Program

  1. Financial Incentives: The ACCIP will provide a grant of 12% for new eligible CCUS capital costs. The financial support is intended to offset the upfront costs associated with implementing carbon capture technologies. ACCIP grants will be paid to operators in 3 installments over 3 years starting after 1 year of operations of the CCUS facility. The province stated that it expects the program to provide a total of $3.2 to $3.5 billion in funding support between 2024 and 2035.
  2. Eligibility Criteria: To qualify for ACCIP incentives, projects must meet specific eligibility criteria. These criteria often include the type of industrial facility, the volume of emissions captured, and the technology employed for CCUS. The ACCIP is expected to be available for hard-to-abate sectors such as the oil sands, oil and gas production, enhanced oil recovery production, petrochemicals, power generation and cement production.
  3. Availability: The ACCIP will be available once the federal government has legislated its CCUS investment tax credit (ITC) and related operating supports, such as contracts for difference. The 2023 Fall Economic Statement from the federal government announced that the Canada Growth Fund would be the principal federal entity issuing carbon contracts for difference and will allocate up to $7 billion in capital to issue all forms of contracts for difference and offtake agreements. Tying the availability of ACCIP to the federal CCUS ITC and operating support sends a clear signal that the program is meant to work in conjunction with federal CCUS incentives but leaves the timeline for implementation uncertain. Given the province's statement that support will be provided between 2024 and 2035 it's possible that some capital costs will become eligible for ACCIP funding as early as next year.
  4. Application Process: Interested parties will be required to submit detailed applications outlining the scope, technology, and anticipated benefits of their CCUS projects. The application process will likely involve rigorous evaluation by provincial authorities to ensure that projects align with program objectives and criteria.
  5. Monitoring and Reporting: Successful applicants are typically subject to stringent monitoring and reporting requirements. This ensures transparency and accountability in tracking the actual emissions reductions achieved by the implemented CCUS technologies.

Benefits of the ACCIP

  1. Economic Stimulus: The ACCIP contributes to economic growth by fostering innovation and job creation within the burgeoning CCUS industry. The financial incentives provided by the ACCIP program can attract private investment, driving further economic activity.
  2. Emission Reductions: By supporting CCUS projects, the ACCIP directly contributes to Alberta's efforts to reduce greenhouse gas emissions. Carbon capture technologies play a crucial role in mitigating climate change by preventing CO2 from entering the atmosphere from hard-to-abate sectors.
  3. Industry Collaboration: The ACCIP program encourages collaboration between government entities, industry stakeholders, and technology providers. This collaboration is essential for developing and deploying effective CCUS solutions at scale.

Challenges and Considerations

  1. Technological Viability: Some critics argue that certain carbon capture technologies may not be proven or economically viable in the long term. CCUS project proponents need to demonstrate to the government and regulators that they can monitor, measure and verify injected CO2 and prevent leakage. Balancing the need for innovation with ensuring practical, safe and scalable solutions is a key challenge the ACCIP seeks to address.
  2. Funding Constraints: The success of the ACCIP relies on the availability of sufficient funding to support eligible projects. A portion of funding for ACCIP will be accessed from the Technology Innovation and Emissions Reduction (TIER) fund. According to the Government of Alberta's 2023 budget documents, there is approximately $149 million of unallocated TIER revenue available for future CCUS projects. Economic uncertainties and competing priorities may pose challenges to sustaining the program's financial incentives over time.
  3. Regulatory Complexity: Navigating the regulatory landscape for carbon capture projects can be complex. Streamlining regulations and providing clear guidance is essential to facilitate the successful implementation of CCUS initiatives. ACCIP funding will be critical for Alberta's oil and gas industry to comply with the emissions cap and trade system that was announced by the federal government on December 7, 2023.

The Alberta Carbon Capture Incentive Program represents a critical step in aligning economic interests with environmental stewardship. As Alberta strives to balance its energy-driven economy with the imperative to reduce carbon emissions, the ACCIP plays a pivotal role in fostering innovation, reducing greenhouse gas emissions, and positioning the province as a leader in sustainable energy practices. While facing challenges inherent to any groundbreaking initiative, the program stands as a testament to Alberta's commitment to addressing climate change and advancing the adoption of carbon capture technologies in the industrial sector. The Government of Alberta is currently working on program specifics with more details on the ACCIP expected to be available in spring 2024.

Interested parties are invited to contact our firm's Energy Group for more information as this program develops, and/or to discuss how a particular CCUS project may benefit from this program.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More