Low-Carbon Investment Incentives in Canada's Chemical Industry

Introduction:

The Canadian Chemical Industry Association (CIAC) has recently submitted a briefing titled "Pre-Budget Submission 2024" to the federal government, urging the swift implementation of low-carbon investment tax incentives. These incentives would be directed towards carbon capture and utilization, clean hydrogen, clean manufacturing, and clean power sectors.

Consultation on Investment Tax Credits (ITC):
CIAC highlights that consultations on Investment Tax Credits (ITC) have been ongoing since the 2020 budget. The organization calls for the expeditious transformation of ITC into law. They emphasize that investors are eager to make investments but require greater certainty before making final decisions. CIAC cautions the government against making specific technologies or approaches for emissions reduction a prerequisite for qualifying for ITC funding.

Challenges of Carbon Capture and Storage (CCS):
Simultaneously, the International Institute for Sustainable Development (IISD) released a report last week expressing growing skepticism about the financial viability of Carbon Capture and Storage (CCS) projects, particularly in the power generation sector where CCS competes directly with renewable energy sources. The report suggests that CCS technology has made slow progress in cost reduction compared to other energy technologies like solar and wind power over the years. In the oil and gas industry, CCS continues to heavily rely on financial support from federal and provincial governments. In contrast, renewable technologies generally require government subsidies only during their initial development stages.

Optimizing CCS Applications:
IISD argues that due to the high costs and complexity of CCS technology, it should be reserved for "challenging industrial processes" involving carbon-intensive chemical reactions and high-temperature processes where decarbonization alternatives like electrification are not easily attainable. The institute suggests that CCS technology may find future deployment in "hard-to-abate" sectors such as steel and cement.

Dow's Net-Zero Cracker Project:
Within the Canadian chemical industry, Dow is set to make a final investment decision on its net-zero cracker project in Alberta by the end of this year. The project, initially announced in October 2021, aims to convert cracker emissions into hydrogen as a clean fuel for the production process, with captured carbon dioxide transported to nearby third-party CO2 infrastructure for storage.

Conclusion:
The CIAC's call for the implementation of low-carbon investment tax incentives reflects the chemical industry's commitment to environmental sustainability. However, the IISD's report raises concerns about the financial feasibility of CCS projects and emphasizes the need for careful consideration of its applications. As the industry navigates the path towards decarbonization, initiatives like Dow's net-zero cracker project serve as promising examples of innovative clean technologies within the Canadian chemical sector.