Key Takeaways

• Seven new CCS projects proposed have the potential to capture 56 million tonnes of CO2e annually by 2030.
• The introduction of the “capture recognition tonne” under the TIER program, provides stacking incentives to CCS projects estimated to be $104 in 2023, rising to $272 in 2030.
• The Alberta Carbon grid proposed to come online in 2025 will have a capacity of 20 M tonnes, annually.
• The Alberta Carbon Trunk Line (ATCL) expansion and the Oil Sands Pathway to Net-Zero, planned and proposed, respectively will increase the CCS capacity of Alberta by 23 M tonnes annually in 2030.

Carbon capture, utilization, and storage (CCUS) is expected to play an essential role in achieving Alberta’s emission reduction targets by reducing greenhouse gas emissions mainly from the oil sands sector of Alberta. The Oil and gas sector is responsible for nearly 100 million tonnes of Alberta’s total TIER-regulated emissions of 153.9 million tonnes of CO2e in 2021. By setting up CCUS, the O&G sector in Alberta can reduce its emissions while maintaining its economic competitiveness. In 2022, the government of Alberta evaluated and selected 25 new CCS projects for further evaluation. Out of these projects, seven new projects (with known capacity and commissioning dates), in addition to the expansion of already existing projects, have the potential to increase the state’s carbon capture potential to 56 million tonnes of CO2e annually. The remaining 18 projects have the potential to further increase the state’s capacity. In this article, we will discuss the following:

• Planned and proposed CCS build-out
• Incentives from the TIER’s “Capture-Recognition tonne” offset

2.96 Million Tons CO2e of Current CCS Capacity in-service 

The state of Alberta has 6 CCS projects in-service, with a combined capacity of 2.96 million tonnes annually. The Joffre project started up in 1984 is the oldest among the currently operational projects in Alberta, followed by the Chigwell project which came into operation in 2005. Quest has been in service since 2015, followed by Hays in 2016, and Atlas Carbon Sequestration Hub in 2020. Glacier (Phase I) and ACTL are newer projects that commenced last year, in 2022. Quest, one of the largest CCS projects in the world, is operated by Shell and can capture and store up to one million tonnes of CO2 per year. Another notable project, the Alberta Carbon Trunk Line (ACTL), is expected to reduce emissions by up to 14.6 million tonnes over 10 years.

Upcoming CCUS projects in Alberta will grow sequestration capacity to 56 million tons CO2e

There are currently several CCUS projects underway in Alberta. The seven new projects discussed in the previous section, have known capacity and commissioning dates, and some involve expanding already existing projects. These hold the potential to boost the province’s CCS capacity to roughly 56 million tonnes of (carbon dioxide) CO2 per year by 2030. Among the milestone projects currently proposed in the region are Alberta Carbon Grid (20 M tonnes), Wabamun Carbon Hub (4 M tonnes), Alberta Carbon Trunk Line (ACTL) expansion (13 M tonnes), and Oil Sands Pathways to Net Zero (10 M tonnes).

Alberta extended legislative support for CCUS projects in coming years 

In December 2022, the Government of Alberta amended the Technology Innovation and Emissions Reduction (TIER) Regulation and introduced two credit types as new instruments: sequestration credits and “capture recognition tonne” CRT. The CRT credit provides a stacking benefit, as they reduce the emission of the facility, in addition to earning the facility Emission Performance credits (EPCs) or reducing its compliance requirement, for having a carbon intensity lower than earlier. A detailed analysis and explanation of the interplay between the development of the projects in the region and the requirement of newly introduced credit types is available on our website.

Stacking of benefits for CCS projects: Expected to rise from $104 per tonne in 2022 to $272 in 2030 

Each tonne of carbon capture recognition credit is retired towards the entities’ total regulated emissions, and hence provides the equivalent benefit of an offset credit. In addition, the emissions reduction would result in a reduction of the carbon intensity of the entity. This results in the entity earning an Emission Performance Credit, given that the entity’s C.I. is below the sector’s benchmark or reducing the compliance requirement if the C.I. is higher than the sector’s benchmark. At a 20% discount for EPCs and Offsets, from fund credits. The total stacked incentive from “Capture recognition tonne” (CRT), turns out to be $80, currently, which rises to $136 in 2030.

Impact is likely beyond Alberta

CCUS projects currently operational and under development in Alberta are expected to contribute to a significant reduction in Alberta’s oil and gas sectors. The introduction of the “capture recognition tonne” will provide additional incentives to the CCS projects in the state, making CCS projects economically lucrative and cost-viable. Alberta’s 56 Million Tons by 2030 is equal to the current global CCUS capacity of 45 million tons (as per IEA). As these projects come online and the technology continues to evolve, it will be interesting to see how CCUS economics change. It is likely that the activity in Albert spurs other CCUS development in the United States where there are significant benefits from the Inflation Reduction Act. We are also likely to see California’s Air Resources Board provide support (beyond the LCFS credits) as CCUS is an integral component of the State’s scoping plan announced in 2022.

Appendix

Analyst Contact:

• Megha Jha (mjha@ckinetics.com)
• Craig Rocha (cmrocha@ckinetics.com)