Shell was making headlines around the world yesterday for giving the green light to their “Quest” project to capture carbon dioxide emissions from a plant that processes bitumen from the tar sands. Or rather, I should say the Canadian public’s project at Shell’s facility because (as the Globe and Mail notes) we are paying for at least 85 per cent of the cost.
Which raises the question: Is subsidizing a (highly profitable) multinational oil company’s tar sands operations the best use of public funds?
Greenpeace’s position is that carbon capture and storage (CCS) is an expensive and risky distraction that prolongs our reliance on fossil fuels while undermining real solutions to climate change like investments in energy efficiency and renewable such as wind, solar and geothermal power. But there are many people who share our concern with climate change who see CCS as a big part of the solution.
So for the sake of argument, let’s assume for the moment that the gases will stay underground for millennia, even though we’re putting them (under high pressure) into a reservoir where they will be acidifying the water that is down there. Further, we’ll ignore the enormous amounts of energy (and hence carbon dioxide emissions) required to pressurize and pump the gases around the province.
Instead, let’s focus on the opportunity cost associated with this use of tax dollars (i.e. what else could we do with the money). The federal and Alberta governments promised $865 million in up front subsidies: $745M from Alberta and $120M from the federal government for this project, which is estimated to cost $1.35 billion to construct and operate for 10 years.
Shell has lobbied hard for these subsidies. For example, if you read between the (redacted) lines of this document obtained under Access to Information legislation, Shell told the federal government that when it comes to CCS: "funding levels not enough and future uncertain; lack of carbon price makes economics 'dramatically short' of what is needed"
The result was that the provincial government offered an additional subsidy (on top of the $865 million). But this new subsidy undermines the overall goal of emissions reduction. Shell managed to negotiate a 2-for-1 GHG offset credit deal (they get 2 tonnes worth of offset credits for every tonne they bury). The net result is that this allows total allowable releases of GHGs from industrial emitters to go up (i.e. it effectively raises the "cap" - there is a good blog from the Pembina Institute that explains it here).
This will likely result in an additional $300 million in public subsidy (and possibly much more). If Shell buries 1 million tonnes of carbon dioxide per year (I’ve also seen 1.1 and 1.2 million tonnes/year, but let’s be conservative) from the Quest project, they will get 2 million tonnes worth of “offset” credits that they can sell within Alberta’s trading system. The current price for offset credits is $15/tonne (the current price in Alberta) = $30 million/year ongoing subsidy from the provincial government for this project for up to 10 years. That would bring the total subsidy to $1.165 billion, or 86 per cent of the total cost.
But as the Globe and Mail’s Nathan Vanderklippe discovered, Alberta is contemplating increasing the carbon price to $30/tonne which would mean Shell would get paid $1.465 billion for a project that costs $1.35 billion. And apparently Shell gets to keep the 2 for 1 deal until the carbon price rises to $40/tonne, with it scaling back to 1:1 when/if the price hits $80/tonne.
So to recap: Canadian taxpayers will hand over more than a billion dollars of public money to a multinational oil company, so that greenhouse gas emissions from industrial polluters in Alberta can go up.
It's not as if Shell lacks the resources to undertake this kind of project: their last Jackpine mine expansion cost $14 billion. Or that governments can encourage tar sands companies to do these kinds of things through regulations or (gasp) putting a price on pollution commensurate with the damage it causes.
Personally, I think that that is a billion dollars that could be better spent on accelerating the shift to more efficient vehicles and/or electric vehicles along with the renewable sources of energy like wind, solar and geothermal energy to power those vehicles. We need our governments to focus their efforts on accelerating the transition off of fossil fuels if we want to leave a healthy planet for our kids, not subsidizing some of the wealthiest corporations on the planet to keep doing what they're doing.
But that may be just me.