After almost two years of waiting, legislation to enable Canada’s two Clean Technology Tax Credits is expected shortly. With this in mind, CleanTech North, an educational convenor for the clean technology industry, presented an informative webinar with a focus on the Carbon Capture, Utilization and Storage (CCUS) credit, exploring its details, and featuring adopters of technology, as well as some of the companies developing it.

The CCUS ITC will offer a refundable Investment Tax Credit (ITC) of up to 60 per cent on capture equipment using direct ambient air, 50 per cent on other capture equipment, and 37.5 per cent on qualified carbon transportation, storage or usage equipment. Expenditures incurred after 2021 are eligible and the ITC rates will be reduced by half from 2031 to 2040 and fully phased out after 2040. Labour requirements must be met to maximize ITC rates.

Bill C-59, introduced in late 2023, is currently in third reading in the House of Commons. Budget 2024 stated Royal Ascent target of June 1, 2024. This remains on track with a vote and third reading expected any day, followed by a rapid passage through Senate.

“There are some noteworthy developments when it comes to the CCUS ITC environment,” said Bryan Watson, who represents CleanTech North, the Ontario Technology Industry Association (OCTIA), and Venbridge, among other ventures. (Watson wears many hats.)

Watson outlined the following developments:

  • Federal ITC – Expanded to include dual use equipment that produces heat and/or power or uses water that is used for CCUS as well as another process. British Columbia joins Alberta and Saskatchewan as eligible jurisdiction for subsurface sequestration; all of Canada is in play for concrete storage with the stated 60 per cent permanently mineralized minimum threshold set.
  • Budget 2024 updates – CCUS considerations are included in the Budget 2024 proposal for Clean Electricity ITC for natural gas electricity/heat generation with carbon capture. Stacking of ITCs is not applicable, so expenses for CCUS elements of a Clean Electricity project is only eligible for one tax credit, i.e., CCUS ITC.
  • Still lagging – There has been limited progress on contracts for differences through the Canada Growth Fund – confined currently to Entropy at $86.50/tonne for 15 years. Natural Resources Canada (NRCan) pre-approval application documents remain unpublished, as are prescribed tax forms from the Canada Revenue Agency.
  • Alberta Carbon Capture Incentive Program (ACCIP) – Announced in Fall 2023 to mirror existing APPIP grants, a 12 per cent grant on eligible CCUS expenditures stackable with Federal ITC. Expanded guidance from Alberta government last month signals intention of Alberta to also support EOR as a valid utilization case, and potential to allow geological analyses (Class 59) and drilling & completions of storage wells (Class 60) expenditures in calculation. Legislation expected to follow Federal CCUS ITC legislation.
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A select assortment of cleantech companies also joined the conversation.

Deep Sky, the first Canadian backed gigaton-scale CDR commercial venture is focused on renewable energy, carbon capture, geological storage and distribution, with a view to leverage Canada’s unique assets to capture and store 1,000+ GT of carbon dioxide. The direct capture machines absorb carbon dioxide molecules in selective materials from ambient air and ocean water. The captured carbon is then safely and permanently sequestered.

Enbridge Gas Inc., North America’s largest natural gas storage, transmission and distribution company, is exploring carbon dioxide utilization opportunities in wastewater treatment, greenhouse yield boosts, mineralization, and more. Currently, the only eligible carbon dioxide use method for ITC credit is through permanent storage in concrete. A pilot project at the Enbridge Gas Office includes carbon capture from flue gases and waste heat recovery.

Carbon Upcycling presented its end-to-end carbon management solution that captures carbon dioxide emissions and utilizes them to transform low-value industrial waste into a local source of high-performance SCMs. The tech features a low-energy, all-electric system, local SCM production from industrial byproducts, rapid installation in a two-year build cycle, and has been commercially proven for more than three years. The three-step process includes material processing, carbonation, and material integration.

Hyperion Energy presented a unique carbon recycling system that removes 98% of carbon dioxide from stack emissions and is targeting a mineral market worth an estimated $44 billion. This circular carbon system includes three key steps: drop-in unit captures carbon dioxide from plant stack, a patented process cleans and converts gas to mineral, and the reuse or sale of high purity minerals.

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Key takeaways

What is Eligible? Capital equipment for direct air capture (60%), other capture, and eligible transport, storage, and use equipment.

Amount of ITC? 18.75-60% depending on year and type of expenditure including equipment, front-end engineering design directly towards carbon capture, carbon transportation, storage and use

Important Dates? Apply retroactively to January 2022 to 2040

Featured image credit: Deep Sky

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