The Billion-Dollar Question

Canadian taxpayers are about to write one of the largest cheques in the country's climate policy history. The federal government has committed at least $103 billion over the next decade to subsidize carbon capture, utilization, and storage (CCUS) technology—a 50% investment tax credit designed to help oil and gas companies capture CO₂ emissions before they reach the atmosphere.

But as costs escalate and performance data disappoints, a contentious debate has erupted: Is carbon capture a necessary climate solution, or an elaborate wealth transfer from taxpayers to an industry reluctant to transition away from fossil fuels?

The Numbers Don't Add Up

Shell's Quest: A Cautionary Tale

Canada's flagship carbon capture facility offers a sobering reality check. Shell's Quest plant near Edmonton, operational since 2015, was supposed to capture 90% of emissions from its hydrogen production facility. Instead, independent analysis by Global Witness found it captured only 48% of emissions—and when accounting for the entire supply chain, the facility actually emitted 7.5 million tonnes of greenhouse gases while capturing just 5 million tonnes between 2015 and 2019.

The financial picture is equally troubling. Taxpayers have covered 93% of Quest's costs through $777 million in federal and provincial funding, plus another $406 million in carbon offset revenue. Under an agreement with Alberta, Shell received two tonnes' worth of emissions reduction credits for each tonne actually captured—a accounting practice that inflates the project's climate benefits.

The Cost-Benefit Disconnect

Carbon capture in Canada costs between $80 and $300 per tonne of CO₂, depending on the concentration in the waste stream. For oil and gas facilities, costs reach $200 per tonne for currently operating projects. Compare this to methane reduction at $17 per tonne, or renewable energy alternatives:

• Onshore wind power: $25–29 USD per tonne of CO₂ avoided
• Utility-scale solar: $25–29 USD per tonne of CO₂ avoided
• Carbon capture: $80–300 CAD per tonne

The Parliamentary Budget Officer projects the CCUS investment tax credit alone will cost $5.7 billion through 2027-28—nearly $1 billion more than Finance Canada estimated. By 2030, the credit could reach $9.1 billion, potentially climbing to $16 billion by its 2041 phase-out date. And those figures keep rising: the PBO's July 2024 report revised total clean economy tax credit costs to $103 billion over 2022-2035, $10 billion higher than Budget 2024 estimates.

For this investment, the federal government expects to reduce emissions by 15 million tonnes annually by 2030—at a cost to taxpayers of $100 per tonne. Meanwhile, Canada's eight commercial carbon capture facilities currently capture only 0.5% of the country's total annual emissions.

The Pathways Alliance: A $16.5-Billion Test Case

No project better illustrates the carbon capture debate than Pathways Alliance's proposed $16.5-billion CCS network in northern Alberta. The consortium of oilsands producers plans to capture CO₂ from over 20 facilities and transport it via a 400-kilometre pipeline to underground storage near Cold Lake.

On paper, it's ambitious. In practice, it's stalled.

Despite federal and provincial governments offering to cover up to 62% of construction costs (50% federal tax credit plus 12% Alberta credit), Pathways executives continue demanding more public money. Internal communications reveal the companies expect taxpayers to cover 50% of operating costs in perpetuity—a request for tens of billions in ongoing subsidies.

Then came June 2024. When federal anti-greenwashing amendments to the Competition Act took effect, Pathways Alliance scrubbed its entire website of carbon capture claims—a tacit admission the consortium couldn't substantiate its environmental promises. Behind closed doors, Pathways has told policymakers it harbours concerns about CCS "technology readiness" and "uncertainty," even while publicly championing the approach.

Most revealing: Pathways has stated its decarbonization efforts could enable increased oil production. The logic is perverse but honest—use taxpayer money to capture emissions so companies can extract and sell more fossil fuels.

The Industry Position: Subsidize or Else

The oil and gas sector's message to Ottawa is clear: provide massive, permanent subsidies, or carbon capture won't happen. This stands in stark contrast to renewable energy, which required government support only during initial development phases and now operates competitively without ongoing subsidies.

Pathways Alliance has actively opposed nearly every serious climate policy affecting its operations:

• The Oil and Gas Emissions Cap (called it "significantly higher than what is achievable")
• Clean Electricity Regulations
• Methane Regulations

The consortium wants subsidies without accountability—billions in public money with no binding emissions reduction requirements.

The Critics' Case: A "Billion-Dollar Scam"

Four hundred international scientists, academics, and energy analysts signed a letter to the Canadian government calling carbon capture subsidies a "scam" and warning that deploying the technology at climate-relevant scale is "a pipe dream." Even Green Party MP Elizabeth May has labelled it a taxpayer wealth transfer disguised as climate policy.

Their arguments are substantive:

1. Minimal Impact: After billions in subsidies since 2000, carbon capture has sequestered only 0.0004% of Canada's total emissions.

2. Enhanced Oil Recovery: Globally, 70% of captured CO₂ is pumped into depleted oil wells to extract more oil—creating more emissions than the technology prevents.

3. Energy Penalty: CCS increases facility energy demand by 15-25%, often powered by natural gas, effectively increasing net emissions.

4. Slow Cost Reductions: Despite 50 years of commercial use, CCS costs have declined far slower than solar (dropped 89% since 2010) or wind power.

5. Safety Risks: When a CO₂ pipeline ruptured in Satartia, Mississippi in 2020, concentrated carbon dioxide displaced oxygen, causing vehicles to stall and requiring 50 people to be hospitalized and the community evacuated.

6. Opportunity Cost: Every dollar spent on carbon capture is a dollar not invested in proven renewable technologies that cost less and work better.

The Supporters' Rebuttal: A Necessary Tool

The International Energy Agency (IEA) offers a more measured perspective. In its net-zero roadmap, the IEA identifies carbon capture as "virtually the only technology solution for deep emissions reductions from cement production" and other hard-to-abate industrial sectors.

The IEA projects carbon capture must contribute nearly 15% of cumulative emissions reductions to achieve global climate targets, eventually capturing and storing 9.5 gigatonnes of CO₂ annually by 2070. With over 700 CCUS projects now in development globally, including the European Union's goal of 50 million tonnes of capacity by 2030, momentum is building.

Proponents argue that industries like cement, steel, and chemical production have no viable alternative to carbon capture for deep decarbonization. Alongside electrification, hydrogen, and sustainable bioenergy, CCUS plays a specific role in sectors where emissions are inherent to industrial processes, not just energy sources.

The Canadian Context: Who Benefits?

Here's where the debate becomes distinctly Canadian. The federal CCUS tax credit overwhelmingly benefits Alberta's oil and gas sector—the same industry that has resisted emissions regulations, opposed carbon pricing, and lobbied against renewable energy policies.

Meanwhile, renewable energy developers receive far less support despite delivering faster, cheaper emissions reductions. A 2024 analysis found that transitioning Canada's electricity grids to net-zero by 2050 could save $15 billion annually in total energy costs, reducing household energy bills by an average of $1,500 per year.

Carbon capture effectively asks taxpayers in every province to subsidize Alberta's fossil fuel industry in perpetuity. For perspective, the $103 billion committed to clean economy tax credits (dominated by CCUS) exceeds Canada's entire annual healthcare transfer to provinces ($52 billion in 2024-25).

The Verdict: Context Matters

Is carbon capture a scam? The answer is nuanced.

For hard-to-abate industrial sectors like cement and steel, carbon capture may represent the only viable decarbonization pathway. These applications deserve targeted support.

For oil and gas production, the case is far weaker. When companies demand permanent taxpayer subsidies to continue extracting fossil fuels, plan to use captured CO₂ for enhanced oil recovery, and actively oppose other climate policies, it's difficult to view carbon capture as anything other than an industry lifeline funded by public money.

The scale of subsidies matters too. Canada's commitment of $103 billion to clean economy tax credits—heavily weighted toward CCUS—crowds out investments in proven renewable technologies that deliver better climate outcomes at lower cost. Recent studies show renewables reduce the economic value of carbon capture by 15-96% depending on the sector.

What Canadian Taxpayers Deserve

1. Strict Performance Requirements: No subsidies without binding, independently verified emissions reduction targets. If facilities underperform like Shell's Quest, clawback provisions should recover public funds.

2. No Enhanced Oil Recovery: Public money should not subsidize CO₂ used to extract more fossil fuels. Ban EOR eligibility for tax credits.

3. Cost Caps: Set maximum per-tonne subsidy rates tied to renewable energy costs. If carbon capture can't compete, it shouldn't receive unlimited support.

4. Transparent Accounting: Require full lifecycle emissions reporting, not just point-source capture rates. Include energy penalties and supply chain emissions.

5. Sunset Clauses: Phase out operating cost subsidies within 10 years. Mature industries should bear their own costs.

6. Reinvestment in Renewables: Redirect at least 50% of clean economy tax credits toward wind, solar, and grid modernization—technologies with proven track records.

The Bottom Line

Carbon capture is not inherently a scam, but Canada's approach to subsidizing it resembles one. When an industry demands tens of billions in permanent taxpayer support to marginally reduce emissions from operations that worsen the climate crisis, while cheaper, more effective alternatives exist, tough questions must be asked.

The $103 billion being committed to clean economy tax credits represents one of the largest industrial policy decisions in Canadian history. Taxpayers deserve evidence it will work—not industry promises, but verified performance data.

So far, that evidence is lacking. Until carbon capture projects can demonstrate they deliver climate benefits commensurate with their costs, and without enabling increased fossil fuel production, Canadians should view these subsidies with deep skepticism.

The climate crisis is real and urgent. But solving it requires investing in solutions that work, not subsidizing industries that resist change.