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Federal government’s emission-reduction plan will cost Canadian workers $6,700 annually by 2030—while failing to meet government’s emission-reduction target

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From the Fraser Institute

By Ross McKitrick

The federal government’s plan to reduce greenhouse gas emissions will impose significant costs on Canadians—while also failing to meet the government’s own emission-reduction target, finds a new study published today by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.

“The government’s plan will significantly hurt Canada’s economy and cost workers money and jobs,” said Ross McKitrick, professor of economics at the University of Guelph, senior fellow at the Fraser Institute and author of The Economic Impact and GHG Effects of the Federal Government’s Emissions Reduction Plan through 2030.

The government wants to reduce greenhouse gas (GHG) emissions to 40 per cent below 2005 levels by 2030. To meet this target, the government has enacted a series of policies including the federal carbon tax, clean fuel standards and various other GHG-related regulations such as energy efficiency requirements for buildings,
fertilizer restrictions on farms, and electric vehicle mandates.

The study finds that these combined policies will only reduce GHG emissions by an estimated 57 per cent of the government’s 2030 emission-reduction target.

And crucially, by 2030 these policies will:

• reduce Canada’s GDP by 6.2 per cent
• cost $6,700 per worker annually
• reduce employment in Canada by 164,000 jobs

“This poorly-designed plan, which will worsen the current downward trends in productivity and income, will reduce emissions but at a cost many times higher than the government’s estimated benefits,” McKitrick said.

  • The federal government has set a GHG emissions reduction target of at least 40% below 2005 levels by 2030, equivalent to 38.5% below 2022 levels.
  • This report examines proposed policies aimed at achieving these goals and evaluates their potential impact, aiming to address the gap left by the federal government’s lack of efforts in this matter.
  • The paper uses a peer-reviewed macroeconomic model to assess the federal government’s Emissions Reduction Plan (ERP), including carbon pricing, Clean Fuel Regulations, and other regulatory measures such as EV mandates.
  • It is estimated that the ERP will reduce Canada’s GHG emissions by about 26.5% between 2019 and 2030, reaching approximately 57% of the government’s 2030 target, leaving a substantial gap.
  • The implementation of the ERP is expected to significantly dampen economic growth, with a projected 6.2% reduction in Canada’s economy (i.e., real GDP) compared to the base case by 2030.
  • Income per worker, adjusted for inflation, is forecasted to stagnate during the 2020s and decrease by 1.5% by 2030 compared to 2022 levels.
  • The ERP costs $6,700 per worker annually by 2030, which is more than five times the cost per worker compared to the carbon tax alone.
  • Overall, while the federal ERP will contribute to reducing GHG emissions, it falls short of meeting the 2026 or 2030 targets and imposes significant economic burdens on Canadian households. Additionally, due to the high marginal cost of many regulatory measures, the ERP plan is costlier than it needs to be for what it will accomplish.

Adobe PDF Read the Full Report

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Carney should rethink ‘carbon capture’ climate cure

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From the Fraser Institute

By Kenneth P. Green

In case you missed it amid the din of Trump’s trade war, Prime Minister Carney is a big believer in “carbon capture and storage.” And his energy minister, Tim Hodgson, who said it’s “critical to build carbon capture systems for the oilsands,” wants the Smith government and oilsands companies to get behind a proposed project (which hasn’t been unable to raise sufficient private investment) in Cold Lake, Alberta.

The term “carbon capture and storage” (or CCS) essentially refers to technology that separates carbon dioxide (CO2) from emissions and either stores it or uses it for other products. Proponents claim that CCS could replace other more ham-handed climate regulations such as carbon taxes, emission caps, etc. The problem is, like many (or most) proposed climate panaceas, CCS is oversold. While it’s a real technology currently in use around the world (primarily to produce more oil and gas from depleting reservoirs), jurisdictions will likely be unable to affordably scale up CCS enough to capture and store enough greenhouse gas to meaningfully reduce the risks of predicted climate change.

Why? Because while you get energy out of converting methane (natural gas) to CO2 by burning it in a power plant to generate electricity, you have to put quite a lot of energy into the process if you want to capture, compress, transport and store the attendant CO2 emissions. Again, carbon capture can be profitable (on net) for use in producing more oil and gas from depleting reservoirs, and it has a long and respected role in oil and gas production, but it’s unclear that the technology has utility outside of private for-profit use.

And in fact, according to the International Institute for Sustainable Development (IISD), most CCS happening in Canada is less about storing carbon to avert climate change and more about stimulating oil production from existing operations. While there are “seven CCS projects currently operating in Canada, mostly in the oil and gas sector, capturing about 0.5% of national emissions,” CCS in oil and gas production does not address emissions from “downstream uses of those fuels” and will, perversely, lead to more CO2 emissions on net. The IISD also notes that CCS is expensive, costing up to C$200 per tonne for current projects. (For reference, today’s government-set minimum carbon market price to emit a tonne of CO2 emissions is C$95.) IISD concludes CCS is “energy intensive, slow to implement, and unproven at scale, making it a poor strategy for decarbonizing oil and gas production.”

Another article in Scientific American observes that industrial carbon capture projects are “too small to matter” and that “today’s largest carbon capture projects only remove a few seconds’ worth of our yearly greenhouse gas emissions” and that this is “costing thousands of dollars for every ton of CO2 removed.” And as a way to capture massive volumes of CO2 (from industrial emission streams of out the air) and sequestering it to forestall atmospheric warming (climate change), the prospects are not good. Perhaps this is why the article’s author characterizes CCS as a “figleaf” for the fossil fuel industry (and now, apparently, the Carney government) to pretend they are reducing GHG emissions.

Prime Minister Carney should sharpen his thinking on CCS. While real and profitable when used in oil and gas production, it’s unlikely to be useful in combatting climate change. Best to avoid yet another costly climate change “solution” that is overpromised, overpriced and has historically underperformed.

Kenneth P. Green

Senior Fellow, Fraser Institute
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Alberta

World’s first direct air capture test centre to open doors in Innisfail

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From the Canadian Energy Centre

By Grady Semmens

Deep Sky Alpha facility will trial technologies that suck CO2 from the sky

Innisfail, Alta. is set to host the world’s first test centre for technology that removes carbon dioxide directly from the air to fight climate change.

This June, Montreal-based Deep Sky completed construction of a $110-million carbon removal innovation and commercialization centre in the town about 120 kilometres north of Calgary.

It is a key piece of the company’s vision to build 100 large-scale facilities across Canada and become a pioneer in the emerging market for direct air capture (DAC) technology.

“As of this summer, we will begin not only carbon removal, which is actually sucking it out of the air through these very powerful fans, but also liquefying it and then putting it underground for storage,” Deep Sky CEO Alex Petre told CTV News.

Work began in August 2024 on the project known as Deep Sky Alpha, which aims to begin testing up to 10 different DAC technologies in real-world conditions. It is expected to be up and running this August.

The Government of Alberta is investing $5 million in the facility through Emissions Reduction Alberta.

The Deep Sky Alpha direct air capture test facility in Innisfail, Alta. Photo courtesy Deep Sky

Deep Sky’s facility will capture up to 3,000 tons of CO2 per year over the next 10 years, with room for future expansion.

Captured CO2 will be transported by tanker trucks about 200 kilometres north to Sturgeon County where it will be injected more than two kilometres below the surface into the Meadowbrook Carbon Storage Hub.

Operated by Bison Low Carbon Ventures, the project is the first approved under Alberta’s open-access carbon sequestration hub initiative and is expected to begin operations before year-end.

“We’re going to line up these eight units side by side and run them to see how they operate in the summer and in the cold of winter,” said Damien Steel, former Deep Sky CEO who continues to serve as a company advisor.

“We’ll be tracking everything to see how all these best-in-class technologies compare – what are their strengths and weaknesses – so that ultimately we can choose the best solutions to scale up for the major commercialization of carbon removal projects that are needed.”

Unlike typical carbon capture and storage (CCS) projects that scrub CO2 from the exhaust of heavy industrial facilities such as power plants, refineries, cement plants or steel mills, DAC utilizes different technology to remove much lower concentrations of CO2 directly from the atmosphere.

According to the International Energy Agency (IEA), there are 27 DAC plants operating worldwide, capturing almost 10,000 tonnes of CO2 per year. In order to reach net zero emissions by 2050, the IEA estimates DAC capacity must expand to more than 60 million tonnes per year by 2030.

Deep Sky selected Alberta for its test facility because of the province’s experience with CCS, including its advanced regulatory system for CO2 sequestration.

“To be successful at carbon removal you need three things: you need access to geologic storage, you need talent, and you need a reliable supply of renewable power to operate DAC facilities. Canada is blessed with these things, and Alberta especially has all of these attributes in spades,” Steel said.

Deep Sky Alpha is one of several clean tech projects underway in a five-acre industrial park in Innisfail as part of an economic diversification plan that was launched in 2022 to make the town a centre for energy innovation.

A municipal solar farm and a power plant that burns garbage and will be equipped with CCS to eliminate emissions are also under development.

Deep Sky says that more than 110 jobs were created during the construction phase of its Innisfail project and it will employ 15 people for annual operations.

Subsequent commercial plants it hopes to build across Canada will employ approximately 1,000 workers for construction and 150 for annual operations.

Steel said he expects the DAC test facility will become a destination for those looking to advance CCS projects around the world, showcasing Canadian expertise in the process.

“My hope is that not only will we learn and improve carbon removal technology, but we will also put Canada on the map in terms of being a place where innovation can thrive and this industry can work,” he said.

“It will be a place where corporate leaders, government officials and customers from around the world can come and see what direct air capture really is, how it works, and how Canada is the place to do it.”

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