No market for carbon capture, studies show

Transalta pulls funding after concluding price of emission reduction is insufficient

CALGARY – The poster child of federal and provincially funded incentives to cut industrial carbon emissions and curry favour in the international community was orphaned by its corporate proponents Thursday.

Trans Alta Corp., lead partner in the $1.4-billion Pioneer carbon capture and storage project, said initial studies indicated there is not enough of a market for carbon dioxide to justify the expense.

“An essential part of this project was to prove the technical and economic feasibility of (carbon capture and storage) before we made a major capital commitment,” chief executive Dawn Farrell said Thursday.

“We have concluded through that study that the technology works, and the capital costs are in line with our expectations. However, the market for CO2 sale and the price of emission reductions are not sufficient at this time to allow the project to go ahead.”

Carbon capture and storage has been heralded by global experts as an essential strategy to reduce greenhouse gas emissions linked to climate change, but has yet to become commercial on a large scale in North America.

The Pioneer project, forwarded by energy producers Transalta, Capital Power Corp. and Enbridge Inc., was one of four major alberta carbon dioxide reduction initiatives funded by federal and provincial governments.

The project involved using chilled ammonia to strip carbon dioxide out of emissions from Transalta’s new Keephills 3 coal-fired generation station. The gas then would have been used to enhance oil production by injecting it into mature wells, as well as stored in deep saline aquifers.

Transalta estimated the technology would eliminate 1 million tonnes of greenhouse gas a year.

Environmental think-tank Pembina Institute called the decision to cancel Pioneer a blow to Canada’s fight against climate change, noting it was only one of the four to involve coal-fired generation – the largest cause of carbon emissions in the province.

“It’s a big setback,” said spokesman Chris Severson-Baker. “The government of Canada has failed to implement climate policy that creates the right kind of incentive for this kind of application of (carbon capture), it has failed to implement policies that create a price on carbon.”

The Calgary-based generator, one of the largest industrial emitters in the province, said it found no firm buyers for the carbon dioxide to be captured at the plant. TransAlta noted there is, as yet, no cap-and-trade system that would let the company and its partners sell emission-reduction credits.

“Two things were instrumental in our decision,” said Don Wharton, vice-president for policy and sustainability at Transalta. “One was the lack ... of a suitable price for the pure CO2 created by the project. The second was the uncertainty around the value of emission reductions that would be created by Project Pioneer under regulatory frameworks that are still being developed.”

Industry observers estimate carbon emissions need to cost emitters between $30 U.S. and $70 U.S. per tonne to make carbon capture and storage economical.

The company received $779 million in federal and provincial funding toward Pioneer, to have been spread over 15 years, as part of strat- egies by Ottawa and Alberta to reduce carbon emissions. Prime Minister Stephen Harper was on hand in October 2009, when the funding was announced, saying then such projects “will define the future of this industry.”

Ottawa has backed away from the so-called cap-andtrade system used in Europe to set limits on emissions at one level and trade carbon credits another. The federal government now is close to finalizing regulations that will allow coal-related projects completed before 2014 to operate until the end of their economic lives, or 45 years, without carbon capture.

Federal Natural Resources Minister Joe Oliver said the Canadian government was “disappointed” by TransAlta’s decision, but it would continue exploring carboncapture and storage technology to reduce greenhouse gas emissions. A federal official said that none of the funding out of $315.8 million allocated to the government’s Clean Energy Fund had actually been spent, but all options were being considered.