Leading up to and following the COP 26 conference in Glasgow in November 2021, Canada made numerous commitments to reduce greenhouse gas (GHG) emissions. Like other countries and jurisdictions (at COP 26 over 40 countries committed to accelerating clean technology innovation and deployment) Canada’s plan for achieving these GHG reductions relies heavily on innovations and emerging technologies. The Canadian government has itself noted that 50 per cent of the global GHG emissions reductions required by 2050 will need to come from commercially available clean technologies that are still in early stages of development. The identification, support and ultimately funding of these technologies was a significant trend in Canadian energy policy, investment and public interest in 2022.
In advance of COP 26, Canada announced its Nationally Determined Contributions (NDC) which are its general GHG reduction targets under the Paris Agreement. These NDC included commitments to cut emissions by 40 per cent to 45 per cent below 2005 levels by 2030 (approximately 406.5 to 443.4 Mt CO2e) and to achieve net zero emissions by 2050. In March 2022, the Federal Government delivered its 2030 Emissions Reduction Plan (the Plan), which sets out the more specific tactics for Canada to meet the 2030 reduction commitments set out in its NDC. While the Plan outlines policies and strategies affecting a range of sectors including buildings, transportation, oil and gas, and electricity, and proposes numerous measures including carbon pricing and clean fuel standards, there is a strong reliance on emerging technologies and innovations to achieve the objectives of the Plan. The following innovations and technologies garnered significant attention and funding in 2022:
Carbon capture use and storage (CCUS) - CCUS is a crucial component of most plans to achieve net zero by 2050, including plans of the UN Intergovernmental Panel on Climate Change and the International Energy Agency. The capture of CO2 from industrial or power applications and its use in products such as concrete and low carbon synthetic fuels, or its storage in underground geological formations, is not only considered a means of reducing emissions, it is also a cornerstone of the blue hydrogen strategies previously rolled out by Canada, Alberta, Ontario and British Columbia.
Significant investments and advancements in CCUS were made in 2022. In March and October 2022, the Alberta government requested, evaluated, and selected for further evaluation, 25 proposals to develop carbon sequestration hubs in the province. During 2022, the Federal Government solicited input on, and outlined details of, an investment tax credit (the CCUS Tax Credit), which will apply to investments in equipment for CCUS projects that permanently store captured CO2 (the CCUS Tax Credit is expected to cost approximately $1.5 Billion annually and may be expanded to cover additional costs and investments). Numerous other investments and tax incentives, including funds for studies and projects provided by entities such as Emissions Reduction Alberta and Alberta Innovates, were also announced in 2022. Governments were also keenly aware of the competing incentives and credits available in the U.S. through the Inflation Reduction Act.
Direct air capture (DAC) Direct Air Capture technology captures and uses carbon dioxide from the atmosphere using industrial-sized fans to remove carbon for subsequent storage under ground or for alternative use. To be economically viable it must be close to renewable energy sources. In 2022, the Federal Government incentivized DAC by including it as an eligible investment for the CCUS Tax Credit. Funding was also available from entities such as Emission Reduction Alberta and Alberta Innovates. Leading Canadian DAC companies such as Carbon Engineering Ltd also benefitted from investments from Air Canada, BMO and others in 2022.
Hydrogen – In 2022, Federal and provincial governments built on their respective previously announced hydrogen strategic plans by making significant investments in hydrogen production projects (including $475 million of public funding to support the Air Products Alberta Hydrogen Energy Complex), and in hydrogen blending projects (notably Enbridge in Ontario and ATCO in Alberta). In August 2022, Canada and Germany signed a joint declaration of intent to establish a hydrogen alliance. The Federal Government also proposed to establish a Clean Hydrogen tax credit (Clean Hydrogen Credit) for investments starting in 2023, although many details of the Clean Hydrogen Credit remain to be determined.
Small Modular Reactors (SMR) – SMRs have a lower capital costs than large nuclear reactors, but need to demonstrate scalability. Building on its December 2020 SMR Action Plan to set next steps to develop and deploy this technology, the Federal Government announced in October 2022 that it will, through the Canada Infrastructure Bank, provide $970 million in financing to Ontario Power Generation towards development of a 300 MW commercial grid scale SMR. Similarly, in March 2022, the governments of Ontario, Alberta, Saskatchewan and New Brunswick announced a joint strategic plan for the development and use of SMR.
Fusion - Fusion, which creates energy by combining two atoms (usually hydrogen isotopes), is dispatchable which means it does not rely on environmental variables like the sun or wind, and creates no carbon emissions or long term waste. However, so far, fusion machines have not been viable as a technological path to net zero since the energy input to power the reaction has exceeded the energy produced. However, in December 2022, the National Ignition Facility in California announced that they had produced for the first time more energy in a fusion reaction than was used to ignite it. This remarkable breakthrough is a tremendous milestone in producing clean energy. Work still remains in order to repeat and perfect the process, nurture the supply chain, develop scaled prototypes, establish a regulatory framework and solicit financing. Nevertheless, prudent energy leaders and policy makers will need to consider fusion as a new potential pathway to achieve net zero targets in the mid to longer term.