In Canada, decarbonization will require a massive program of atmospheric carbon removal.
First, we’ll need to remove carbon from the atmosphere to counteract emissions from sectors that will be too difficult or costly to decarbonize before 2050, like aviation.
Then, even after reaching net zero by 2050, we’ll need to pull carbon out of the air and sequester it in order to reduce levels of atmospheric carbon enough to stay below a 1.5°C increase in temperature by 2100.
Natural solutions like tree planting, better forest management, and regenerative agriculture can play an important role. But we’ll need much more carbon removal than these solutions can provide in order to meet our targets.
We’ll need negative emissions technologies like direct air capture (DAC) to get us to our net-zero goal by 2050. Canada should be acting now to develop the technologies that will be needed in the coming decades. Rising carbon prices can help to unlock them, along with other targeted measures.
Clean Prosperity has several recommendations on carbon removal.
Recommendation: Pursue natural carbon sequestration including through tree planting, better forest management, and regenerative agriculture.
Natural solutions—planting trees, restoring wetlands, soil sequestration—can play an important role in removing emissions. The federal government has committed to planting two billion trees, which could remove at least 3 Mt of emissions annually by 2030. The government should continue to expand efforts in this area.
The government should also increase support for farmers to conserve and restore degraded land. A quarter of Canadian farmland is considered to be degraded; a mix of afforestation, reforestation, and conservation could help sequester 22 Mt of emissions annually on this land according to a Corporate Knights analysis. The federal government could consider direct support to farmers to sequester this carbon, along the lines of the successful agricultural land use services model.
Recommendation: Accelerate the adoption of negative emissions technologies (NETs), in coordination with international partners, through a combination of policy actions that stimulate demand, reduce costs, advance research and development, and accelerate deployment.
Specifically, the NET sector needs:
- Direct procurement. The sector needs early adopters to create a market that will prove out the technology and help bring costs down. The federal government should play this role, ideally in partnership with the provinces or other countries. The government should conduct an annual procurement for carbon removal from 2022 through 2025. The contracts should pay a fixed rate per tonne and should last up to 30 years, the current lifetime of a DAC plant. Public procurement will not only help catalyze growth in the market, it will provide price discovery on the true costs of carbon removal.
- Tax credits to reduce costs and stimulate demand. The government should create a refundable and stackable carbon-removal tax credit of at least $100 per tonne, guaranteed for the lifetime of a DAC plant. This would be similar to the 45Q tax credit that is stimulating activity in the DAC market in the United States. In addition, there should be a limited-time investment tax credit of 30% for a DAC plant’s first 10-20 Mt of captured carbon. This will help to offset the high capital costs of early projects.
- Financing and loan guarantees. The government could help reduce the cost of capital through loan guarantees and/or directing the Canada Infrastructure Bank to prioritize existing funding for large-scale NET projects. The Bank’s current focus does not include carbon removal technologies.
- Support for research and development. Funding could be directed to basic research, process improvements, and demonstration projects for direct air capture and other promising carbon removal technologies. The National Academies of Science has proposed that the US government spend up to US$240 million annually on negative emissions technologies. For Canada to keep up, it should consider allocating $25-50 million for its own program.
- Enabling policies including compiling geologic data to identify suitable sites for carbon sequestration, clarifying liability for ensuring that sequestered CO2 stays in the ground, and clear and efficient permitting. Clarity in these areas will make the market more attractive to private investment.