Bill C-262 (Historical)

An Act to amend the Income Tax Act (capture and utilization or storage of greenhouse gases)

This enactment amends the Income Tax Act to establish a tax credit for the capture and utilization or storage of certain greenhouse gases.

Income Tax Act

[Robert Gordon Kitchen, Conservative, Souris—Moose Mountain, SK]

Madam Speaker, it is always an honour to rise on behalf of the constituents of Souris—Moose Mountain.

I am happy to speak today on Bill C-262, and I would like to thank my colleague, the member for Calgary Centre, for introducing it.

Carbon capture, utilization and storage, or CCUS, is something that I personally have been championing since I was first elected as an MP in 2015. To me, it is a clear way forward when it comes to protecting the environment while also ensuring that we are supporting Canada's economy.

My hometown of Estevan in Saskatchewan is home to SaskPower's Boundary Dam, a CCUS facility. It is the world's first CCUS facility to be fully integrated with the coal-fired power plant. The development and implementation of CCUS on Unit #3 of Boundary Dam established Canada as a world leader in this emissions-reducing technology, and this bill would go a long way to expand CCUS into other regions and industries in this country.

I have been fortunate to tour the Boundary Dam facility a number of times throughout my time as an MP, and I am always thoroughly impressed by their hard work. Since the CCUS facility went online in October 2014, over four million tonnes of CO2 have been captured and sequestered, which is the equivalent of one million cars being taken off the road. Also, there is storage space for over 400 billion tonnes in the Alberta and Williston basins. Thanks to this incredible technology, these emissions have been captured and put to use in other industries, such as oil and gas with enhanced oil recovery.

Furthermore, the fly ash that is created as a by-product of the process is captured and sold as a necessary component for things like cement production. Modern's concrete contains about 25% fly ash, a cementitious content, reducing its emissions. We know that this technology is a proven solution to reducing global greenhouse gas emissions.

The International Energy Agency has listed CCUS as the third most important measure needed for the world to meet its Paris agreement targets. Therefore, the assertion that this is one of the best ways to reduce emissions going forward is valid and has been extensively researched. However, the issue that Canada faces now is a lack of incentive for private investment, but Bill C-262 aims to address this matter through the development of a tax credit.

As I stated earlier, Canada has always been seen as a world leader in the development and implementation of CCUS. However, that has started to shift over recent years. Our American neighbours to the south have a measure called the “45Q”, which allows the sharing of tax credits associated with the cost required for the successful capture, utilization and storage of CO2 emissions. This tax credit has been widely successful in the U.S. to the point that it has driven private investment away from Canada due to the lack of competitive policies on our end. This is unacceptable, especially considering the need to revitalize Canada's economy in every way we can following the COVID-19 pandemic. I am very pleased that my colleague has introduced the bill in an attempt to level the playing field and rectify this situation.

In its policy paper of July 2020, the Energy Future Forum stated the following with respect to Canada's involved in CCUS. It said:

It is critical that Canada maintain and advance its leadership position in carbon capture. It must be understood as part of a broader strategy to sustain our comparative advantage as a leading energy-exporting nation and reliable, responsible resource developer. Our commitment to the ongoing reduction of emissions and the attainment of the highest levels of the environment, social and governance standards and performance, must be evidenced in our industry activities. This carbon capture policy initiative points to a serious opportunity for government and industry collaboration.

I emphasize that the bill and the discussion surrounding it are a necessary and long overdue first step towards wider-scale use of CCUS technology across multiple industries. Again, it is a first step, and while much more will need to be done to fully integrate CCUS into the fabric of Canada's emissions reduction policies, we need to start somewhere.

Unlike the Liberals who just continue to introduce ineffective measures like their carbon tax, we Conservatives understand that Canada can, once again, become a world leader in CCUS so long as we can provide the proper incentives for investment.

I would like to summarize the recommendations that were made by the Energy Future Forum in its policy paper, which I mentioned earlier.

One, the federal government and provincial governments should clearly signal that CCUS is integral in Canada's climate change policy framework.

Two, the federal tax policies should meet or exceed the U.S. measures such as the aforementioned 45Q tax credit in order to attract private investment to Canada.

Three, that the federal and provincial governments work together to establish stackable tax credits with respect to CCUS.

Four, that the Canada Infrastructure Bank standards reward carbon reduction strategies in the allocation of capital.

Five, that all levels of government work together to implement a strong regulatory framework.

Six, that we create financing vehicles such as a green transition bond, public-private partnerships and equity investments by federal and provincial governments in the Canada Infrastructure Bank to help attract private investment into the CCS sector.

These recommendations provide a solid basis for encouraging and increasing private sector investment into CCS technology in Canada, and it is clear now is the time to act.

The Liberals have failed to show any meaningful leadership on this issue, despite industry stakeholders calling for it. To put it bluntly, they talk the talk, but they do not walk the walk. We see this when major companies continue to choose to do business in the U.S. rather than in Canada.

We know the landscape of Canadian and energy production and emissions reduction is always changing, and this is something I see in my riding day in and day out. As the world moves away from coal-fired power, we need to ensure there are viable options for those whose industries and jobs will be transitioning as well. This includes power plant workers, miners, geologists and many more. Unfortunately, they have received little or no help from the government, despite Liberals' promises to the contrary.

The Canada coal transition initiative committed to help with the transition through measures such as pension bridging, but we have yet to see any such program be implemented. This leaves many Canadians uncertain about their futures, something that could be at least partially offset by encouraging investment into CCUS technology.

The construction of a CCUS facility alone has the potential to create hundreds of jobs, with many continuing on a more permanent basis for the management and maintenance of such facilities. Not only is this creating good, high-paying, private industry jobs for those directly employed in CCUS, it also bolsters the local economies where these facilities are located.

We also know, thanks to “The Shand CCS Feasibility Study”, conducted by the International CCS Knowledge Centre, that CCUS is becoming more affordable. Implementing CCUS technology on the Shand Power Station in my riding, in comparison to the cost of the Boundary Dam facility, could be done at 67% less per tonne of CO2 capture, a significant reduction thanks to the lessons learned from the building and operation of CCUS unit 3.

The cost of capture of CO2 would be $45 U.S. per tonne, which is far less than the $170 per tonne the Liberals are implementing, regardless of the exchange rates. As mentioned, cement factories are some of the heaviest emitters worldwide. The CCUS by-product of fly ash could reduce their emissions up to 25%.

CCUS can also be used to reduce emissions in steel production, another major Canadian resource. It is a simple fact that opportunities for sequestration in Canada are considered some of the best in the world, and we must take full advantage of that by incentivizing investment.

This bill and this tax credit would do just this that. Given the Liberals' assertion that the environment and the economy must go hand in hand, it would be logical that they support this important first step toward large-scale investment into CCUS projects.

According to an assessment provided by industry stakeholders, and modelling by Capital Power, the deployment of six CCS plants would result in roughly $1.4 billion in foregone tax revenue. At the same time, it would lead to approximately $5.5 billion of private sector investment, with six megatonnes of greenhouse gas emissions being captured each year.

We know the economic impact is substantial, with projections stating that just a few CCS projects over four years would generate $2.7 billion in GDP across Canada and support 6,100 jobs. However, we, as the opposition, are unable to do this alone. Given the importance of reducing our greenhouse gas emissions to all the parties in this House, I would hope and encourage that we come together and make this initiative a real priority.

Canadians expect their government to do what is best for them, and Bill C-262 would help secure the future and health of our economy, while also addressing the issue of emissions reduction. I therefore call on members of the House to support this bill and help to move Canada's leadership in this technology forward.

[Mark Gerretsen, Liberal, Kingston and the Islands, ON]

Madam Speaker, I am pleased to rise today to take part in the debate on a private member's bill, Bill C-262. I would like to make to clear from the outset that our government fully recognizes the importance of deepening and accelerating the actions needed to fight climate change.

In this regard, we appreciate the intent of the proposed legislation that is the subject of our debate today. By capturing carbon dioxide emissions from large industrial facilities before they are released into the atmosphere, carbon capture, use and storage technologies will play an important role in helping Canada exceed its 2030 Paris Agreement emissions reductions target. They have the potential to significantly reduce emissions from heavy industrial processes where other emission-reducing alternatives may be limited.

That is why, as part of the strengthened climate plan we announced in December, our government is proposing to develop a comprehensive CCUS strategy and explore other opportunities to help keep Canada globally competitive in this growing industry. It is important that we do so in a way that is fair for all Canadians, takes into account the views of stakeholders and is effective in achieving its objectives. It is here, in this regard, that Bill C-262 falls short. As the saying goes, the devil is in the details. I would like to take a moment to consider some of the troublesome details apparent in this bill.

The tax credit proposed in Bill C-262 would be equal to the amount of captured carbon dioxide or carbon monoxide emissions in tonnes, multiplied by the price of the excess emissions charged for a carbon dioxide equivalent under Canada's output-based pricing system. As we know, the OBPS is part of Canada's carbon pricing framework that applies to industrial emitters, with charges set at $40 per CO2 equivalent tonne in 2021 and $50 per CO2 equivalent tonne in 2022.

Unlike the carbon capture tax credits in the United States, Bill C-262 would not impose time limits on the availability of the tax credit. What does this mean? It means that, because the value of the proposed tax credit is linked to excessive emission targets, its value could increase significantly if the OBPS excess emissions charge under the Greenhouse Gas Pollution Pricing Act were to increase as anticipated under our proposed plan to strengthen Canada's carbon pricing framework beyond 2022.

If the excess emissions charge were to increase by $15 annually from $50 per tonne in 2022 to $170 per tonne in 2030, this would lead to a situation where the government is very heavily subsidizing, or even more than fully subsidizing, certain projects that employ CCUS. This is the point at which incentives, if not properly designed, can become perverse and encourage an unproductive gaming of the system by businesses at the taxpayers' expense.

The bill also appears to be open to accommodating the international trade of physical CO2, as it refers not only to Canadian federal and provincial laws in this respect, but also to U.S. laws. This suggests the measure would allow for the import into Canada of physical CO2 for storage or use in Canada without requiring the capture of that CO2 to have been in Canada. This would clearly undermine the credit's ability to meet our government's objective of reducing Canadian emissions.

Bill C-262 also proposes that multiple types of use would be eligible for the tax credit, including storage through conversion, and use for any other purpose for which a commercial market exists. It is not clear how the use of CO2 for any proposed commercial purpose would reduce Canadian emissions. In fact, some commercial uses could result in CO2 being reintroduced into the atmosphere. What is more, the bill's definitions of “utilization” and “qualifying corporation” suggest the credit would be accessible to all existing and operating facilities, and not just those that are developing and expanding their CCUS capacities.

By providing a windfall for existing operations, which may have already received significant federal and provincial support, the bill does not fully leverage our capacity to encourage the adoption of these technologies to meet our CO2 reduction goals.

As I said, while the bill is commendable in its objectives, it is severely flawed in its execution. It is in this regard that our government can offer a better way forward. Canada's strengthened climate plan, a healthy environment and healthy economy, proposes measures to cut energy waste, provide clean and affordable transportation to power, build Canada's clean industrial advantage and support nature-based climate solutions.

It also proposes to put a price on pollution through to 2030. The plan is supported by an initial $15-billion investment, which will create jobs, grow the middle class and support workers in a stronger and cleaner economy. This is in addition to the Canada Infrastructure Bank's $6 billion for clean infrastructure that was announced in the fall.

Under our plan, CCUS projects would benefit from credits that are generated under carbon pricing regimes and the clean fuel standard if projects reduce the carbon intensity for fuel suppliers. The plan also provides direct support that may be available for CCUS investments through the new net-zero accelerator, which will provide $3 billion over five years via the strategic innovation fund. The fund is expected to face high demand as it aims to rapidly expedite decarbonization projects with large emitters, scale up clean technology, and accelerate Canada's industrial transformation across all sectors.

Certain projects could also be complemented by funding under the $1.5 billion low-carbon and zero emissions fuels fund to increase the production in use of low-carbon fuels. As well investments by Sustainable Development Technology Canada will support advancement of pre-commercial clean technologies.

In conclusion, it is important that governments continue to work with stakeholders to determine the best approach to leveraging CCUS technology in Canada. It is also important that these efforts are advanced through the budget process, which enables the government to fully consider trade-offs, balance priorities and undertake new fiscal commitments only to the extent that they are effective, fair and affordable, and when no better alternative is identified.

As I have made clear today, it is precisely in these regards that Bill C-262 falls short. That is why the government cannot support it.

[Kristina Michaud, Bloc, Avignon—La Mitis—Matane—Matapédia, QC]

Madam Speaker, I will not beat around the bush. The Bloc Québécois will be voting against Bill C-262. My colleague from Jonquière said as much before me.

We will vote against the bill for one very simple reason. We refuse to provide this type of subsidy for fossil fuels and non-renewable energy. That is what Bill C-262 is about. It is a new subsidy for fossil fuels disguised as a tax credit. Let us be clear. Some subsidies can be effective for fighting climate change. However, tax breaks for carbon capture and storage, which is what Bill C-262 provides, are not effective.

In this case, the captured carbon is actually being used to continue extracting oil and extend the lifespan of aging reservoirs. In addition to being ineffective in terms of protecting the environment, the proposed measure is unfair to taxpayers. Quebeckers' money should not be going to fill the coffers of Canadian oil companies. To encourage businesses to capture and store carbon, we must increase the price per tonne of carbon. It is no secret that there should be a financial cost to polluting for oil companies. Why else would they stop polluting?

If we increase the price per tonne of carbon, that upholds the polluter pays principle. That is the key to an effective environmental policy, but when it comes to the environment, Canada is behaving badly. It is on track to miss its greenhouse gas emissions reduction target, and it is failing to reduce its fossil fuel subsidies.

Economic recovery and support for jobs must not come at the expense of climate action. It is high time we invested in a real transition focused on our renewable resources, our knowledge and our regions. That is what an independent Quebec would do, and Canada would be well advised to do the same. Let me get back to Bill C-262.

It is quite clear that the purpose of this bill is to weaken the Greenhouse Gas Pollution Pricing Act. It is no secret that the Conservatives oppose the carbon tax, even if they now claim the opposite.

The numbers speak volumes. The effects of climate change will cost Canada dearly. According to a new report released yesterday that was spearheaded by 20 or so researchers and funded by Environment and Climate Change Canada, in addition to multiple environmental threats, climate disruption will also have a major impact on Canadians' health, and that will result in huge costs to society.

In fact, the scientists estimate that the costs of death and lost quality of life will be $86 billion per year by 2050 and $250 billion per year by 2100. That is enormous. They also warn of the effects of the increasingly frequent and severe heat waves happening across the country. The report shows that this widespread increase in temperature will have “a large negative impact on productivity”. The researchers calculate that it could cause the loss of 128 million work hours annually by end of century, which is the equivalent of 62,000 full-time jobs, at a cost of almost $15 billion. Those are frightening numbers.

The climate crisis is not a myth. We must fight it and stop presenting bills like Bill C-262 that only serve to delay debate on tangible, effective solutions for reducing greenhouse gases. The worst part of all this is that we are lagging far behind.

Already, in 2019, a report produced by Environment and Climate Change Canada concluded that Canada's climate was warming twice as fast as the global average and that over the next 10 years, the whole country would be severely affected as the consequences of warming continued to intensify. It is clear that we have not a moment to lose.

The problem with moving forward with carbon capture and storage technologies as proposed in Bill C-262 is that they distract from the need to reduce sources of emissions and divert attention from the actions required to do so quickly and effectively.

The tax credit proposed in Bill C-262 is actually inconsistent with the logic of carbon pricing and the carbon tax. Setting a price on pollution will never be an incentive if the public absorbs the cost of managing emissions. The price on pollution must lead to changes in behaviour and to commitments to start working on an energy transition. Bill C-262 undermines that goal.

With Bill C-262, the Conservatives are once again proposing a solution that socializes the environmental costs of economic activity while retaining the profits and benefits in the private sector, namely the oil companies. What is appalling, not to say completely ridiculous, is that the Conservatives are trying to sell this as an ecological solution to fight climate change when they do not even recognize its existence. If they believed in it, they would bring forward credible, science-based solutions, not bills that seek to destroy the only serious, concrete tool Canada has implemented to reduce its emissions, namely carbon pricing.

Earlier I said that the economic recovery and support for employment must not happen at the expense of the climate, and I want to come back to that because it is a crucial point.

The Bloc Québécois believes that it is quite legitimate for the government to make public expenditures, including tax expenditures, to support employment and the economy. This obviously includes the energy sector, but is not limited to the western oil and gas industries. If Quebec already relies on the production of renewable energy for almost 99% of its needs, Canada also has potential renewable energy and can choose to end its dependency on fossil fuels.

If the government believes that the recovery is an opportunity to accelerate the energy transition, as the Bloc Québécois and Quebec do, federal investments must be made in sectors of the future. Oil is not one of them. Oil is not a renewable energy despite what certain members believe.

In the first months of the pandemic, the Bloc Québécois brainstormed about the type of economy we want for Quebec and how to launch a recovery that serves the transition to a green economy. After extensive consultation throughout Quebec, the Bloc Québécois presented a green recovery plan that includes transferring adequate financial resources to Quebec to fight the COVID-19 pandemic and at the same time prepare for an ambitious green recovery with a focus on the regions.

We are not fooled when a bill like Bill C-262 is introduced in the House. It pretends to be green, but in fact it serves those who oppose the fight against climate change and want to perpetuate Canada's dependence on fossil fuels. We are not fooled when the Liberal government promotes a green image in public, but in fact funds outdated energies to the tune of billions of dollars. I am thinking about Alberta oil. I am thinking about the Trans Mountain pipeline. I am thinking about the transfers to support the offshore oil industry in Newfoundland. These are all examples that clearly illustrate the inconsistency between the Liberals' environmentalist claims and their support for the fossil fuel industry.

The Bloc Québécois will do everything in its power to prevent even more of Quebeckers' money being spent at the expense of the planet, which is what is currently happening. Despite the Prime Minister's rhetoric about climate change and a green recovery, federal subsidies for fossil fuels reached $1.91 billion in 2020. That is an increase of 200% compared to 2019.

The other parties may like to apply a green sheen to their policies, but our support for public-funded environmental measures is based on the intrinsic value of each of those measures. Our challenge for the recovery, in addition to proposing bills that build on the strengths of Quebec and its regions, is to remain vigilant and to oppose false green economy solutions. As for the fossil fuel subsidies, we will oppose them vigorously, every time. We will storm the barricades every time the government tries to use the pandemic to justify them.

[The Assistant Deputy Speaker (Mrs. Alexandra Mendès), Alexandra Mendes]

For his right of reply, the hon. member for Calgary Centre.

[Greg McLean, Conservative, Calgary Centre, AB]

Madam Speaker, I am very pleased to rise today to speak to my bill at second reading in the House of Commons. I will read some quotes that are very important to this debate, which state:

Carbon capture, utilization and storage is an important tool for reducing emissions in high emitting sectors.... CCUS is the only currently available technology with the potential to generate negative emissions....

We have the right building blocks in place, including infrastructure such as the Alberta Carbon Trunk Line, and innovative companies like CarbonCure in Nova Scotia, which developed a technology to inject captured carbon into concrete, making it stronger and less polluting. Alberta and Saskatchewan have the greatest near-term potential to become global leaders in CCUS by creating new ‘hubs’ where carbon from high-emitting facilities can be efficiently captured, transported, stored, or used.

Canadian innovators and engineers have developed some of the leading global technologies for CCUS technologies that are in demand as more countries take action to fight climate change. The government intends to take significant action to support and accelerate the adoption of these technologies. By providing incentives to adopt CCUS technologies, the proposed measure will be an important element in Canada’s plan to achieve net-zero emissions by 2050. This important new element of Canada’s tax system is also intended to accelerate the growth of new...jobs related to carbon capture.

Budget 2021 proposes to introduce an investment tax credit for capital invested in CCUS projects with the goal of reducing emissions by at least 15 megatonnes of CO2 annually.

Enough said. I am happy for the deathbed conversion of my colleagues on the other side of the House that they actually acknowledge everything we have been saying on this side of the House since we introduced this bill. I recall how much they were fighting it before the budget came out. However, I am very pleased they are going to move forward with this and I really appreciated my colleague opposite tonight when he told me the little things that were wrong with the proposal that were put forward for him, that he could tweak around the edges and make it look a little different, smell a little different, seem a little different or maybe feel a little different. It is the carbon capture, utilization and storage bill that we put forward that recognizes this industry is going to contribute to the reduction in carbon in Canada and in the world going forward. We lead, and we intend to continue to lead.

Members may recall, when we first put it on the agenda, the intent of this bill was to continue to allow our energy sector in Canada to lead the world, like it does. It used to lead. It lost that lead in carbon capture, utilization and storage in 2018. How did it lose it? It lost it because the United States offered the 45Q, which allowed the split of the tax credit between those who were actually capturing the carbon and those who were storing the carbon. That is important because usually the people who can store the carbon are the hydrocarbon companies, but the people who need to capture the carbon are the other industries that are emitting carbon. This split tax credit moved investment from Canada to the United States very quickly.

Technology we developed here got moved down south in a heartbeat. We had to bring it back here. We have to have a competitive regime where we recognize the advantages that we bring to this world, that we bring to this technology and that we can continue to lead on going forward. The challenge, of course, is to provide a split tax credit, and we think we have accomplished that with the construction of this tax measure, as much as we can on the opposition side of the House. I would love it if the government tweaked it, as my colleague suggests he is going to, and make it just a little better.

Oil and gas is a very important industry in Canada. We lead the world in environmental production of power and energy, we lead the world in accountability to governments and the public, we lead the world as a rent payer and, contrary to what we have heard, this industry contributes $24 billion a year, on average, to Canadian taxpayers for all our services. Let us lead, let us continue to lead and let us allow our Canadian industry to lead again.

[The Assistant Deputy Speaker (Mrs. Alexandra Mendès), Alexandra Mendes]

It being 6:38 p.m., the time provided for debate has expired. The question is on the motion.

If a member of a recognized party present in the House wishes to request a recorded division or that the motion be adopted on division, I would invite them to rise and indicate it to the Chair.

The hon. member for Calgary Centre.

[Greg McLean, Conservative, Calgary Centre, AB]

Madam Speaker, I request a recorded division.

[The Assistant Deputy Speaker (Mrs. Alexandra Mendès), Alexandra Mendes]

Pursuant to order made on Monday, January 25, the division stands deferred until Wednesday, June 9, at the expiry of the time provided for Oral Questions.

Pursuant to order made Tuesday, June 1, the House will now proceed to the consideration of Bill C-8, an act to amend the Citizenship Act with regard to the Truth and Reconciliation Commission of Canada's call to action number 94, at third reading stage.

The House resumed from June 3 consideration of the motion that Bill C-262, An Act to amend the Income Tax Act (capture and utilization or storage of greenhouse gases), be read the second time and referred to a committee.

[The Speaker, Anthony Rota]

It being 3:14 p.m., pursuant to order made on Monday, January 25, the House will now proceed to the taking of the deferred recorded division on the motion at second reading stage of Bill C-262 under Private Members' Business.

Call in the members.

(The House divided on the motion, which was negatived on the following division:)

Vote #132

[The Speaker, Anthony Rota]

I declare the motion defeated.