‘Hidden subsidy’ made project appear profitable

Shell’s carbon capture project sold $200M of ‘phantom’ emissions credits

This article was written by Marco Chown Oved and was published in the Toronto Star on May 7, 2024.

Shell’s Quest carbon capture and storage facility in Fort Saskatchewan, Alta. A new report from Greenpeace calls into question the economic viability of the oil industry’s preferred way to reduce its emissions.

Only days after a planned carbon capture project near Edmonton was cancelled for being too expensive to operate, a new report shows that Alberta’s longest-running carbon capture project was only able to turn a profit because it received a favourable deal from the province, calling into question the economic viability of the oil industry’s preferred way to reduce its emissions.

Shell’s Quest carbon capture and storage (CCUS) project, which has been operational since 2015, has received $777 million in subsidies from the federal and provincial governments and $406 million from selling carbon credits.

Documents obtained by Greenpeace via freedom-of-information legislation reveal that half of those carbon credits were for carbon that was never captured because the Alberta government granted the facility two tons of carbon credits for every ton sequestered underground.

That two-for-one deal, the report states, allowed Shell to to double the amount of money it made selling credits, adding more than $200 million from selling “phantom” credits for captured carbon that was actually emitted into the atmosphere.

This artificially transformed the operation, northeast of the Alberta capital, from a money loser to a profitable business on paper, said Keith Stewart, a senior energy strategist with Greenpeace Canada.

“Two hundred million (dollars) is a lot of money, even for an oil company,” he said, calling it a “hidden subsidy” that makes the project appear viable, when in fact the public is paying for almost all of it.

When the $200 million in phantom credits are added to the government subsidies, 93 per cent of Shell’s carbon capture project ended up being financed by the public dime, according to the report. This at a time when oil companies are reporting record high profits.

“The Quest project has been used as the poster child for carbon capture for years now,” said Stewart. “It is a project that has been used to sell low carbon capture as a solution.

But when you dig into the details, it’s part of the problem.”

In response to the report, Shell spokesperson Stephen Doolan said carbon capture is critical to achieving the international climate goals established in Paris in 2015.

“As a result of innovative fiscal and regulatory frameworks, nine million tonnes of CO2 have been captured at Shell’s Quest facility that would have otherwise been released into the atmosphere,” he wrote in an email.

Alberta Premier Danielle Smith’s office called the report “a smear job by Greenpeace.”

“Alberta is a world leader in CCUS. While others were talking about CCUS as an abstract idea, we were putting in place a system that helped show the world that carbon capture works,” wrote Smith’s spokesperson, Ryan Fournier. “Launched in 2011, the program was a huge success and kick started major advancements in CCUS in Alberta. Thanks to this program, Alberta now has 12 million tonnes of carbon stored and two of the largest CCUS projects in the world now operating here.”

Alberta’s two-for-one carbon capture subsidy ended in 2022.

The Canadian oil industry has touted carbon capture as a way to continue to extract and burn fossil fuels without having the accompanying carbon emissions. Environmental advocacy groups have long cast doubt on the technology as a viable way to reduce emissions and lessen the impact of climate change.

The national inventory of emissions, released last week, shows that emissions are relatively flat or down from their 2005 levels in every sector of the economy but one: the oil and gas industry.

Emissions from the oil sands have more than doubled since 2005, and oil and gas now produces nearly one-third of all 708 million tonnes of greenhouse gas emissions in Canada.

Shell’s Quest project captures less than one-third of the emissions from the oil sands refinery where it is located. The Pathways Alliance consortium of oil sands producers has a carbon capture project designed to be more than 10 times as big. Even then, it will capture less than 15 per cent of the emissions from the oil sands, according to the Greenpeace report.

None of these figures include the far greater amount of emissions created when the petroleum products produced in the oilsands are burned. If these “downstream” emissions are included, the Pathways’ carbon capture project would sequester less than two per cent of total emissions.

Author: Ray Nakano

Ray is a retired, third generation Japanese Canadian born and raised in Hamilton, Ontario. He resides in Toronto where he worked for the Ontario Government for 28 years. Ray was ordained by Thich Nhat Hanh in 2011 and practises in the Plum Village tradition, supporting sanghas in their mindfulness practice. Ray is very concerned about our climate crisis. He has been actively involved with the ClimateFast group (https://climatefast.ca) for the past 5 years. He works to bring awareness of our climate crisis to others and motivate them to take action. He has created the myclimatechange.home.blog website, for tracking climate-related news articles, reports, and organizations. He has created mobilizecanada.ca to focus on what you can do to address the climate crisis. He is always looking for opportunities to reach out to communities, politicians, and governments to communicate about our climate crisis and what we need to do. He says: “Our world is in dire straits. We have to bend the curve on our heat-trapping pollutants in the next few years if we hope to avoid the most serious impacts of human-caused global warming. Doing nothing is not an option. We must do everything we can to create a livable future for our children, our grandchildren, and all future generations.”