A proposed $400 million facility in Edmonton aiming to convert landfill waste into electricity may face cancellation due to a recent carbon tax agreement between the Alberta and federal governments.
Originally, the national industrial carbon price was projected to reach $170 per tonne by 2030. However, a revised deal last month by Prime Minister Mark Carney and Alberta Premier Danielle Smith altered this trajectory to set the price to reach $130 per tonne by 2040.
This policy change has placed Varme Energy’s waste-to-energy project in jeopardy. The facility was designed to capture greenhouse gases and store them underground while also generating sellable carbon credits. Yet, the reduced carbon price would diminish the value of these credits.
Sean Collins, the CEO of Varme Energy, expressed concerns about the project’s future, highlighting that without further government policy adjustments, the company may be forced to halt the project.
The agreement signed by Carney and Smith is part of a broader effort to reduce methane emissions and fast-track major projects in Alberta, including the development of a new oil export pipeline to the West Coast.
Various industrial companies advocated for a lower carbon price to maintain competitiveness and avoid additional costs compared to counterparts in the US, where no carbon tax is imposed.
Ross Linden-Fraser, a researcher with the Canadian Climate Institute, emphasized that a slower and lower carbon price increase in Alberta would likely deter investments in emissions reduction initiatives.
The proposed facility by Varme Energy has secured agreements with the City of Edmonton’s landfill and provincial permits for electricity production. The project has received funding from the Alberta government and support from the federal Canada Growth Fund to ensure the sale of carbon credits at a minimum of $85 per tonne.
Despite these preparations, the project’s operational cost of approximately $118 per tonne could become unsustainable under the revised carbon pricing scheme.
Varme Energy, a subsidiary of a Norwegian clean energy company, specializes in waste-to-energy conversion projects and aligns with the federal priorities of attracting foreign investment and reducing emissions.
The carbon capture industry is hopeful that additional policy changes will allow for better pricing of carbon credits in various markets, potentially enhancing the sector’s viability.
As Varme Energy and other carbon capture companies face financial challenges, they are urging for further support from both levels of government to ensure the sustainability of their projects.
The sector will closely monitor the implementation of the new agreement between Alberta and the federal government, particularly focusing on credit calculations and potential loopholes in carbon tax obligations.
Collins emphasized the urgency for favorable fiscal policies to support the sector and stressed that without such support, the proposed project may be at risk of cancellation in the near future.