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 Alberta and the federal government. Originally, the national industrial carbon price was set to increase to $170 per tonne by 2030, but a revised deal last month between Prime Minister Mark Carney and Alberta Premier Danielle Smith altered the trajectory, with the price now projected to reach $130 per tonne by 2040.
Varme Energy, the company behind the waste-to-energy project, is feeling the impact of this policy shift. The facility’s plan involves capturing greenhouse gases and storing them underground while also generating sellable carbon credits. However, the decreased carbon price would diminish the value of these credits, posing financial challenges for the project.
Unless there are additional government policy adjustments in the coming months, Varme Energy’s CEO, Sean Collins, has cautioned that the project might be at risk of being abandoned. The revised agreement, part of a broader initiative to reduce methane emissions and streamline regulatory procedures for major projects in Alberta, was signed by Carney and Smith.
Some major industrial players had advocated for a lower carbon price to stay competitive with counterparts in the US, where no carbon tax is imposed. However, experts like Ross Linden-Fraser from the Canadian Climate Institute warn that a slower and less steep increase in Alberta’s carbon price could lead to reduced investments in emission-cutting projects.
Varme Energy, a subsidiary of a Norwegian clean energy firm, is already in collaboration with Edmonton’s landfill and possesses provincial permits for electricity production. Despite receiving 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, the project’s operating cost of approximately $118 per tonne may become unsustainable under the revised carbon pricing plan.
In a plea to Ottawa, Collins emphasized the need for the federal government to address the revenue challenges faced by projects like theirs. The company’s vision aligns with the federal priorities of attracting foreign investments, reducing emissions, and promoting clean energy production.
The revised policy sets a price floor for carbon credits, starting at $60 per tonne in 2030 and escalating to $110 per tonne by 2040. This move aims to instill confidence in companies investing in Canada, as stated by Emily Jackson, a spokesperson for the federal environment minister.
The impact of the altered carbon pricing scheme is not limited to Varme Energy, as other carbon capture companies are also feeling the financial strain. Jamie Stephen, managing director of Torchlight, expressed concerns over the viability of carbon capture and storage projects in Canada under the new pricing structure.
The carbon capture sector is hopeful that the federal government will introduce policy changes allowing companies to sell carbon credits in different markets to secure better prices. As stakeholders await further details on how credits will be calculated and whether loopholes can be exploited to reduce carbon tax liabilities, companies like Varme Energy are faced with critical decisions on the future of their projects.
