Terence Corcoran: carbon race down for subsidies


Government risk reduction – this is the net zero economic model. Good luck with that

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And they’ve gone … across Canada and around the world, from Norway to China, oil companies from Suncor to Exxon, automakers from Ford to GM, battery developers, solar power companies and mining companies, bankers and investment houses are scrambling to get their hands on the windfall of the trillion dollar net zero carbon reduction global subsidy.

For the most part, the transition to net zero carbon emissions is presented as a golden opportunity. We can remake the world’s energy system and economy, using massive government funding and regulation, including heavy applications of central planning and industrial strategy techniques.

Whether the goals are achievable remains a big unknown, but there is no shortage of business leaders, politicians and government officials willing to channel taxpayer dollars into projects and industries that carry enormous risks and uncertainties. .

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A good example of the carbon subsidy rush is a recent Public Policy Forum “document” titled “Carbon Capture, Use and Storage – Now is the time.The six-page document is endorsed by the Energy Future Forum, a mini-who’s who of Canada’s energy elite and financial firms – Suncor, CIBC, Imperial Oil, RBC, Shell Canada, TC Energy – as well as ‘a cabal of sustainable development activists. like the ubiquitous Ivey Foundation and the Pembina Institute.

The theme of the document can be summed up: We want massive taxpayer funding and government regulatory support to ensure that if the whole regime is bonkers, we won’t be left with the tab. Naturally, the corporate / activist power group supports a strong carbon tax to stimulate carbon capture, use and storage (CCUS), as well as an aggressive adoption of American-style tax credits, the creation of a CCUS fund to “leverage private sector investments”, carbon capture the criteria of the Canada Infrastructure Bank, creation of green bridging bonds and “federal government equity investments and provincial ”. The dollar value of all of this has yet to be tabulated, nationally or globally. Days after the release of the PPF document in March, Alberta Premier Jason Kenney request Ottawa will spend $ 30 billion to advance the province’s carbon capture plans. Alberta has already funded CCUS projects, and more to come as it joins the global plan to capture carbon and use or store it underground or elsewhere.

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Norway, rich in oil (and therefore a producer of carbon), is considered a leader in CCUS funding, having committed at least $ 3 billion to finance projects. Norway will also host an international conference in June, as part of a series of global events aimed at raising the profile of carbon capture and taxpayer support.

In the United States, on April 22, Exxon-Mobil marked Earth Day with a call for “bold thinking” on climate policy and sketch a plan for a major $ 100 billion carbon capture project in Houston, Texas. An Exxon executive said the project would require public and private funding, as well as “improved regulatory and legal frameworks that allow investment and innovation.” Exxon-Mobil would have liked Washington to launch tax breaks or put in place carbon pricing policies to help get the project off the ground.

The International Energy Agency, custodian of global statistics and research on energy issues, recently outlined the extent of the government’s carbon capture needs. “The rapid deployment (of CCUS) depends crucially on a massive increase in government support, as well as new approaches to public and private investment,” the IEA said in a special report. Among other measures, the IEA has said that carbon capture needs support in the form of subsidies, operational subsidies, carbon pricing, carbon trading mechanisms, regulatory standards, policy measures. risk mitigation and government funded innovation and R&D.

It’s capitalism in the new carbon economy: give us subsidies, etc. and we may or may not do the job. Of course, the IEA is not full of confidence. Without CCUS, the overall goal of net zero carbon emissions will not be met, and achieving this requires a total effort.

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It will take even more effort to achieve another goal of the net zero industrial planning system. A new IEA report this month – The role of critical minerals in clean energy transitions – documents the key issues behind what appear to be overwhelmingly optimistic claims that the world can transition to electric vehicles and other clean tech without encountering massive and insurmountable commodity shortages.

Chemicals that will enable a carbon-free transition are scarce and current investment plans “fall far short” of what is needed to support an accelerated deployment of solar panels, wind turbines and electric vehicles. Many minerals come from a small number of producers. For example, in the case of graphite, cobalt and rare earth elements, the world’s top three producers control well over three-quarters of global production. The prices of nickel, copper and other raw materials could skyrocket.

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A commentator noted the IEA’s observation that “a typical electric car requires six times more minerals than a conventional car, and an onshore wind power plant requires nine times more mineral resources than a gas power plant.”

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Warns the IEA: “The high geographic concentration, the long lead times for commissioning new mineral production, the declining quality of resources in certain areas and the social impacts all raise concerns about reliable supply and sustainable in minerals to support the energy transition. These dangers are real, but they are surmountable. “

How to overcome them? Make a guess. To avoid shortages, soaring prices and lack of supply, governments will need to take steps to send clear political signals – and “attract investment” to the sector. To avoid “bottlenecks”, governments will need to streamline authorization procedures and provide financial support for strategic risk reduction projects.

Government risk reduction – this is the net zero economic model. Good luck with that.

Financial post

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