‘Mayday to Ottawa’: $400M carbon capture facility could be cancelled after

A shovel-ready, $400-million facility proposed for Edmonton that would convert landfill waste into electricity could be cancelled after a recent carbon tax agreement between the Alberta and federal governments.

The national industrial carbon price was supposed to rise to $170 a tonne by 2030, but a revised deal last month by Prime Minister Mark Carney and Alberta Premier Danielle Smith means the price would instead reach $130 a tonne by 2040.

For Varme Energy, the policy change is putting its proposed waste-to-energy project on life support. The facility would capture greenhouse gases and store them underground. The project would also generate carbon credits that could be sold. However, a lower carbon price means those credits would be worth less.

Without further government policy changes over the next few months, Varme Energy chief executive Sean Collins warns the company may have to pull the plug on the project.

“Unfortunately, nobody has runway forever,” said Collins. He now describes the company as facing a “very challenging” financial situation.

Carney and Smith signed the deal as part of a broader agreement between the governments to reduce methane emissions, expedite the regulatory process for major projects in the province and pursue a new oil export pipeline to the West Coast.

Some large industrial companies had pushed for a lower carbon price to avoid higher costs and remain competitive compared with counterparts in the United States, which do not have to pay a carbon tax.

In Alberta, a carbon price that rises more slowly and does not climb as high will result in less investment in emissions reductions, said Ross Linden-Fraser, a researcher with the Canadian Climate Institute.

“It’s just the reality of what happens when you set a lower value on one of the main sources of revenue for emissions-reducing projects,” he said.

Lower target price

Varme Energy already has agreements in place with the City of Edmonton’s landfill, as well as provincial permits to produce electricity. The proposed project has received funding from the Alberta government and support from the federal government’s Canada Growth Fund to ensure the carbon credits are sold for at least $85 a tonne. 

Still, the project has an expected operating cost of about $118 a tonne, said Collins. That would have made financial sense under the federal government’s previous plan to raise the price to $170 a tonne by 2030.

“We’re calling a mayday to Ottawa and we hope they listen,” said Collins. He said the federal government’s message should be: “Ottawa: We have a revenue problem. And the solution to a revenue problem is revenue.”

Varme Energy is a subsidiary of a Norwegian-based clean energy company that has developed similar projects to divert waste from landfills. Instead, the garbage is…