June 25, 2024
Blog

How to scale carbon removal in Canada

How can Canada scale carbon removal rapidly and responsibly? The rapid aspect will require leveraging new and existing markets and regulatory schemes. The responsible aspect will require a robust set of overarching standards and project-specific protocols to govern the industry and help ensure positive outcomes. Both are formidable undertakings and will require substantial funding.

Mobilising the adequate funding to realise carbon removal at scale will require the consideration and layering of different scaling vectors. Below, we outline three considerations for scaling carbon removal:

    1. Voluntary carbon market: provides optional support for carbon removal through carbon credit purchases in an unregulated market.
    2. Compliance markets and programmes: typically provides optional support for carbon removal through carbon credit purchases in regulatory schemes that compel emitters to meet emissions performance requirements.
    3. Novel regulatory schemes: provides mandatory support for carbon removal through regulatory schemes that compel emitters to conduct carbon removal projects within their own value chain or purchase carbon credits for any emissions liabilities.

 

The Voluntary Carbon Market

The voluntary carbon market (VCM) has been an indispensable early scaling vector for carbon removal and its main engine for technology, policy, and business model innovation. Yet, Canada needs greater ambition to support carbon removal in the VCM given that only 14 known companies have made purchases to date, amounting to roughly 150,000 tonnes of durable removal (Table 1). 

Table 1. Canadian Corporate Purchases of Carbon Removal in the Voluntary Market

Buyer Supplier(s) Amount of durable removal (tCO2)
Air Canada Carbon Engineering (1PointFive) Portion of Airbus’ pre-purchase of 400,000 tonnes from 1PointFive
ArcTern Ventures Oplandske Bioenergi 57
BMO CarbonCure, Carbon Engineering (1PointFive) 6,750
Georgian Running Tide 4
Greensoil PropTech Ventures Wakefield Biochar, Carbon Engineering (1PointFive), Charm Industrial, UNDO,  78
Guardian Capital Group Carboneers 132
HIVE Digital Technologies LTD Bussme Energy 5
Invert, Inc. BC Biocarbon 3
MaRS Discovery District CarbonRun, Planetary Technologies, Gaia Refinery, TerraFixing, Arca 84
Karbon-X Drax 25,000
Kirk & Co. Charm Industrial, UNDO, Carbon Engineering (1PointFive) 7
Shopify 39 companies 84,400 – 102,146*
TD Bank Group Carbon Engineering (1PointFive) 27,500
Wheaton Precious Metals BC Biocarbon 12
TOTAL N/A 144,032 – 161,778 (excludes Air Canada purchase amount)
*Note: Shopify has purchased 102,146 tonnes of durable carbon removal according to CDR.fyi
Source: Carbon Removal Canada, 2024. Compiled using data from CDR.fyi and individual company websites.

 

Boosting support for carbon removal could be facilitated by increasing the buyer pool and total amount of credits purchased. Government procurement of VCM credits via the Low Carbon Fuel Procurement Program (LCFPP) is a new opportunity in Canada that will allow for the purchase of carbon removal in addition to low-carbon fuels to help meet federal climate commitments.

The LCFPP could also be used to increase private sector purchases similar to the U.S. Department of Energy’s Voluntary Carbon Dioxide Removal Purchasing Challenge. Such a move could spur more Canadian corporations to take interest in supporting home-grown innovators and projects. 

Another way of stimulating support for carbon removal would be through the creation of a Canadian-led advance market commitment (AMC) similar to Frontier which could pledge to support the most promising carbon removal methods with the potential to scale in Canada.

 

Compliance carbon markets and programmes

Compliance carbon markets and programmes present an opportunity to use carbon removal to help meet emissions performance standards. Recent estimates valued such markets and programmes at more than $800 billion globally in 2023, dwarfing the size of the VCM. 

One such compliance programme is Canada’s mandatory carbon pollution pricing systems, which were put in place to help facilitate emissions reductions across the economy. The federal government allows subnational jurisdictions to design their own programmes according to minimum national stringency requirements or adopt the federal system as a backstop measure. 

One component of the national carbon pollution system involves large-emitter trading systems which assign an escalating carbon price on industrial emitters that is scheduled to reach $170 per tonne of CO2 by 2030. Industrial emitters currently included in these systems must either meet a certain emissions intensity benchmark, or purchase credits to cover any excess emissions. 

Both the federal and some provincial or territorial systems allow for the inclusion of offsets and therefore could be amended to include credits from qualifying carbon removal projects. Historically, these offset programmes either have not allowed any carbon removal activities to qualify as valid project types or have only allowed lower durability solutions, such as improved forest management, to qualify. Such systems will therefore need to develop project-specific protocols for higher durability carbon removal methods (such as the ongoing efforts to create a protocol for direct air capture or DAC) to help support further industry growth and maturation (Table 2).

Another component of the carbon pollution pricing system could involve implementing clean fuel standards. These standards impose regulatory requirements for fuel suppliers to reduce the carbon intensity of fuels produced and sold for use in Canada; a portion of that carbon intensity requirement could then be met by purchasing credits from carbon removal projects. For example, British Columbia has proposed using DAC as a qualifying mechanism in their Low Carbon Fuel Standard and is developing eligibility criteria for project inclusion.

 

Table 2. Potential opportunities for carbon removal to serve as a compliance option

Type Name Highlights
Industrial carbon pricing & greenhouse gas offset credit systems Federal: Greenhouse Gas Offset Credit System

Alberta: Technology Innovation and Emissions Reduction (TIER) Regulation

British Columbia: B.C. Output-Based Pricing System

New Brunswick: Output-based pricing system

Quebec: Cap-and-Trade System

Saskatchewan: Output-Based Performance Standards

The Government of Canada is currently developing a DAC protocol, and bioenergy with carbon capture and storage (BECCS) is under consideration for future protocol development. Note that the federal system applies if provincial and territorial governments voluntarily adopt it or fail to design their own carbon pollution pricing system that is compliant with the national stringency requirement. The federal system applies in full to Manitoba, Nunavut, Prince Edward Island, and the Yukon. The federal system applies in part in Alberta, New Brunswick, Nova Scotia, Ontario, Newfoundland & Labrador, and Saskatchewan.

Protocols for ‘Energy Generation from the Combustion of Biomass Waste’ and ‘CO2 Capture and Permanent Storage in Deep Saline Aquifers’ which, coupled together, could support BECCS. Regulations for CO2 storage in the subsurface are in place and federally approved.

A ‘Carbon Capture and Sequestration (CCS) Protocol’ is currently under development which could support durable carbon removal projects. Regulations for CO2 storage in the subsurface are in place and federally approved.

The province is currently exploring offsets as a compliance flexibility mechanism.

Up to 8 percent of an emitter’s compliance obligation can be met through the purchase of regulated credits. There are currently no known protocols to support durable carbon removal projects.

Regulations for CO2 storage in the subsurface are in place and federally approved.

Clean fuel standards Federal: Clean Fuel Regulations

Alberta: Renewable Fuels Standard

British Columbia: Low Carbon Fuel Standard

Manitoba: Biodiesel Policy

Ontario: Cleaner Transportation Fuels Regulation

Saskatchewan: Clean Fuel Regulations

Quebec: Clean fuels requirement

British Columbia is the only known province or territory to pursue carbon removal as a qualifying project type to generate compliance credits for clean fuel standards.

Source: Carbon Removal Canada, 2024

Novel regulatory schemes

Aside from the VCM and compliance regimes, Canada could develop novel regulatory schemes that would compel emitters to conduct carbon removal projects within their own value chains as a common practice, or purchase durable carbon removal as a compensatory mechanism for any emitting activity. For example, common practice regulatory schemes could obligate a mining company to treat its alkaline waste material (mine tailings) in a manner that accelerates the carbon mineralisation process. Another example could be to incentivise farmers to apply basalt to agricultural lands to promote enhanced rock weathering. 

Other novel regulatory schemes could include a carbon takeback obligation or the potential inclusion of carbon removal in trade policies such as a carbon border adjustment mechanism to help meet the emissions intensity requirements of imported goods (such as the one being implemented in the EU).

Currently, no such novel regulatory schemes currently exist in Canada (but a carbon border adjustment has been discussed). Given that voluntary and compliance market interventions may not be sufficient to scale carbon removal on their own, the government should consider developing novel regulatory schemes that include carbon removal. Such schemes are another lever Canada can use to become a world leader in using carbon removal to help address the climate crisis.

 

What’s next?

We need to consider all three vectors to help scale up carbon removal and meaningfully contribute toward meeting global climate goals. However, the relative scaling potential of these vectors may shift over time as markets and regulatory schemes evolve. Much like we need a portfolio approach to support a host of the most promising carbon removal methods to hedge against a variety of risks, so too do we need to support a variety of vectors to help grow this industry at scale.

As always, none of these actions can come at the expense of reducing emissions across the global economy; both emissions reductions and carbon removal must be advanced in parallel. We must strive to ensure the ‘net’ in net zero is as small as possible (i.e. the amount of residual emissions) so we can focus carbon removal capacity on its bigger, and arguably more important, role of cleaning up historical emissions from the atmosphere.

 

By: Tim Bushman, Carbon Removal Canada

Tim Bushman has a background in climate science and has worked extensively across the fields of carbon removal and clean energy. He is currently the Director of Policy and Research at Carbon Removal Canada.