Canada’s largest oil companies welcomed new tax breaks for carbon capture and storage schemes contained in the federal budget, though clean-tech leaders are concerned Ottawa is focused on “moonshots” rather than immediate actions to reduce emissions.

Finance Minister Chrystia Freeland introduced Canada’s first federal budget in two years on Monday, which contained promises of tax breaks for investments in carbon capture, utilization and storage (CCUS) projects as well as $319 million in funding for research and development in CCUS systems.

Ottawa hopes its CCUS incentives will result in an additional 15 megatonnes of CO2 emissions sequestered annually, which would be roughly seven times what CCUS projects currently capture in Canada each year.

Despite aggressive carbon reduction promises, Canada’s biggest oil and gas producers welcomed the budget and particularly its plans to invest in carbon sequestration and provide tax incentives for CCUS spending.

“The federal budget reinforces the tremendous opportunity for Canadians to work together — across sectors and governments — to build infrastructure that will help Canada to get to net zero. We see carbon utilization and storage as a key enabler in meeting our shared environmental objectives,” Suncor Energy Inc. president and CEO Mark Little said in an emailed statement.

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Investment in carbon capture projects will allow Canada to benefit from economic investments by the oil and gas industry while reducing emissions, Cenovus Energy Inc. president and CEO Alex Pourbaix said.

“(The) announcement from the federal government is an important step forward and we look forward to working with them to learn more about their plans so we can advance the important work of decarbonizing Canadian oil production as soon as possible,” Pourbaix said.

Canadian Natural Resources Ltd., which operates two large carbon sequestration projects, including the Quest CCS project at its Scotford oilsands upgrader and the carbon capture system at the North West Refinery, said it’s eyeing opportunities to advance investments in CCUS projects.

“Details of the proposed program are important and we look forward to working together with government through the upcoming consultation period,” the company spokesperson Julie Woo said in an email.

Canada’s largest oil and gas lobby group, the Canadian Association of Petroleum Producers, said carbon capture projects will help the government achieve its goals of reducing emissions and that Canada’s oil and gas sector accounts for 75 per cent of all funding to the country’s clean technology sector.

“We are well positioned to be a central pillar of the country’s economic recovery,” CAPP president and CEO Tim McMillan said in an email.

But in the clean tech sector, one executive believes Ottawa’s focus on CCUS projects shows a fixation on “moonshots” and ignores easier, more immediate ways to reduce emissions across the country.

“To pick some of the most complicated, most expensive things and try to incentivize them to happen is probably not the smartest thing from an economy/rate-of-return/business perspective, especially when we’re in an economy where we’ve got a large deficit,” said Audrey Mascarenhas, president and CEO of Questor Technology Inc.

She said between the $1.5-billion Boundary Dam CCS project in Saskatchewan and the $1.35-billion Quest CCS project in Alberta, the country captures and sequesters about two million tonnes of CO2 per year.

By contrast, Mascarenhas said, smaller-scale projects on methane abatement can reduce emissions at a lower cost and also have a bigger impact because methane is a more potent greenhouse gas than CO2. Questor just completed a project in Mexico for $8.5 million to reduce GHG emissions by 450,000 tonnes per year.

“You have to do the easy stuff first, that gets you 80 per cent of the way,” Mascarenhas said, adding those were “low hanging fruit,” particularly in the face of large budget deficits.

The David Suzuki Foundation said the $319 million over seven years to support expensive CCUS could potentially delay the transition from fossil fuels.

“That money would have been better allocated to measures that reduce fossil fuel consumption,” Ian Bruce, acting executive director of David Suzuki Foundation, said in a statement.

The federal budget, which includes a $354.2-billion deficit this year and an expected $154.7-billion deficit next year, also includes plans to spend $1.5 billion on biofuels as part of the Clean Fuel Standard, develop carbon border adjustment taxes and more aggressive climate change measures aimed at reducing greenhouse gas emissions 36 per cent below 2005 levels.

“It is critical that this government moves on carbon border adjustments because if they don’t they’re going to make everything uncompetitive and I don’t mean oil and gas, I mean the entire economy,” said Tristan Goodman, president of the Explorers and Producers Association of Canada, which represents small- and mid-size oil and gas companies.

Goodman said, in total, there were three positive signals in the budget for the oil and gas industry: the CCUS incentives, the promises of a carbon border adjustment tax and a recognition that hydrogen derived from natural gas can be part of Canada’s energy future as long as it includes a carbon capture scheme.

The environment-friendly budget comes days before Prime Minister Justin Trudeau joins U.S. President Joe Biden and leaders of other nations virtually for a Leaders Summit on Climate on April 22 and 23. The Biden administration is expected to unveil its goal for reducing greenhouse gases at the summit. Earlier this year, Canada and the U.S. agreed to align their policies focused on climate change and clean energy.

• Email: gmorgan@nationalpost.com | Twitter: geoffreymorgan

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