Canada’s oil sands majors want to secure government aid to help fund their large scale carbon capture plans, which they hope would reduce emissions from the country’s heavy oil production. Canadian Prime Minister Trudeau aims to keep Canada competitive in terms of subsidies for energy transition technologies, like the U.S. Inflation Reduction Act. Canadian companies, including Suncor and Cenovus Energy, are looking to use the C$15 billion Canada Growth Fund, which was unveiled by the government in its 2022 budget, in developing their carbon capture projects.

Trudeau has already put forward a tax incentive for building carbon capture projects, but Canada still faces a gap in matching the production tax credits included in the U.S. Inflation Reduction Act. It provides an annual operating subsidy for carbon-capture systems.

Executives from Cenovus and the Pathways Alliance, a group of the largest Canadian oil-sands producers, set out their vision for lowering the pollution from Canada’s energy sector and creating “the globally preferred barrel of sustainable oil.”

The companies have set a target to lower emissions by 22 million tons by 2030, from 81 million in 2020. The government says the industry’s emissions have more than doubled over the previous 15 years. The plan to cut emissions requires C$24 billion in spending, including on carbon capture.

Pathways President Dilling said comparable de-carbonization plans in Europe and the U.S. typically get two-thirds of their funding from public sources in order to get the projects “moving ahead in a way that’s sustainable and reasonable from a corporate private investment perspective.”

Therefore, oil sands producers seek C$16 billion in government subsidies, some of which has already been pledged by Trudeau. Last April’s budget set aside more than C$7 billion for the carbon capture investment tax credit through 2030.

Other federal programs, such as the C$8 billion Net Zero Accelerator, could be used for equipment costs. The producers are also expecting support from Alberta’s regional government.

Pathways says all those incentives mean Canada is close to matching the U.S. on capital cost incentives, but there is still a gap on the operating cost side. The industry group thinks that could be solved through the Canada Growth Fund.

In its November fiscal update, the Trudeau government said the fund could be used in a variety of ways to spur private investment in clean technology. It explicitly flagged carbon capture as a priority.

The program could be used to provide “a more predictable environment for decision making about long-term investments,” according to the budget document. One example is guaranteeing a floor price for carbon credits through what are known as contracts for difference.

In practice, this would mean the government guarantees oil-sands operators get a certain amount of money in exchange for sequestering carbon each year, even if the carbon trading market can’t support the flood of credits generated by new projects.

Tapping Canada’s massive oil-sands deposits carries unique challenges that make them among the world’s most carbon-intensive sources of crude.