Canada strikes first deal to backstop carbon credit prices (updated)

Advantage Energy

21/12/2023 03:26

(Recasts headline first paragraph, adds more of the agreement
in para 10)
    By Nia Williams
       Dec 20 (Reuters) - Canada on Wednesday signed its first
deal to backstop future carbon prices, a step that would help
bring price certainty to firms looking to invest in carbon
capture and storage projects that are key to cutting emissions.
    The Canada Growth Fund (CGF), a federal clean-tech financing
agency, would invest C$200 million ($150 million) in carbon
capture and storage developer Entropy Inc, a unit of oil and gas
producer Advantage Energy  AAV.TO , the fund said in a
statement.
    Canada is the world's fourth-largest oil producer and carbon
capture and storage projects are seen as vital to cutting
emissions from Alberta's highly-polluting oil sands without
slashing production.
    Under the terms of the 15-year deal, the CGF has agreed to
buy up to 1 million tonnes a year of carbon credits generated by
Calgary-based Entropy. 
    The CGF will initially buy 185,000 metric tons of carbon
credits per year at C$86.50 per ton, generated by the second
phase of a carbon capture and storage project at Advantage's
Glacier gas plant in Alberta.
    Last year Entropy signed a C$300 million deal with
infrastructure firm Brookfield Renewable  BEPC.N . Entropy CEO
Mike Belenkie said in the statement that the company has a clear
path to accelerating growth and reducing emissions in Canada.
    National Bank analysts said the deal was a "massive
milestone" for Entropy. 
    Canada has been working on ways to provide carbon price
certainty to firms looking to invest in carbon capture and
storage to reduce their emissions, in addition to providing
investment tax credits.
    The U.S. Inflation Reduction Act (IRA) has offered massive
incentives to clean tech companies, leaving Canada behind in
attracting investments in new, low-carbon technologies.
    Canada set up the C$15 billion CGF last year to help attract
private investment in clean tech by mitigating financing risks.
Oil and gas sector is Canada's highest-polluting industry,
accounting for more than a quarter of all emissions.
    The second phase of the commitment would see the fund buy
another 415,000 metric tons – for a total of 600,000 – annually
from Entropy at a similar fixed price for projects using its
technology elsewhere in Canada.
    Dale Beugin, executive vice president with the Canadian
Climate Institute, said the investment will help minimize risk
in clean growth projects and make carbon pricing work better in
Canada.
    "By guaranteeing value for Entropy Inc's carbon credits,
this investment drives emissions reductions, without crowding
out private investment," Beugin said.
    ($1 = 1.3358 Canadian dollars)

 (Reporting by Nia Williams; Editing by Michael Perry)
 ((nia.williams@thomsonreuters.com; +1 403 531 1624; Reuters
Messaging: nia.williams.thomsonreuters.com@reuters.net))