Canadian government aid needed to decarbonise chem industry

TORONTO (ICIS)–Canadian chemical industry executives are defending the government subsidies and incentives that help drive the sector’s decarbonisation.

While a lot of people look at these incentives as “corporate welfare, I would push against this wholeheartedly”, Mike Burt, president and global director, climate and energy for Dow Chemical Canada, told participants at an industry webinar this week.

Rather, a company like Dow may get an incentive that was “miniscule” compared with the overall investment, and the payback to the country’s economy on a 30 or 50-year project was “magnitudes” bigger than the incentive, he said.

Dow is still in talks with the Canadian government about plans, announced in October 2021, to build a net zero carbon emissions cracker project at Fort Saskatchewan in Alberta province. It expects to make a final investment decision (FID) in October.

Bob Masterson, CEO and president of trade group Chemistry Industry Association of Canada (CIAC), said that the incentives for decarbonising the industry involved investment tax credits or production credits.

As such, companies have to build and operate the plant before the incentives kick in, with no risk for taxpayers, he said.

The industry was not looking to the government “to pick up the tab” for its decarbonisation, he added.

It was the government’s role to create the right conditions for companies to  make the investment, he said.

In addition to new projects such as the Dow complex, Masterson stressed that the existing facilities need to be kept in mind in addressing decarbonisation.

Canada’s built chemical production infrastructure has a roughly estimated value of Canadian dollar (C$) 300bn ($220bn), and almost all of this would need to be recapitalised in coming years for the industry to get to net zero emissions, he said.

The country therefore needed to “radically” raise its ability to attract capital, in particular with the challenges from the US incentives under that country’s Inflation Reduction Act (IRA), he said.

Oliver Sheldrick from Clean Energy Canada, a research centre at Vancouver’s Simon Fraser University, said that 10 big production sites accounted for more than half of the emissions in Canada’s chemicals and fertilizer industry.

Concentrating on those sites would go a long way to reduce the industry’s emissions, he noted.

According to Clean Energy Canada’s recent white paper, “Decarbonizing the Canadian Chemical and Fertilizer Industry”, the top emitters are:

1 NOVA Chemicals’ ethylene and polyethylene (PE) complex at Joffre, Alberta, which includes a cogeneration power plant;

2 Canadian Fertilizer Ltd, Medicine Hat, Alberta;

3 Dow’s existing petrochemicals complex at Fort Saskatchewan, Alberta;

4 Redwater Fertilizer, Sturgeon County, Alberta;

5 NOVA Chemicals’ Corunna petrochemicals site in south Ontario;

6 K+S’ Bethune potash mine in Saskatchewan;

7 CF Industries Courtright fertilizer complex in Ontario;

8 Koch Fertilizer complex, Brandon, Manitoba;

9 Mosaic’s potash site in Belle Blaine, Saskatchewan;

10 Nutrien’s nitrogen operations at Fort Saskatchewan, Alberta.

Critics have questioned whether it makes sense for a relatively small country like Canada to even try to compete against the US IRA incentives.

Canada’s incentive policies came under public scrutiny earlier this month when automaker Stellantis halted construction work on a battery cell project at Windsor, at the border to Detroit, Michigan, in a dispute over government funding.

($1 = C$1.36)

(Thumbnail photo: Canadian flag; souce: shutterstock)

Focus article by Stefan Baumgarten