Carbon capture a focus of federal budget

A new $1 billion Clean Energy Fund the federal government hopes will leverage more than $2.5 billion in investment in carbon capture and storage (CCS) and other environmental projects over the next five years is the largest energy component of the 2009 federal budget as tabled in the House of Commons by Finance Minister Jim Flaherty.

Other than $351 million for Atomic Energy of Canada to cover mainly continued development of its next generation of Candu power reactors, there was little else in the way of direct support for the energy sector. The main focus was on general economic stimulus, which will move the government from a decade of healthy surpluses to a cumulative deficit of some $84 billion in the next four fiscal years, after which the government expects a $700 million surplus in 2013-14.

In a bid for support from the main Liberal Party opposition when the budget is put to confidence votes (the New Democratic Party and the Bloc Quebcois had already said they would not support it) the Conservative minority offered an array of initiatives which generally were seen as more liberal than conservative. Following on the heels of details released before the budget on elements such as “shovel ready” infrastructure projects and the need for deficits, Flaherty announced a range of personal income tax changes.

On the corporate front, there was $7.5 billion in targeted support for the automotive, manufacturing and forestry sectors – the latter despite the threat of legal action from U.S. lumber lobbies – and a promise to eliminate most remaining import tariffs on machinery and equipment.

Other industry-focused elements of the budget include a two-year Extraordinary Financing Framework which will make up to $200 billion available to businesses, a two-year extension of the 50% straight-line accelerated Capital Cost Allowance rate, and a one-year extension of the Mineral Exploration Tax Credit to help mining companies to raise capital.

“Budget 2009 . . . aims to protect our country from an immediate economic threat while providing the solutions we need to ensure our long-term growth and prosperity”, the Finance Department said in a budget background document, explaining that its initiatives mirrored those being taken by others in the G20 group of countries.

“It is only by acting together to boost global economic growth that countries can derive maximum impact from their actions. The government’s actions . . . fulfill Canada’s commitments at the recent G20 leaders’ summit (last November 15 in Washington) to provide timely stimulus to domestic demand while maintaining long-term fiscal sustainability.”

Details of the Clean Energy Fund in the budget documents show that it includes $150 million over five years in support of “clean energy technologies” with the other $850 million “development and demonstration of promising technologies”, including large-scale CCS.

Until this latest commitment, Ottawa had pledged $375 million in support of CCS technologies, including $250 million in its 2008 budget, mainly for a full-scale commercial demonstration at a Saskatchewan coal-fired generating station. The other $125 million is for CCS projects under the auspices of the ecoENERGY Technology Initiative overseen by Natural Resources Canada.

“Canada has committed to a 20% reduction of greenhouse gases (from 2006 levels) by 2020,” the Finance Department notes. “Clean-energy technologies have the potential to make a significant contribution. . . . This is particularly the case for technologies that capture carbon dioxide . . . at the point of production in industrial facilities and safely store it underground.”