A proposed $400 million facility in Edmonton that aims to convert landfill waste into electricity may face cancellation due to a recent agreement on carbon taxes between the Alberta and federal governments. The initial plan was for the national industrial carbon price to increase to $170 per tonne by 2030. However, a revised deal signed by Prime Minister Mark Carney and Alberta Premier Danielle Smith has adjusted this target to $130 per tonne by 2040.
Varme Energy, the company behind the waste-to-energy project, is now in a precarious position as the policy change affects the project’s viability. The facility, which includes capturing greenhouse gases and storing them underground while generating carbon credits for sale, may suffer from decreased credit values with the lower carbon price.
Sean Collins, the CEO of Varme Energy, expressed concerns about the project’s future, indicating that without additional government policy adjustments in the coming months, the company might have to abandon the project due to financial challenges.
The agreement between Carney and Smith was part of a broader pact aimed at reducing methane emissions, streamlining regulatory processes for major projects, and exploring a new oil export pipeline to the West Coast. Some large industrial firms had advocated for a lower carbon price to maintain competitiveness against U.S. counterparts, who do not have a carbon tax.
According to Ross Linden-Fraser, a researcher with the Canadian Climate Institute, a slower and lower carbon price increase in Alberta could lead to reduced investments in emission reduction initiatives. The impact of setting a lower value on revenue sources for emission-reducing projects is a reality that cannot be ignored.
Varme Energy already has agreements with the City of Edmonton’s landfill and provincial permits for electricity production. The project, which has received funding from the Alberta government and support from the federal Canada Growth Fund, was designed to ensure that carbon credits are sold for a minimum of $85 per tonne. However, with an expected operating cost of around $118 per tonne, the project’s financial feasibility under the revised carbon pricing scheme is in question.
Collins emphasized the urgent need for Ottawa’s intervention to address the revenue challenges faced by the project and stressed the importance of maintaining revenue streams for sustainability. Varme Energy, a subsidiary of a Norwegian clean energy company, specializes in waste-to-energy projects that generate electricity by converting garbage into steam.
The carbon capture sector, including Varme Energy, is advocating for policy changes that would enable companies to sell carbon credits in different markets to achieve better prices. As the federal and provincial governments implement the new carbon pricing agreement, the industry is closely monitoring credit calculation methodologies and potential loopholes that could impact carbon tax obligations for polluters.
For Collins and Varme Energy, time is of the essence. The fate of the proposed project hinges on the introduction of supportive fiscal policies; otherwise, the project may face cancellation in the upcoming months. Despite the challenges, Collins remains committed to the vision of a landfill-free future for Canada and the vital role his team plays in realizing this vision.