Developments in carbon management projects

 
A subset of carbon management approaches involves the capture of CO₂ either from point sources (such as industrial facilities) or directly from the atmosphere (known as Direct Air Capture or DAC). The Government of Canada has incentivized both approaches through the federal Carbon Capture, Utilization and Storage Investment Tax Credit (CCUS ITC), provided the captured CO₂ is geologically sequestered or incorporated into certain concrete production processes².

The scaling of this carbon management infrastructure will require extensive capital investment in CO₂ capture equipment, transportation pipelines and storage facilities, as well as in new generation to supply the power for these energy-intensive facilities. This investment, in turn, will require a continued commitment to strong regulatory frameworks and incentives.

Growth of carbon capture and sequestration (CCS) infrastructure

In Canada, provinces have jurisdiction over subsurface natural resources and thus have primary regulatory authority over CCS activities, including transportation and subsurface sequestration. The exception to this is CO₂ pipelines that cross provincial or international boundaries which, like oil and natural gas pipelines, are regulated primarily by the federal government³. Intraprovincial CO₂ pipelines and sequestration facilities are subject to the jurisdiction of specialized provincial regulators, such as Saskatchewan’s Ministry of Energy and Resources and the Alberta Energy Regulator. We anticipate the regulation of new CO₂ pipelines in other Canadian provinces will also fall to specialized regulators.

There are presently five large CO₂ transportation pipelines in operation in Canada: the Souris Valley Pipeline, Midale CO₂ Pipeline, and Boundary Dam to Weyburn CO₂ Pipeline in Saskatchewan, and the Quest project pipeline and Alberta Carbon Trunk Line (ACTL) in Alberta. The advancement of several CCS hubs⁴ and enhanced oil recovery projects in Alberta and Saskatchewan, in particular, present opportunities for investment in CO₂ pipeline and related infrastructure projects. In addition, Ontario has proposed the Geological Carbon Storage Act, a statutory framework for commercial-scale CCS in the province. For further information on some of these developments, please see our article, Cross-country carbon capture and sequestration check-in.

Growing investment in DAC

The development of new CCS infrastructure is unlocking opportunities not only for point source emissions capture but also for new DAC projects that capture CO₂ from the atmosphere. As mentioned, eligible expenditures for these projects can take advantage of the CCUS ITC. In addition, in January 2025, Environment Canada and Climate Change (ECCC) released a draft protocol that, if adopted, would allow DAC projects to generate offset credits that could be used in certain Canadian compliance markets, provided that those projects meet criteria for permanence, quantifiability and transparency, among others. To date, DAC projects are predominantly generating credits under voluntary market standards; as of January 2025, over 1.6 million tonnes of DAC carbon credits have been purchased to date at an average price of $470 per tonne⁵. The draft ECCC protocol marks an important move toward incorporating DAC into the compliance markets. In fact, the draft ECCC protocol is the first proposed government-backed DAC protocol in the world. The proposal follows the Government of Canada’s commitment to purchase at least $10 million in carbon dioxide removal (CDR) services by 2030 through the Low Carbon Fuel Procurement Program. As described in the February 2025 Request for Information, registered DAC projects are eligible for the procurement⁶.

The growth of DAC represents a significant opportunity within the broader CDR industry. According to a McKinsey study, a CDR industry (including DAC) capable of delivering gigaton-scale removals at net-zero levels could be worth up to $1.2 trillion by 2050⁷.

Conditions for continued growth

In recent years, the market for DAC projects has largely been driven by the demand of a few large corporations seeking CDRs in the voluntary carbon markets to meet their net-zero commitments, including Microsoft, JP Morgan and Next Gen. The market is expected to grow further. A projection by BCG estimates the demand for CDRs in 2030 to be anywhere between 40 to 200 million tons of CO₂ (Mt CO₂), which far exceeds the expected supply for the same year (approximately 15 to 32 Mt CO₂)⁸. Despite these growing figures, even greater supply and demand will be necessary for companies to meet their carbon commitments and to achieve global decarbonization.

The expansion of the DAC industry will also require—and help enable—continued investment in CO₂ transportation and sequestration infrastructure. In Canada, investment to date has been driven in large part by the escalating backstop carbon price implemented by the Greenhouse Gas Pollution Pricing Act. However, the political uncertainty surrounding the upcoming federal election will need to be resolved to help scale investment in this infrastructure. To ensure future growth, regulatory measures (such as integrating CDRs into compliance markets to grow the demand base) will be important, along with the continuation of critical incentives such as the CCUS ITCs. Last, given the energy intensity of CDR facilities, investment in low-cost renewable energy production to support these facilities will be an important factor in the growth of the sector.