Canada's CO₂ Capture and Storage TRM 
The Challenges: An Issues Scan

• The Emerging Energy Scene
  • The National Scene
• Challenges to Overcome
  • Environmental Concerns
  • Competing Alternative Energy Sources
  • Resource Recovery Factors
  • Effective Policy
• Section Summary

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Carbon dioxide (CO₂) is a naturally forming compound that is essential to life on the planet. The carbon cycle, a never ending movement and transformation of carbon (in various forms including CO₂) between the biosphere, atmosphere, oceans and geosphere, is an important natural phenomenon, which is only beginning to be understood by the scientific community. What is known is that a delicate balance exists, and significant changes in this balance can cause a serious response in terms of the earth's climate.

A problem arises in that human induced CO₂ and other GHG emissions are occurring today at an unprecedented rate. As the global economy grows, so do GHG emissions, because of the direct link between economic growth and growth in energy demand (which is primarily met by combusting coal, oil or other fuels). Therefore a serious challenge arises: the need to reduce, or even eliminate, GHG emissions while maintaining a strong economy which is dependent on fossil fuels.

This, and a number of other critical issues are driving change in energy industries, and this section provides a valuable overview of some challenges that are motivating the need for CCS technology today. It begins with a review of the emerging global and national energy scenes (in terms of energy supply and demand), and is followed by a review of key challenges that are changing the energy picture. These challenges include the growing urgency of certain environmental concerns, competition from alternative energy sources, current petroleum recovery factors (which can be improved), and the need for a policy framework regarding CCS development.

The Emerging Energy Scene

Throughout recent history the need for affordable, convenient and secure energy has led to a situation where fossil fuels accounted for 80 percent of the world's commercial energy supply in 2002 (IEA, 2004a). The IEA expects this number to rise to 82 percent by 2030. World primary energy demand is forecast to increase at a rate of 1.7 percent/yr between 2000 and 2030 (even with the looming prospect of higher energy prices); resulting in an increase equal to 60 percent of the current demand by 2030 (Figure 2).

Although increased demand for nuclear and renewable energy is anticipated, the IEA expects that fossil fuels will meet more than 85 percent of the global increase in energy demand over the coming 25 years (IEA, 2004a).

The IEA expects oil to remain the single largest fuel source in the global primary energy mix, as demand grows from 77 million barrels per day (Mb/d) in 2002 to 121 Mb/d in 2030 (IEA, 2004a). This growth will primarily be driven by demand in the transportation and power generation sectors. However, oil's overall percentage market share will decrease slightly as its annual growth rate (at 1.6 percent/yr) is slightly less than the rate of increase in total energy demand.

The share of oil production from the Organization for Petroleum Exporting Countries (OPEC) will increase rapidly near the end of this timeframe, from a 2002 market share of 37 percent to a 2030 market share of 53 percent, as non-OPEC production begins to dwindle during this period due to decreasing reserves (IEA, 2004a). Large investments in supply infrastructure will need to be deployed to accommodate this shift in regional energy supply, which will likely result in increased security concerns regarding energy procurement, especially among energy importing nations like the United States (U.S.), India, Japan, China and most European Union (E.U.) countries.

Oil will remain the most heavily traded fuel, and imports may account for 57 percent of North America's consumption (the U.S. and Canada) by 2030. Demand will grow fastest in developing countries. However, escalating crude prices will force consumers to consider other options to meet their energy needs.

Part of oil's lost market share will be supplied by natural gas which has an expected growth rate of 2.3 percent/yr between now and 2030 (IEA, 2004a). Growth rates will be highest in Asia, Africa and Latin America, while actual growth will be highest in the mature European and North American markets.

Most gas markets are currently constrained by geographic boundaries, and market prices in each region depend on local supply and demand balances. The supply of liquefied natural gas (LNG) (which provides cross-boundary relief in gas markets) is expected to increase to 0.4 Mb/d in 2010 and 2.4 Mb/d in 2030. However, this will only serve a small amount of the global demand for energy (IEA, 2004a). The bottleneck is getting the gas to market which requires a large capital investment in exploration and infrastructure, estimated to be approximately (USD) $100 billion annually until 2030 (IEA, 2004a). Much of this expenditure will take place in Russia, the Middle East and Africa, which again raises security concerns over supply and capital investments.

Nevertheless, the IEA predicts that natural gas demand will double between now and 2030, mostly because of increased demand in Asia, Latin America and Africa. New power generation will account for more than 60 percent of the increase. LNG plants and new pipelines will be built in Russia and the Middle East, and account for over half of the gas traded by 2030.

Coal is the world's most abundant conventional energy source, accounting for 60 percent of remaining world hydrocarbon reserves, and 91 percent in the U.S. and Canada combined (if oil sands or oil shale are not included) (NEB, 2003). The IEA states that proven world coal reserves of over 907 Billion tonnes (Bt) should last another 200 years with production at current rates (IEA, 2004a; BP, 2005). The E.U., Australia, countries of the former Soviet Union (including Russia and Kazakhstan), China, and India all have extensive coal reserves. The latter two have large populations that rely heavily on coal for power generation — 75 percent of China's electricity is coal-fired.

Unlike oil and gas, many countries have domestic coal resources with 70 nations having recoverable reserves (WCI, 2005). Over 40 percent of these recoverable reserves are situated in Organisation for Economic Cooperation and Development (OECD) countries. Coal is a global commodity with relatively stable prices, which makes it an affordable and economically risk free source of energy.

Coal use will grow and continue to play a similar role in the world's energy mix in 2030, meeting 22 percent of global energy needs (IEA, 2004a). It will remain the primary energy source for power generation in 2030. Most of the growth will occur in developing Asian nations; China and India together will account for 68 percent of the total world growth (IEA, 2004a). The IEA emphasizes that the future of coal in OECD countries will rely to a great degree on climate change policy, and the development and deployment of advanced clean coal technology, which includes CCS.

The IEA (2004a) indicates that total nuclear capacity will grow by 2030, but by how much is uncertain. The cost of nuclear and environmental performance concerns may drive down demand. Meanwhile nuclear has enjoyed renewed interest in some countries because of it's near-zero emissions profile and the role it could play in energy security. As a result of these mixed driving forces there is little certainty over what role nuclear will play in future energy supply.

Nuclear energy's market share declined in recent years. The retirement of some existing plants led to a 2 percent decline in nuclear energy in 2003. In absolute terms, nuclear capacity may increase, but its overall share of the total primary energy market is predicted to decrease from 7 percent in 2002, to 6 percent in 2010, and 5 percent in 2030 (IEA, 2004a).

Biomass (and waste), hydro and other renewable energy sources all play a role in current markets and will continue to do so in the future. The sum contribution of these sources to total primary energy demand was 14 percent in 2002 — a number that will remain in 2030 (IEA, 2004a). Of the 14 percent, 7 percent is met using traditional biomass for energy (such as the burning of wood or dung) (IEA, 2004a). While contributions from traditional biomass will decrease, very high growth rates are expected for other renewable markets, thus resulting in the slight upward trend seen in Figure 2. The fastest growing markets, like wind and solar (which will grow sixfold by 2030), are starting from a very low penetration point so it will take time for their contributions to make a difference. Hydro is poised to grow, but will remain at 2 percent of primary energy supply because of resource limitations and the enormous amount of capital required to build new large hydro facilities (IEA, 2004a).

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The National Scene

Canada is less reliant on fossil fuels than many nations; however, oil, natural gas and coal are still the top three sources for meeting primary energy demand even in Canada. Together they accounted for 77 percent of total primary energy demand in 2000 (see Table 1). This reliance on fossil fuels increases in certain jurisdictions such as Saskatchewan where it is 93 percent and Alberta where it is 96 percent (NEB, 2003).

As indicated in the scenarios work done by Canada's National Energy Board (NEB) two years ago, it is expected that fossil fuels will continue to dominate energy demand in the future (Table 2). Looking at either the Supply Push (SP) and Techno-Vert scenarios (TV) in Table 2, fossil fuels are projected to dominate the picture in 2025.

Table 1: Primary Energy Demand by Fuel Type

Fuel Type	Percentage
Total = 11 363 PJ in year 2000  Source: NEB, 2003
Oil	38%
Natural Gas	27%
Coal	12%
Hydro	10%
Nuclear	7%
Other Renewable	6%

Table 2: Predicted Primary Energy Demand by Fuel Type

Fuel Type	2000	2025 SP	2025 TV
Source: NEB, 2003
Oil	4000 PJ	6000 PJ	4300 PJ
Natural Gas	3000 PJ	4200 PJ	4300 PJ
Coal	1420 PJ	1900 PJ	1200 PJ
Hydro	1120 PJ	1500 PJ	1250 PJ
Nuclear	1010 PJ	1400 PJ	1800 PJ
Other Renewable	813 PJ	900 PJ	900 PJ

In addition to relying on fossil fuels for domestic energy demand, Canada derives large revenue streams from their trade and export. In 2000, Canada produced 16 128 peta joules (PJ) of primary energy, of which 11 363 PJ was consumed domestically, leaving 4765 PJ for export abroad. The majority of energy exports are fossil fuel based, such as oil, natural gas and coal.

Fortunately, however, Canada is blessed with abundant energy resources, and its fossil fuels in particular are world-class in scale. With the recent addition of Alberta's vast oil sands deposits to conventional reserves, Canada quickly became the second largest nation in terms of established reserves in 2002, with 178 billion barrels in place (NEB, 2004). Canadian coal reserves are also large at 6.6 billion tonnes (with many hundreds of millions of tonnes more in resource) (WEC, 2004). With the scale and quality of hydrocarbon resources available in Canada, it's clear that careful consideration must be taken as to how to treat this economic opportunity. The future development of both conventional and unconventional hydrocarbon resources will greatly impact Canada's economic future.

Whether looking at the NEB scenarios or the previous IEA forecasts, a common theme is that energy demand will increasingly be met by fossil fuels. While conventional oil and gas reserves in the Western Canadian Sedimentary Basin (WCSB) are maturing, Canadian industry is moving to increase established reserves of its unconventional oil and gas resources (such as oil sands and coalbed methane) to meet demand long into the future. A vast coal resource can also easily be turned into reserves in Canada, and these too will supply energy long into the future. Meeting the demand projected by the NEB is possible, as there is no imminent shortage of fossil fuel energy resources in Canada.

The oil sands are a living example of how quickly Canada can add up reserves in a new world of relatively high energy prices. Official Canadian oil reserves jumped to 178 billion barrels in 2002, moving Canada from a very low standing (on the global scale) to its current position as the country with the second most reserves. A similar story emerges for coalbed methane. Canadian potential for coalbed methane is thought to be between 150 and 500 trillion cubic feet (tcf) in place, which compares to the estimated existing undiscovered conventional potential of 71–99 tcf in the WCSB (CSUG, 2003; NEB, 2003). It is also thought that the world's gas hydrate deposits contain more organic carbon than all other known fossil fuels combined, and some of the largest and best known deposits are in Canada. However, gas hydrates production is far from becoming economically feasible, and it will be some time before the world sees gas hydrate reserves added to the assets of any energy company (probably not until post-2025). However, the simple truth remains: while conventional petroleum resources are being exhausted, there is no shortage of other fossil fuels to make up the shortfall.

What all of this does highlight, however, is the growing need for CCS in Canada. To realize the future benefits of Canada's rich energy resource endowments (including conventional oil and gas, coal, oil sands and unconventional gas), while at the same time achieving reductions in domestic CO₂ emissions, requires new and innovative technologies, practices and processes that better enable efficient resource development and provide assurance of environmental integrity.

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Challenges to Overcome

Energy systems, today and in the future, are extremely dependent on fossil fuels, and as global energy demand increases this may raise a number of critical challenges. The issues include: environmental concerns that arise from fossil fuel use, the potential need for alternative sources of energy to help meet demand, the need to enhance recovery of existing energy resources, and the need for effective policy to provide solutions to these issues.

Environmental Concerns

Today's fossil fuel industries already use many innovative technologies to reduce their environmental footprint on land, water and air resources. Examples include reduced land footprint from oil and gas activities and active land reclamation, reduced pipeline and offshore leaks and spills, tailings pond management for coal preparation plants and oil sands upgrading facilities, and reduced gas flaring and venting from oil and gas production sites. Continual improvement in practices and procedures, and higher industry standards also contribute to reduced environmental impacts.

Significant air emissions reductions have already been achieved at existing power plants, oil refineries and natural gas processing facilities. However, further reductions are needed to continue to reduce environmental impacts such as acid rain, smog, particulates and air toxics build-up, and climate change. Solutions to all of these problems are needed. CCS is one of many options suggested for dealing with climate change-causing GHG emissions, and therefore the issue of climate change is one of the primary drivers behind CCS development today.

Climate Change

A natural system called the 'greenhouse effect' regulates the earth's temperature by keeping a somewhat constant concentration of heat-trapping greenhouse gases (GHGs) in the atmosphere. Human induced or anthropogenic GHG emissions are a concern because they are increasing annually. Anthropogenic CO₂ emissions have increased atmospheric GHG concentrations by more than 31 percent in recent years, from pre-industrial levels of 280 parts per million (ppm) to 368 ppm in 1999 (IPCC, 2001). Most anthropogenic emissions are caused by fossil fuel energy production and consumption (mostly from combustion processes) with the remaining emissions (10 to 30 percent) coming from land use change and deforestation. Energy accounted for nearly 25 Gt of CO₂ emissions in 2003, with oil contributing 40.8 percent of these emissions, coal 38.4 percent, natural gas 20.4 percent, and only 0.4 percent coming from other fuel sources (IEA, 2005). As CO₂ and other GHG concentrations increase in the atmosphere, so does the planetary greenhouse or warming effect.

Carbon dioxide (CO₂) is the GHG of most concern, being responsible for 62 to 64 percent of the enhanced greenhouse effect today. However, methane (CH₄) is another significant GHG, and one that escapes during coal mining and petroleum processing operations. Nitrous oxide (N₂O) is a GHG that results from many combustion processes, including those used in internal combustion engines which are used throughout the transportation industry (in trains, trucks and cars). Ozone and a number of trace gases also contribute to the greenhouse effect. Although CO₂ is the most problematic GHG of the group, other GHGs may become part of the capture and storage process as new technology is developed to accommodate other gas streams over time.

The United Nations Framework Convention on Climate Change (UNFCCC) was struck to address the climate change issue, and in fact has the ultimate objective of "achieving stabilization of GHG concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system" (UNFCCC, 1992). The Intergovernmental Panel on Climate Change (IPCC) was established to provide scientific, technical and socio-economic information relevant to the understanding of climate change, and provides much of the technical information used at UNFCCC meetings for discussion and decisions. The IPCC recently completed a report on CCS entitled IPCC Special Report on Carbon Dioxide Capture and Storage, which states the important role of CCS in a portfolio of global measures aimed at stabilizing GHG concentrations (IPCC, 2005). This role for CCS in a portfolio of options for reducing GHG emissions is also supported by the popular publication by Pacala and Socolow (2004) in Science magazine. The IPCC also identified the significant role that CCS will continue to play in developing transformational new energy systems and infrastructure based on hydrogen/electricity, and perhaps even bio-based energy carriers.

Canada ratified the Kyoto Protocol to the UNFCCC in 2002, thus agreeing to lower its GHG emissions to 6 percent below 1990 levels during the period from 2008 to 2012. However, the gap between Canada's Kyoto target and the business as usual (BAU) scenario has increased since 1990 (see Figure 3). In 2002 it was estimated that the gap in the 2012 timeframe may reach 240 MtCO₂e or more, if the appropriate reduction programs and initiatives are not in place (Government of Canada, 2005). The latest estimates indicate this gap may have grown to 270 Mt or more, due primarily to higher than expected growth in gross domestic product (Government of Canada, 2005). The challenge facing Canada is how to reduce these emissions while minimizing the negative economic impact of making the reductions. In an ideal (but perhaps somewhat unrealistic) situation, the negative impacts would be mitigated, and in fact turn out to be positive benefits resulting from the development of technology and knowledge that would result in a more innovative and competitive Canadian marketplace.

The Large Final Emitters (LFE) group, a compilation of over 700 large emitting companies in Canada, are responsible for the vast majority of Canadian industrial GHG emissions. Industry in general (which is largely represented by the LFE), is already responsible for more than half of Canada's total GHG emissions (as indicated in Table 3) (Environment Canada, 2003), a share that is expected to increase by 2010. As a result, LFE companies are expected to collectively reduce their emissions by 39 Mt CO₂e/yr by 2008 to 2012 (using the original methodology for calculating the LFE target) in the Government of Canada climate change plan (Government of Canada, 2005).

Table 3: GHG Emissions by Sector

Sector	Percentage
Source: Environment Canada (2005)
Industrial	51%
Transportation	26%
Agriculture	9%
Commercial and Institutional	5%
Residential	6%
Other	3%

This indicates that some sort of a carbon constraint is emerging in Canada, and it seems quite likely that industry could be expected to reduce emissions even more in subsequent years (post-Kyoto).

Within the LFE group, emissions are split as indicated in Table 3. The fossil fuel sectors (thermal electricity and oil and gas combined) account for 78 percent of total LFE emissions, therefore reductions from these sectors are essential (Environment Canada, 2005). Thermal power generation is the largest single industry sector source, contributing nearly all of the 33 percent of emissions allocated for electricity in Table 4, and the coal-fired facilities in Alberta, Saskatchewan, Ontario and Nova Scotia generate the majority of these emissions (Environment Canada, 2005).

Emissions from these thermal power plants and from other fossil fuel industries are some of the primary contributors to the asymmetrical distribution of GHG emissions by province across Canada (see Table 5). Although Alberta only has the fourth largest population in Canada (its population of 3.3 million is far lower than the provinces of Ontario and Quebec which have 12.6 and 7.6 million inhabitants respectively), it emits the most GHG of any province or territory (Statistics Canada, 2005). Saskatchewan has the highest GHG emissions on a per capita basis of all provinces in Canada.

Currently Canada does not regulate GHG emissions, but the situation is changing rapidly, and certain provincial jurisdictions plan to regulate regardless of federal direction. LFE companies will likely be able to use a number of flexible mechanisms under this legislation, including domestic emissions trading and the use of offsets and international mechanisms under the Kyoto Protocol (including International Carbon Markets, Clean Development Mechanism, and Joint Implementation). Canadian LFEs will also have the option to reduce emissions from their operations through energy efficiency, fuel switching, sequestering carbon in the biosphere, and capturing and storing CO₂ geologically.

Table 4: Emissions from Large Industrial Emitters 2000

Industry	Percentage
Source: Environment Canada 2005
Oil and Gas	35%
Mining and Manufacturing	32%
Electricity	33%
Total	342 Mt

CCS offers an important opportunity to reduce Canada's net emissions, and the UNFCCC is expected to endorse CCS as a recognized and encouraged method of reducing CO₂ emissions into the atmosphere in the near future. Once accepted by the international community, CCS can begin contributing to Canada's emissions reduction efforts, but will likely not contribute in any significant way until sometime after 2012. How long until CCS contributes in a meaningful way depends on how aggressively Canada pursues the research, development, testing and deployment of CCS technology and practices.

Table 5: GHG Emissions per Jurisdiction

Province or Territory	Emissions
Source: Environment Canada 2005
Alberta	224.0 Mt
Ontario	206.0 Mt
Quebec	91.5 Mt
Saskatchewan	65.2 Mt
British Columbia	63.4 Mt
Manitoba	21.3 Mt
Nova Scotia	21.2 Mt
New Brunswick	21.0 Mt
Newfoundland and Labrador	10.9 Mt
P.E.I.	2.1 Mt
North West Territories & Nunavut	1.8 Mt
Yukon	0.5 Mt

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Competing Alternative Energy Sources

As already noted, a number of other options exist to try to reduce CO₂ emissions from energy systems. This includes reducing emissions through energy efficiency and conservation, which has both economic and environmental benefits. However, energy efficiency and conservation can only go so far, beyond which a significant change to energy production and use is needed. Another option is to reduce emissions through fuel switching to less CO₂-intensive fuels like natural gas. However, using natural gas still results in significant GHG emissions, and therefore capturing these emissions for storage would still be necessary. While the fossil fuel sectors continue to be the most dominant providers of energy on the global scene, a number of alternative energy sources continue to compete, and over time, are making inroads into conventional markets. Therefore, these other sources (which have been briefly discussed) should be considered in the Canadian context to determine what impacts, if any, they might have on fossil fuel sectors, because any such impacts would also affect CCS.

Nuclear

The centrepiece of Canada's nuclear industry is the Canada Deuterium Uranium (CANDU) pressurized heavy water reactor. There are 22 CANDU reactors in Canada, 20 in Ontario, one in Quebec and one in New Brunswick. The Ontario plants were originally planned for decommissioning by 2010, but are being, or have been, refurbished to extend their lifetimes to at least 2020.

Today's appetite for new advanced reactor construction in Canada is uncertain. The industry still needs to improve the economics of nuclear power and prove that the handling of radioactive waste can be managed successfully. As well, to plan and commission a new nuclear facility takes a decade to complete, which is far too long for most private investors. In fact, only public institutions seem capable of bringing nuclear projects to fruition. Therefore public policy plays heavily into the future of nuclear, and as a result public acceptance becomes critical.

While nuclear may one day play a significant role in Canada's energy future it is not a clear-cut option at this point. As a result, another choice must be available to supply Canada's energy needs.

Hydro

Hydroelectricity provides 60 percent of Canada's electricity generation, with 62 500 MW of the 64 000 MW of hydroelectricity coming from large-scale hydro (NRCan, 2000). Large hydro is the least expensive source of base-load electricity because of its low associated fuel and operating costs. Hydro is also considered to be near-zero emissions which has served to increase its attraction. Canada's large hydro capacity is expected to increase by 20 percent by 2025 (NEB, 2003), with most of the new generation coming from British Columbia, Manitoba, Quebec and Newfoundland and Labrador.

This capacity is not enough to meet future growth in electricity demand, let alone to make up for the replacement of existing generation capacity that has served its plant life. New large-scale hydro projects are expensive and difficult to build. Building hydroelectric capacity entails long-term projects that are extremely capital intensive. These projects have significant impacts on land and water resources. As a result, hydro is no longer considered to be 'the' green option in power generation, despite its renewable stature. As with nuclear, hydro is not a clear-cut option for providing all the future electricity capacity Canada needs, therefore an alternative must be made available.

Wind

The cost of wind power has decreased dramatically due to technology improvements and economies of scale in turbine production over the past two decades. Canada has a large wind resource, but its development is limited because of competition from other low-cost electricity supplies. In addition, wind power is intermittent and therefore can only supply a portion of the total installed generation capacity. Although wind is the fastest growing source of new electricity generation in Canada (and in the world) in terms of the rate of installed new capacity, its overall presence in the energy mix will continue to be small in the near future.

Biomass

Biomass is the second most abundant source of renewable electricity in Canada, with the two main industrial sources of biomass being sawmill residues and black liquor from pulp and paper mills. The pulp and paper industry has more than 1200 MW of installed capacity (often co-fired with fossil fuels). Independent power producers use wood waste from sawmills for an additional 200 MW in 10 plants across Canada. Small amounts of electricity are generated from landfill methane by incinerating municipal solid waste or using the biogas from anaerobic digesters.

Biomass on its own is not an economically feasible option in most cases, but it can be co-fed into advanced fossil fuel-fired facilities to generate significant emissions reductions over a regular plant. Energy efficiency improvements and biomass co-feeding can dramatically improve the emissions intensity of either coal or natural gas-fired generating stations. In addition, the same CCS processes being developed for fossil fuels may also be applied (with incremental changes) to co-fed facilities. By using CCS in conjunction with a biomass energy source, the result is not only the elimination of GHG emissions, but also the extraction of GHG from the atmosphere and subsequent storage of them underground, thereby contributing net negative emissions (or 'neg-emissions'). This process would begin by promoting the growth of biomass to increase the sequestration of CO₂, followed by the capture of that CO₂ when the biomass is either combusted, liquefied or gasified, and finally storing the CO₂ in geological formations.

Hydrogen

A hope exists today for hydrogen to one day substitute for fossil-based energy. However, it should be noted that hydrogen is an extremely reactive substance not found in its pure form in the natural environment, and it must be derived from other substances such as water, hydrogen sulphide or hydrocarbons. This distinguishes hydrogen from the sources noted earlier in that it is a produced energy carrier much like electricity.

Today, hydrogen production in commercial quantities comes from hydrocarbons. Using today's hydrogen production technology results in more CO₂ being generated (on a per-unit-of-heat basis) by producing hydrogen from fossil fuels and then converting it to energy (via a fuel cell or a turbine), than by generating an equivalent amount of energy through directly combusting the fossil fuel.

Electrolysing water using a renewable energy source such as hydro or nuclear, is a possibility for producing emissions-free hydrogen. However, this process is nowhere near cost-effective on a commercial scale, and until it is, the best use for these energy sources is to directly feed the electricity into the grid.

Nevertheless, the notion of a 'hydrogen economy' receives a lot of attention and significant global efforts are underway to enable such a future. This includes the U.S.-led International Partnership for the Hydrogen Economy and the European Hydrogen and Fuel Cell Technology Platform project. Canada's first hydrogen technology roadmap entitled Charting the Course: A Program Roadmap for Canada's Transition to a Hydrogen Economy (H₂FCC, 2004), speaks to Canadian efforts to develop and commercialize hydrogen based technologies like fuel cells. All of these initiatives indicate that mass hydrogen will likely be produced from fossil fuels (for quite some time) in whatever hydrogen economy emerges (IPHE, 2005; HFP, 2005; H₂FCC, 2004). Therefore, like the fossil fuel based economy of today, a hydrogen economy of the future will likely rely on CCS technology to reduce CO₂ emissions arising from energy production.

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Resource Recovery Factors

A challenge that has always faced the global energy industry is current recovery factors of certain hydrocarbon resources. Although both coal and natural gas have high recovery factors (approximately 100 percent and 90 percent respectively), oil and coalbed methane are harder to extract from geological formations. With today's high energy prices, producers are looking for ways to increase these factors and thereby boost recoverable reserves and ultimately profits.

The situation is no different in Canada's WCSB, which is a maturing oil and gas region that has been extensively explored for any and all sources of conventional hydrocarbons. The focus of large energy companies investing in the WCSB today are the large unconventional oil and gas deposits (such as the oil sands and coalbed methane), and enhanced recovery opportunities such as enhanced oil recovery (EOR), and to a much lesser extent, enhanced coalbed methane recovery (ECBM) and enhanced natural gas recovery (ENGR).

Oil recovery factors are site specific and depend on the characteristics of the hydrocarbon product and host reservoir. Average recovery factors for Alberta light-medium versus heavy crude oil (using primary recovery techniques) is 23 percent and 13 percent respectively, which averages to 19 percent overall (EUB, 2005). The oil and gas industry has developed a number of secondary techniques to enhance recovery factors, and the use of water flooding and solvent flooding has brought the total average recovery factor to 27 percent (EUB, 2005).

A technique being used in some applications is CO₂ enhanced oil recovery (CO₂-EOR). It is anticipated that CO₂-EOR can recover anywhere between 8 to 15 percent of the total original oil in place, (IEA, 2004), and therefore this constitutes a significant boost in production in many cases. However, other secondary recovery techniques such as water flooding may have better results in certain locations, and a decision must be made on a reservoir by reservoir basis as to which EOR technique would be best.

CO₂ enhanced coalbed methane recovery (CO₂-ECBM) is still a speculative technology (in the infancy of its technological development), but, if successful, it is expected to improve CBM recovery factors to 90 percent from the current range of 40 to 50 percent (IEA, 2004). Even conventional natural gas, which has a recovery factor of 90 percent, may benefit from CO₂ enhanced natural gas recovery (CO₂-ENGR) in the form of a slight recovery boost, but more importantly, through a faster recovery process which would also prove economically beneficial. Much more detail is provided on all of the enhanced recovery techniques in Technology Pathways.

Enhanced recovery techniques using CO₂ injection would increase the recoverable reserves of many North American hydrocarbon resources (with the exception of mined coal). Increased reserves, through the use of enhanced recovery techniques, have both economic and energy security implications, and are an indication of the benefits that CCS can provide on many fronts.

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Effective Policy

A non-technical challenge facing today's energy industries is the lack of a clear and concise policy on the role of CCS, and the subsequent incentives and regulations that would result from such a policy agenda. Most of the work to date on CCS has focused on technical issues, but social, political and administrative issues related to CCS are very complex, and, unless properly addressed, could delay commercial deployment of the technology. It is completely understandable that some policy gaps exist today as this is a new technology area, and some of the uncertainties related to CCS are still being worked through. However, policymakers must begin to tackle the issues facing CCS today and start to develop a framework under which a robust and vibrant industry can develop.

Work is being done to address many of the policy gaps and the recent IPCC Special Report on Carbon Dioxide Capture and Storage communicates an enormous amount of important technical information to help policymakers make their decisions. Another useful document for policymakers is the IEA's Prospects for CO₂ Capture and Storage. Part of the role of the CCSTRM is to provide relevant information to the same senior policymakers. With the correct technical information in mind, appropriate actions and strategies can be taken to develop policy and regulatory frameworks, capacity building and public awareness in Canada.

Policy Framework

The building of a robust CCS policy framework needs to start now. An effective policy framework can start with a vision and strategy for the role that CCS can play both internationally and in Canada, in the portfolio of options for dealing with GHG reductions. This includes a clear indication of how CCS can operate within and along side other policies and measures related to climate change, energy and sustainable development, which was the overarching theme that emerged from the 2005 G8 Summit outcome in Gleneagles Scotland. At the centre of this theme is the idea that energy and energy technology are essential elements in achieving the necessary GHG reductions to stem climate change while also managing to sustain the global economy.

As outlined in a recent position paper by the Pembina Institute (Marr-Laing et al, 2005), the government needs to address some critical policy decisions related to climate change and CCS including: what amount of reductions are to be expected from CCS in Canada, and in what timeframe; who will pay for the development of CCS infrastructure and systems (government or industry); and, which specific CCS activities are most desirable from a societal point of view? Other overarching decisions related to climate change are also needed to guide CCS policy in Canada.

An important policy direction under this framework may be to assist in the safe and responsible development of both global and domestic CCS industries. This would require the use of appropriate policy incentives or penalties to either directly or indirectly drive the development and deployment of CCS infrastructure and systems. The policy framework and mix of incentives/penalties would be discussed openly and transparently, to engage Canadians in the debate, and include relevant opinions on how to develop a strong domestic CCS industry.

A joint effort between federal, provincial and territorial jurisdictions may be necessary for a Canadian policy framework, because there would be aspects of the framework that have international, federal, provincial and territorial implications.

It seems most appropriate for the policy work to precede the development of a regulatory framework, because once effective policy is in place it can guide the development of regulation. A policy framework would also include strategic planning for other essential elements such as capacity building and public awareness.

Regulatory Framework

A suitable regulatory framework must respond to the needs of different parties. Industry needs to be confident that regulation is workable and feasible. Planners of individual projects need to know the rules and regulations that govern their operations. Financial institutions need assurance that the projects they invest in meet regulatory requirements. The public needs to understand and accept that appropriate regulations are in place to ensure public safety and environmental protection. Finally, the regulator itself needs to have confidence that the framework is sufficient to meet its reporting, compliance and other regulatory needs.

One specific issue that needs resolution through regulation is the handling of "avoided" versus "captured" emissions. The use of CCS increases the amount of energy used by an energy system due to the additional energy that is required to capture, compress, transport and inject the CO₂. If this additional energy is supplied by using fossil fuels, more CO₂ is emitted from the system. Therefore, there is a difference between the actual amount of CO₂ captured and stored in a system (gross emissions), and the amount of CO₂ avoided (net emissions) by using CCS to reduce emissions from the original plant designed without CCS. As an example, if the CCS facility actually captures 90 percent of the emissions, the avoided emissions may only be 75 to 80 percent of the original emissions due to the excess emissions. Whatever regulatory framework is in place, it needs to distinguish between the two so that accurate tracking of both numbers can be undertaken.

Another issue that arises is the permanence of CO₂ stored in a geological formation. One interesting approach to the issue of slow, but persistent leakage of CO₂ through the lithosphere and potential seepage to the atmosphere is to determine the total quantity of fossil fuels in place to set an upper limit on the required storage time (IEA, 2004). For example, if fossil fuels are used to their full potential, and if a CO₂ concentration of 450 ppm is the acceptable limit in the atmosphere, then a retention time of at least 7000 years is needed for geological storage (IEA, 2004). Regardless of such a limit, geological repositories should be designed for zero leakage, with clear regulations on acceptable levels of leakage and seepage (based on the limit) in case such an event takes place.

Other issues important to a CCS regulatory framework include the monitoring, measurement and verification (MMV) of the stored emissions. MMV will be important in determining the performance of storage systems by verifying whether massive amounts of CO₂ can be stored over the long-term. MMV is an important area of regulation because it entails an essential set of procedures and protocols for addressing any health, safety and environmental concerns regarding storage operations.

Capacity Building

A CCS industry is poised to begin in Canada and internationally. However, the cost of developing and deploying new CCS technologies and approaches is high. Therefore, the industry needs to be focused and strategic in its activities and investments. An approach to investing in capacity building, both human and infrastructure, is an important step that needs to be guided by policy.

Canada and other nations will benefit most by supporting an approach of cost-sharing, pooling of expertise, collaborating and disseminating knowledge to build global capacities in CCS. CCS needs to be piloted, field tested, adapted and commercially demonstrated, and far too many promising technologies exist for any one nation to undertake the necessary steps in solitude. In addition, large-scale projects are expensive. For example, the IEA Weyburn CO₂ Monitoring and Storage Project — a Canadian CO₂-EOR project in Saskatchewan — has cost (CDN) $28 million to date, but this is on top of an initial commercial project investment of (CDN) $1.5 billion. The Norwegian Saline Aquifer CO₂ Storage Project (or the Sleipner Project) cost a similar amount. It will take at least five or six more of these demonstration projects, followed by testing the most promising concepts in different locations, to ultimately determine best approaches for CCS. Because of the size of these investments and the long lead times in project development and proofing, international collaboration is important, and strategic policy aimed at building this global capacity is critical.

Another essential form of formal capacity building is investment in human capital through education, research, mentorship and succession planning. Governments, companies and research organizations engaged in CCS activities have a vested interest in funding the development of formal education programs in CCS to help train the next generation of engineers, technicians, policymakers and business leaders that work in CCS. A big part of this training and education includes the transfer of existing skills, knowledge and expertise to the next generation of researchers and practitioners, and therefore formal efforts for succession planning and mentoring is needed.

Public Awareness

Public awareness and eventually acceptance of CCS is needed for capture and storage projects to be widely implemented across Canada and around the globe. However, the notion of capturing and storing CO₂ in geological structures is relatively new, and the general public is quite unaware of the topic in many countries. While surveys in Japan suggest that 31 percent of respondents know what CCS is, the U.S. number is only 4 percent (IPCC, 2005). Further, some responses indicate that CCS risks are being seen as an 'end-of-pipe' solution, a technology that simply treats the symptoms and not the root cause of climate change. Others may view CCS as a delay tactic that enables the continued use of fossil fuels instead of other renewable energy sources. Most surveys conducted to date suggest that even where there is support for CCS, it is described as 'reluctant' rather than 'enthusiastic' (IPCC, 2005).

Effective outreach and awareness building will help balance any incomplete information or unsubstantiated views, and help contribute to the widespread understanding of this important option for meeting Canada's climate change goals, and the pivotal role the technology can play in transitioning today's economy to a new low-emissions energy future. However, raising public awareness is not a Canadian issue alone; it is a global problem that must be addressed internationally. Even if Canada or another society were to endorse the technology, global acceptance of the technology is required for the industry to be developed, simply because of the global nature of the climate change issue and the required solutions. Thus outreach and awareness building is needed for the general public, policymakers and regulators, both domestically and internationally.

A special case of awareness building is needed for financiers and insurers, because companies that develop and deploy CCS will depend on these stakeholders for investment dollars and for risk management approaches for the projects.

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Section Summary

According to the IEA, fossil fuels supplied 80 percent of global energy demand in 2002 and will supply 82 percent in 2030. While efficiency gains are being made in energy use, it will take a 60 percent increase in energy supply to meet total demand in this timeframe. Essentially, world energy demand continues to grow and fossil fuel sources will continue to be the supply choice. Energy demand is also growing in Canada, a country that is richly endowed with world-class conventional and unconventional fossil fuel resources.

At the same time, a number of critical issues challenge the choices being made regarding energy supply. Environmental issues like climate change are creating pressure to reduce global dependence on fossil fuels. CCS technology offers an alternative approach by enabling the development of low-emissions fossil fuel industry sectors. This technology would be an enormous benefit to Canada and like nations that are endowed with vast fossil fuel resources, both conventional (like oil, gas and coal) and unconventional (like oil sands and coalbed methane). A robust and thriving CCS sector would assist countries like Canada in their struggle to meet global GHG reduction commitments, while continuing to grow the domestic economy.

A number of energy alternatives show promise for meeting future energy demand; however, each faces a number of its own issues. Hydroelectricity is limited in its growth potential by resource availability. Nuclear faces a complex set of economic, environmental, and societal challenges that keep the industry from growing in western countries. Other renewable energy technologies are at a very early stage of development. An alternative is needed for the interim period, such as a technology like CCS which allows for the use of low-emissions fossil fuels until alternative energy can be deployed at a later date. However, CCS should not only be viewed as a transitional remedy, rather it should be seen as a way to transform to a low-emissions future energy industry, such as a hydrogen/electricity, or perhaps even a bio-based, energy future.

Until then a much better job can be done on the use of existing resources. CCS can be used for CO₂-EOR, CO₂-ENGR or CO₂-ECBM to both increase recoverable reserves and enable their expeditious recovery. Either way the result is an economic benefit with environmental and social advantages for all Canadians.

A final challenge is the development of effective CCS policy for addressing the role of CCS in the energy system today and in the future. Much of the CCS work being done so far is of a technical nature, mostly on technology research, development and deployment. Much more work is required on a CCS policy framework, a regulatory framework, capacity building and public awareness. In part, the technical information provided in the CCSTRM is meant to help inform policymakers during their endeavours in these relatively new policy areas.

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