Feds set aside $7B from Canada Growth Fund for carbon-price contract guarantees

Almost half of the Canada Growth Fund for clean technology investments will be allocated to special contracts intended to give companies the confidence they need to make major investments to lower their greenhouse-gas emissions.

Finance Minister Chrystia Freeland used her fall economic update Tuesday to confirm that the fund — which she launched a year ago in the 2022 fall economic statement — would be the principal vehicle to deliver carbon contracts for difference.

She said up to $7 billion of the $15-billion fund will be set aside for contracts for difference, some of which are already being negotiated.

The contracts acknowledge that companies are making decisions to invest in things that lower their carbon emissions based on how much they expect to pay for the carbon price over several years. Those investments are only sound if they would cost less than what the company would pay in carbon pricing without the technology.

If the carbon pricing system changes in the future, the investments companies make to avoid paying it could become far less lucrative. Contracts for difference are an insurance policy of sorts against the carbon price going down or being eliminated, making the clean-tech investments less risky.

Freeland has been floating the idea of carbon contracts for difference for more than a year, as major energy companies, in particular, look for additional support to stay competitive in the face of the massive subsidies on offer under the U.S. Inflation Reduction Act.

She said on Tuesday that she wants Canadians to know no other country is competing harder with the United States for clean-tech transition investments.

"We are in a race, and we are committed to owning the podium. And that is what we saw in the budget in the spring, and that is what we see in this economic update," she said in a news conference just before tabling the fall update in the House of Commons.

"This is a plan to attract investment. It is a plan for the economic transformation, for the industrial transformation. Most of all, it is a plan for good jobs for Canadians today and tomorrow."

The contracts could be the final piece of the puzzle that major oilsands companies need in place to start building massive carbon capture and storage projects, which are critical if Canada wants to have any chance of meeting its next emissions targets.

But how Canada might move expeditiously on those deals wasn't part of this update, much to the disappointment of some experts. 

"I was hoping that we were going to see at least a framework around contracts for differences, a broad program getting announced at least for consultation, but we did not see anything like that," Scott MacDougall, the director of electricity for the Pembina Institute, told CBC News. 

Industry stakeholders were also waiting for an update on investment incentives for clean technology and emissions reduction projects, like carbon capture and storage.

"I think the government must know how much pressure that they're under and how great everyone's expectations are around these investment tax credits," MacDougall said.