Canada’s government has committed $200 million to Calgary-based carbon capture company Entropy through the Canada Growth Fund (CGF). This comes in conjunction with a fixed-price carbon credit purchase agreement for a maximum of one million tonnes annually, aimed at ensuring the success of Entropy’s green projects in industries with high emissions and difficult decarbonization processes.
Entropy was established in 2020 by Calgary-based natural gas firm Advantage Energy, along with Allardyce Bower Consulting, an energy-oriented professional services provider. The company pioneers in creating modular carbon capture and storage (CCS) facilities to control pre-combustion and post-combustion emissions from industrial sources. Glacier Gas Plant in Alberta witnessed the operation of Entropy’s premier commercial natural-gas-fired CCS project just last year.
In addition to Canadian government funding, a significant investment of $300 million was made by Brookfield through the Brookfield Global Transition Fund last year.
A significant study on climate change mitigation by the Intergovernmental Panel on Climate Change (IPCC) suggested that to limit global warming to 1.5°C, carbon dioxide removal methods need to scale up to billions of tons per annum.
At present, most carbon capture and storage solutions are in early development stages and limited in scale, requiring substantial initial development investment. Financial uncertainty is highlighted as a primary risk for such projects according to a recent report from S&P Global Ratings.
According to Entropy, their newly inked agreement with CGF, which guarantees a large-scale and long-term carbon credit supply, will help minimize risks associated with private CCS projects and catalyze their growth. With this deal secured, the company announced a preliminary final investment decision regarding Glacier Phase 2.
Mike Belenkie, President and CEO of Entropy, expressed the company’s enthusiasm about the partnership with CGF. “By creating a large-scale CCO to guarantee long-term carbon pricing and coupling it with the existing Brookfield funding for third-party projects, Entropy can foresee a path to expedite growth and reduce emissions domestically.”
Under this agreement, CGF commits to purchasing up to 9 million tonnes of carbon credits from Entropy projects over 15 years at 600,000 tonnes per year, kick-starting with the Glacier Phase 2 project at a maximum of 185,000 tonnes per year. The initial price agreed upon is $86.50 per tonne. This scales up to an additional 400,000 tonnes per year for other CCS projects.
“With its abundance of natural resources, access to high-quality geological storage, and sophisticated engineering know-how, Canada is the best place in the world to build a CCS industry,” said Patrick Charbonneau, President and CEO of CGF Investment Management. “We are thrilled to facilitate this inaugural transaction in Alberta’s carbon market, and anticipate putting more capital to work throughout Canada.”
CGF, operational since early 2021, has a budget of $15 billion for the forthcoming five years. The principle aim of this fund is to foster a clean economy in Canada, drawing private capital to share risks and motivate investment in low carbon projects, technologies, businesses, and supply chains.
Commenting on the investment, Canadian Deputy Prime Minister and Minister of Finance, Chrystia Freeland, said, “Today’s investment in Entropy by the Canada Growth Fund is a positive step for Alberta, Canada, and the workers contributing to the development of a cleaner, stronger economy from coast to coast.”