Varme Energy’s $400-million proposal in Edmonton to transform landfill waste into electricity faces possible cancellation following a recent carbon tax agreement between the Alberta and federal governments. Initially, the national industrial carbon price was set to reach $170 per tonne by 2030, but a revised deal by Prime Minister Mark Carney and Alberta Premier Danielle Smith now aims for $130 per tonne by 2040.
The policy shift has placed Varme Energy’s waste-to-energy project in jeopardy as the lower carbon price diminishes the value of the carbon credits the facility would generate. Without additional government policy adjustments in the coming months, Varme Energy CEO Sean Collins forewarns that the project may need to be abandoned due to financial challenges.
The agreement between Carney and Smith, part of a broader initiative to reduce methane emissions and facilitate major project approvals in the province, was influenced by the desire of some large industrial companies to maintain competitiveness with U.S. counterparts without a carbon tax burden.
The lowered carbon price trajectory in Alberta could deter investments in emissions reduction projects, as mentioned by researcher Ross Linden-Fraser from the Canadian Climate Institute. The reduced value on emissions-reducing projects’ revenue sources could impact the viability of such initiatives.
Varme Energy, backed by a Norwegian clean energy company, has existing agreements with the City of Edmonton’s landfill and provincial permits for electricity production. Despite receiving funding and support, the project’s operating cost of approximately $118 per tonne could become unsustainable with the revised carbon price target.
The federal government’s plan to introduce a price floor for carbon credits starting at $60 per tonne in 2030, increasing to $110 per tonne by 2040, is aimed at bolstering confidence in investing in Canada’s carbon market. However, the adjustments have raised concerns among carbon capture companies like Varme Energy and Torchlight, urging for additional government assistance to navigate the financial implications.
Efforts are underway to explore alternative markets for carbon credits and assess the impact of policy details on polluters’ carbon tax obligations. Despite hopes for supportive fiscal policies to salvage the project, Varme Energy faces a critical decision in the near future regarding the fate of its landfill-to-electricity endeavor.