Ottawa, Canada - Canadian energy companies will get both direct assistance and tax breaks to develop carbon-capture-and-storage technology that promises to reduce greenhouse gas emissions from coal-fired power plants and oil sands projects.

In his budget Tuesday, Federal Finance Minister Jim Flaherty unveiled a $1-billion “green energy fund” that will support research and commercialization of clean-energy projects, including carbon capture and storage (CCS).
The finance minister also moved to extend accelerated tax writeoffs to companies that invest in CCS, which diverts carbon dioxide from smokestacks and then pipes it underground for permanent storage.

While the federal budget falls short of the ambitious conservation and renewable energy goals laid down by U.S. President Barack Obama, the Harper government did allocate $2.4-billion over five years to finance environmental infrastructure, clean energy development and energy-saving retrofits in homes.

The energy fund will provide $15-million over five years towards research, and another $850-million over the same period for clean-energy demonstration projects, including large-scale carbon capture.

The federal program complements a $2-billion fund launched by Alberta to finance CCS projects. More than a dozen oil companies and coal-dependent utilities have submitted projects that are now short-listed to receive provincial funding.

Ottawa has touted CCS as a major part of its effort to reduce greenhouse gas emissions by 20 per cent by 2020, even as the country continues to expand production from carbon-intensive oil sands projects and the use of coal-fired electricity.

Mr. Flaherty did not extend financing under the ecoEnergy renewable energy program that provides grants for wind, small hydro and other clean energy projects. That program is due to expire in the coming year, and the wind industry, in particular, was keen to see it replenished.

Instead, the budget allocates $300-million in funding for energy-saving home retrofits, a program that will provide additional assistance to homeowners who take advantage of the home renovation tax credit announced yesterday that applies to all renovation projects.

Mr. Flaherty also trumpeted Ottawa’s continued support for Canada’s nuclear industry with a one-year, $351-million payment to Atomic Energy of Canada Ltd., the federal Crown corporation that is developing a new generation of Candu reactor.

The budget plan said AECL will use the money to pursue its Advanced Candu Reactor, and the “maintain safe and reliable operations” at the corporation’s Chalk River laboratories.

The Chalk River plant – where AECL produces medically-necessary isotopes – needs major renovation and modernization. In fact, there were reports yesterday that AECL had discharged low-level-radioactive waste water into the Ottawa River.

The Harper government has been reviewing its ownership of AECL amid speculation that it might privatize the Crown corporation. Finance Canada said Tuesday that the review continues, but signaled Ottawa is now considering selling off a portion of AECL’s commercial operations to a private sector partner, an option that falls well short of full privatization.