Carbon solutions

The opportunity

Canada is establishing itself as a global frontrunner in carbon solutions, including carbon capture, utilization, and storage (CCUS) (which captures CO₂ at a source point) and carbon dioxide removal (CDR), which pulls CO₂ directly from the atmosphere for permanent storage. Backed by one of the world’s most generous tax credit regimes, a rising federal carbon price, and the natural advantages of abundant geology, clean energy, and vast land mass, Canada offers a uniquely attractive environment for investors across the full spectrum of carbon management projects.

The country is already home to some of the world’s most significant CCUS facilities, and is rapidly building a CDR industry alongside them.

On the CCUS side, the Quest Carbon Capture and Storage facility in Alberta, operated by Shell, has captured and stored more than 10 million tonnes (Mt) of CO₂ since 2015. The Alberta Carbon Trunk Line (ACTL), a 240-kilometre CO2 pipeline with a design capacity of up to 14.6 Mt per year, transports captured CO₂ for permanent storage and enhanced oil recovery. The Oil Sands Alliance, a consortium of five of Canada’s largest oil sands producers, is advancing the Pathways carbon capture and storage (CCS) project in northeastern Alberta.

On the CDR side, as of early 2026, Canada was already home to 78 CDR companies and 48 active or planned CDR projects, spanning direct air capture (DAC), enhanced rock weathering (ERW), carbon mineralization, biochar, and ocean-based removal. Global technology companies, financial institutions, and airlines are purchasing Canadian CDR credits. McKinsey & Company has estimated the global CDR market could be worth as much as $1.2 trillion by 2050.

For investors and for Canada, the current landscape presents a significant and growing opportunity.

Market entry and investment strategies

Consortium and joint venture models. The capital-intensive nature of large-scale CCS favours consortium and joint venture structures that enable risk-sharing and alignment of technical expertise with upstream emission reduction obligations. The Oil Sands Alliance—comprising Canadian Natural Resources, Cenovus Energy, ConocoPhillips Canada, Imperial Oil, and Suncor Energy—exemplifies this approach, pooling resources to develop shared capture, transportation, and storage infrastructure across multiple oil sands facilities.

Carbon hubs and shared infrastructure. Investors can also participate through hub-and-spoke models, in which a central CO₂ transportation and storage network serves multiple industrial emitters. The ACTL operates on this model, currently collecting CO₂ from fertilizer production and oil refining facilities for permanent storage and enhanced oil recovery. Other hubs are under development, attracting foreign investment, such as Marubeni’s investment in Bison Low Carbon Venture to facilitate the development of the Meadowbrook CCS project near Edmonton. These hub models can reduce costs per project and create platform opportunities for follow-on investment as additional emitters connect to the network.

CDR and technology partnerships. Canada has emerged as a global centre for CDR innovation and project development. DAC technology, which removes CO₂ directly from the atmosphere, is being scaled in Canada by companies including Deep Sky, which operates a multi-technology testing facility in Alberta, and is building a 500,000-tonne commercial facility in Manitoba, powered by Manitoba’s clean hydroelectric grid. Carbon Engineering, a British Columbia pioneer in DAC, was acquired by Occidental Petroleum in 2023, underscoring global commercial interest. International leaders have also entered the Canadian market; for example, Climeworks, the Swiss DAC leader, established its Canadian headquarters in Calgary in 2025, and has entered into a 10-year offtake agreement to sell high-quality CDR credits to Toronto-Dominion Bank (TD).

Beyond DAC, Canadian and international companies are advancing ERW, carbon mineralization, biochar, and ocean-based removal across the country. For example, Vancouver-based Arca has developed a carbon mineralization process that turns CO₂ into rock, leveraging existing industrial waste facilities and mine sites. UK-based UNDO has also become a world leader in ERW through its Ontario projects. And Charm Industrial has been looking to enter the Canadian market after entering into a long-term offtake agreement with TD. Investors can access the Canadian CDR market through technology licensing, project development partnerships, equity investment, or carbon credit offtake agreements.

Carbon offset and removal credit markets. Canada’s compliance carbon markets, particularly Alberta’s Technology Innovation and Emissions Reduction (TIER) regulation, have helped generate demand for CCS-based offset credits. The ability to monetize sequestered CO₂ through the generation of TIER compliance credits underpins the economics of industrial CCS projects in the province.

The voluntary carbon markets are also supporting the growth of CDR across the country. The federal government committed in 2024 to purchasing CDR services to green its own operations and ran a formal procurement process for removal credits across five technology streams: DAC, bioenergy with CCS (i.e., BECCS), biochar, other biomass carbon removal and storage, and enhanced mineralization. Pre-purchases of CDR credits in Canada have grown from approximately 75,000 in 2024 to more than 700,000 in 2026, and are expected to grow further. Earlier in 2026, the Advance Carbon Removal Coalition, which counts several of Canada’s largest banks as members, committed to mobilizing $100 million to scale the CDR sector. Opportunities continue to grow for investors to provide financing for the development of offset and removal projects, including nature-based carbon solutions such as forestry and soil carbon sequestration, and to sell credits into compliance and voluntary markets.

M&A. Acquisition opportunities exist across the CCUS and CDR sectors, from capture technology developers and equipment manufacturers to pipeline operators and geological storage licence holders. As the sector matures and smaller developers bring projects toward construction, strategic acquirers may find attractive entry points.

Financing and investor support

Canada’s federal government offers some of the world’s most significant financial incentives for carbon solutions investment, including the following:

• The CCUS Investment Tax Credit can provide a refundable investment tax credit of up to 50% of eligible capital costs for carbon capture equipment, and up to 60% for direct air capture equipment. Transportation, storage, and use equipment are eligible for credits of up to 37.5% (provided certain labour requirements are met). These rates generally apply to eligible expenditures incurred from 2022 through 2035, and are reduced by half for expenditures incurred from 2036 through 2040. The Clean Technology Investment Tax Credit provides a 30% refundable credit for investment in certain clean technology property. The Clean Electricity Investment Tax Credit provides a 15% refundable investment tax credit for certain clean electricity property (e.g., certain emissions-abated natural gas–fired electricity generation equipment). Although certain property acquired in connection with a carbon solutions project may qualify under more than one of these investment tax credits, multiple investment tax credits cannot generally be claimed in respect of the same property.
• The Canada Growth Fund (CGF), a $15-billion independent investment fund operating at arm’s length from the federal government, has entered into carbon credit purchase agreements to de-risk private investment in various carbon management projects, including long-term offtakes that guarantee a price for carbon credits generated by future projects, helping to provide revenue certainty over the long term.
• Canada Infrastructure Bank (CIB) invests in revenue-generating infrastructure projects alongside private and institutional partners. Clean energy, including carbon management infrastructure, is a priority sector, with a $20-billion investment target. Since its inception in 2017, the CIB has committed roughly $18 billion across 106 projects, representing $54.4 billion in total value.
• The Major Projects Office (MPO) is also available to help coordinate federal approvals, including potentially for CCUS projects of national significance.

Key risks and how to manage them

Carbon price and policy risk

The economic viability of many CCS projects depends on the continued trajectory of Canada’s federal carbon price and the availability of the CCUS ITC. In May 2026, Canada and Alberta entered into an agreement that, among other things, agreed to a headline carbon price under TIER that will rise to $130 per tonne by 2035 and $140 per tonne by 2040—a headline price trajectory that functions as a price ceiling, and to which Canada subsequently committed across the country. The effective price of carbon remains less clear, especially in the short term before an anticipated floor price for TIER credits is implemented in 2030, although Canada and Alberta have agreed to target an effective price of $130 per tonne by 2040.

Carbon markets have been highly politicized across the country, and future policy changes or legal challenges could affect these projections. Investors should monitor the political and legal landscape, including provincial challenges to the federal pricing framework, and consider structuring investments to account for potential policy shifts.

Technology and scale-up risk

While many CCUS technologies are commercially proven at industrial scale, many CDR technologies—including DAC, ERW, and ocean-based approaches—are in earlier stages of commercial deployment. Costs of DAC credits remain high, often selling for hundreds of dollars per tonne, and energy requirements for these projects are significant. Investors should conduct thorough technical due diligence, including on capture or removal rates, energy requirements, and long-term performance, and consider structuring investments to include performance milestones and risk-sharing mechanisms. Canada’s 2023 Carbon Management Strategy identifies innovation funding and technology de-risking as federal priorities.

Pore space and long-term storage liability

Geological storage of CO₂ requires secure access to subsurface pore space. In Alberta, the provincial government owns subsurface pore space rights on Crown lands, and has established a mature regulatory framework for granting carbon sequestration evaluation permits and leases. In contrast, in Ontario, pore space is generally owned by the surface rights holders, which can create challenges in the assembly of contiguous pore space rights necessary for a commercial-scale reservoir. To have a degree of long-term certainty, investors should engage early with provincial regulators, both to secure the necessary tenure and assess storage capacity, and to determine whether the Crown assumes post-closure liability for stored CO₂ after a project meets prescribed regulatory conditions.

Foreign investment review

The Investment Canada Act requires review of certain acquisitions by non-Canadians. If CCUS infrastructure becomes increasingly viewed as strategically important, investments in this sector may attract heightened scrutiny. For more information, please see our primer on reviews under the Investment Canada Act.

Indigenous partnerships

Indigenous economic participation is an important consideration for CCUS and broader carbon solutions projects in Canada, particularly where projects are located on or near traditional territories, or involve the use of Crown land for subsurface storage. For more information, please see our primer on Indigenous partnerships [link to Indigenous partnerships primer], which takes a close look at Indigenous equity investments.

All dollar amounts in this primer are C$ unless indicated otherwise.