Canada’s Climate Tech Plan Faces Threat From New Oil Deal
There’s a deep contradiction at the heart of Canada’s climate policy. While Ottawa is publicly championing a C$20 billion Green Industrial Strategy to scale up promising climate technologies, it’s simultaneously providing massive financial backstops for a new offshore oil project that could wipe out many of those gains.
The policy disconnect is stark. The Green Industrial Strategy is designed to deploy specific, high-impact technologies across the country. In British Columbia, a startup named Carbon Quantum is working on a modular direct air capture (DAC) system, a technology that uses large fans and chemical filters to pull existing CO2 directly from the atmosphere. The federal plan earmarks funds to help Carbon Quantum scale its operations from a pilot project to a facility capable of capturing one megatonne of CO2 per year, a target set for 2030, according to documents from Natural Resources Canada.
It’s not just about carbon removal. In Ontario, the strategy supports Voltara Power’s development of a 400-megawatt grid-scale battery installation. This project is meant to solve a key renewable energy problem: intermittency. The battery system will absorb excess power from wind and solar farms when production is high and feed it back into the grid when it’s not, a critical function for stabilizing a grid that’s increasingly reliant on variable power sources. The goal is to improve grid throughput and reduce reliance on natural gas peaker plants.
But then there’s the oil. The federal government recently announced loan guarantees for the Bonavista Bay Project, a C$12 billion deep-water oil platform off the coast of Newfoundland and Labrador. Led by Equinor Canada, the project is projected to extract 300 million barrels of crude oil over its lifespan. The government argues this is a necessary evil, with Natural Resources Minister Seamus O’Regan calling it a “bridge fuel” that provides revenue to fund the green transition.
The math, however, tells a different story. The entire portfolio of projects under the Green Industrial Strategy, including Carbon Quantum’s DAC and a new green hydrogen facility in Alberta, is projected to mitigate a combined 15 megatonnes of CO2 equivalent annually by 2035. The Bonavista Bay Project, per its own environmental impact statement, is expected to generate 8 megatonnes in upstream operational emissions alone each year. This doesn’t even account for the downstream, or Scope 3, emissions produced when the 300 million barrels of oil are eventually burned in cars and power plants globally.
“You can’t use the profits from building a bigger fire to buy a smaller fire extinguisher,” says one analyst from the Pembina Institute, a Canadian think tank. “The atmospheric physics simply doesn’t care about the accounting.”
Equinor Canada has pushed back. The company highlights its plan to integrate a carbon capture, utilization, and storage (CCUS) system into the Bonavista Bay platform’s design. This system, however, is engineered to capture CO2 from the platform’s own power generation and flaring—a fraction of the project’s total carbon footprint. A technical brief filed with the Canada Energy Regulator shows the CCUS facility is designed for a maximum throughput of 1.2 megatonnes per year, leaving the vast majority of operational and all downstream emissions unaddressed.
The conflict goes beyond emissions data. It’s a battle for a finite ecosystem of resources. The specialized engineers, welders, and project managers needed to build a deep-water oil platform are the same talent pool required to scale green hydrogen plants and DAC facilities. This creates a bottleneck. It’s a competition for capital, for supply chains, and for political will. The federal support for Bonavista Bay, critics argue, sends a signal to the market that the old energy model isn’t going away, which could chill private investment in the very climate tech ecosystem Ottawa claims to be building.
This policy paradox creates immense uncertainty for companies like Voltara Power. Deploying a grid-scale battery system requires long-term planning and confidence in a government’s commitment to decarbonization. When that same government underwrites new fossil fuel infrastructure, it complicates the investment thesis. The risk isn’t just financial; it’s about the fundamental direction of the national energy grid the technology is meant to integrate with.
The first C$1.5 billion in federal loan guarantees for the Bonavista Bay Project are set to be finalized by the end of the fiscal year.
