The Government of Canada announced a $200 million investment through the Canada Growth Fund (CGF) in Calgary-based carbon capture startup Entropy, alongside a long-term fixed-price carbon credit purchase agreement for up to one million tonnes per year, aimed at de-risking Entropy’s projects to help decarbonize emissions-intensive, hard-to-abate industries.

Founded in 2020 by Calgary-based natural gas company Advantage Energy and energy-focused professional services provider Allardyce Bower Consulting, Entropy develops modular carbon capture and storage facilities to capture and sequester pre-combustion and post-combustion  emissions at industrial sources. The company’s first commercial natural-gas-fired carbon capture and sequestration (CCS) project at the Glacier Gas Plant in Alberta went into operation last year.

Entropy announced a $300 million investment from Brookfield last year through the Brookfield Global Transition Fund.

According to the landmark Intergovernmental Panel on Climate Change (IPCC) climate change mitigation study released last year, scenarios that limit warming to 1.5°C include carbon dioxide removal methods scaling to billions of tons of removal annually over the coming decades.

Most solutions that capture and store CO2 are early stage and currently limited in scale, however, and involve significant initial development investments. A recent report from S&P Global Ratings highlighted the significant risks facing CCS projects resulting from financial uncertainty.

According to Entropy, the large scale and long-term fixed price of the new carbon credit offtake (CCO) agreement with CGF will help to de-risk and accelerate private CCS development, and with the new deal in place, the company announced a provisional final investment decision of Glacier Phase 2.

Entropy President and CEO Mike Belenkie said:

“Entropy is excited to partner with CGF in re-establishing Canada as a world-leading CCS market. By creating a large-scale CCO to guarantee long-term carbon pricing and adding $200 million to our existing Brookfield funding for third-party projects, Entropy has a clear path to accelerating growth and reducing emissions, right here at home.”

Under the new agreement, CGF has committed to purchase up to 9 million tonnes of carbon credits from Entropy projects over 15 years at 600,000 tonnes per year (tpa), beginning with Glacier Phase 2 at up to 185,000 tpa at an initial price of $86.50 per tonne, and with the potential for an additional 400,000 tpa for other CCS projects.

Patrick Charbonneau, President and CEO of CGF Investment Management, said:

“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. The CGF Investment Management team is pleased to deliver this inaugural transaction in Alberta’s carbon market, and we look forward to putting additional capital to work across Canada in the months ahead.”

CGF commenced operations earlier this year, capitalized with $15 billion for deployment over the next five years, aimed at helping develop a clean economy in Canada, and attracting private capital to help absorb risks and encourage investment in low carbon projects, technologies, businesses, and supply chains. The fund announced its first investment in October, investing $90 million in Calgary-based geothermal energy company Eavor Technologies.

Following the announced investment in Entropy, Canadian Deputy Prime Minister and Minister of Finance Chrystia Freeland said:

“Today’s investment in Entropy by the Canada Growth Fund is great news for Alberta, for Canada, and for the workers who are helping to build a cleaner, stronger economy from coast to coast to coast.”