By Nia Williams
Dec 20 (Reuters) - The Canada Growth Fund (CGF), a federal clean-tech financing agency, on Wednesday said it would invest C$200 million ($149.72 million) in carbon capture and storage developer Entropy Inc and backstop carbon credit prices for the first time.
Under the terms of the 15-year deal, known as a carbon credit offtake (CCO) commitment, the CGF has agreed to buy up to 1 million tonnes a year of carbon credits generated by Calgary-based Entropy, a subsidiary of oil and gas producer Advantage Energy.
The initial commitment will enable Entropy to sell up to 185,000 tonnes a year of credits, generated by the second phase of a carbon capture and storage project at Advantage's Glacier gas plant in Alberta, to the CGF at a price of C$86.50 per tonne.
Last year the company also agreed a C$300 million investment deal with infrastructure firm Brookfield.
"By creating a large-scale CCO to guarantee long-term carbon pricing and adding C$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," Entropy CEO Mike Belenkie said in a statement.
The CGF is a C$15 billion body set up last year by Canada's Finance Ministry to help attract private investment in clean tech by mitigating financing risks.
Ottawa has been working on ways to provide carbon price certainty to firms looking to invest in carbon capture and storage to reduce their emissions, in addition to providing investment tax credits.
Canada is the world's fourth-largest crude producer and the oil and gas sector is its highest-polluting industry, accounting for more than a quarter of all emissions.
National Bank analysts said the deal was a "massive milestone" for Entropy. Dale Beugin, executive vice president with the Canadian Climate Institute, said the investment will help minimize risk in clean growth projects and make carbon pricing work better in Canada.
"By guaranteeing value for Entropy Inc's carbon credits, this investment drives emissions reductions, without crowding out private investment," Beugin said.
($1 = 1.3358 Canadian dollars) (Reporting by Nia Williams; Editing by Michael Perry)