Can Canada's worst polluters lead the battle against CO2 emissions?

We recycle paper, plastic, aluminum and glass. So why not carbon?

Taking carbon dioxide, a greenhouse gas, and making it into something useful could help solve the climate crisis, if it could be done on a large scale. But capturing carbon emissions from power plants and turning them into fuels, feed, chemicals or building materials has so far proven to be an expensive and difficult proposition.

Lately, though, a burst of financial and technical support for recycling carbon emissions has come from an unexpected source: the Canadian oil sands industry.

Reviled by environmentalists, pilloried by Canadian rock legend Neil Young and denounced by crusading climate scientist James Hansen, the oil sands industry seems an unlikely partner in the battle against carbon emissions. But its interest in finding a carbon-dioxide solution actually makes sense.

After all, the coal, oil and natural gas industries produce more CO2 than anybody else. And given current legal trends, it's clear that they don't expect to be able to dump it into the atmosphere, willy-nilly, for free and forever. Alberta, the western province that is home to the oil sands and is Canada's closest thing to Texas, enacted a $15-per-ton carbon tax in 2007. Next door, British Columbia charges a $30-per-ton carbon tax.

That's not nearly expensive enough to persuade fossil fuel generators to capture CO2 from their plants, but if the taxes get higher – and companies could find a way to recycle CO2 into new products – the economics of carbon capture might begin to make sense.

"We know that we are headed to a carbon constrained future," explains Bob Mitchell, senior director of the oil sands business unit at ConocoPhillips Canada. "We need a whole portfolio of options for getting our costs down and revenues up from the capture and reuse of CO2."

Mitchell spoke about carbon recycling last week at Globe 2014, North America's biggest environmental and business conference.

Carbon recycling could become a pillar of the so-called circular economy, where waste of all kinds becomes the nutrients for new products.

Thirteen fossil fuel companies that operate in Alberta have formed an unusual partnership to limit the environmental impact of oil sands development on land, water and the climate. Formed in 2012, Canada's Oil Sands Innovation Alliance (COSIA),has emerged as a key entity in the carbon recycling movement.

Among other things, COSIA is supporting a pilot plant being built by Canadian Natural Resources Ltd, a member company, that will use waste carbon to produce algae-based fuel. The biorefinery will capture carbon dioxide from oil sands facilities and feed it to algae grown in large tanks warmed by waste heat, which is also produced by the oil sands. If all goes well, the algae will produce a low-carbon bio-based oil that could be used for jet fuel or blended into synthetic crude oil.

COSIA is also collaborating with Prize Capital, a small California company that provides early-stage capital to startups; with Tri-State Generation and Transmission Association, a Colorado-based coal-burning power generator that has financed research into carbon recycling; and with the X-Prize Foundation, which is developing a prize for carbon capture and reuse.

These collaborations aim to reframe the conversation about CO2. "Most people think of CO2 as a problem," says Lee Stein, the founder and CEO of Prize Capital. What would it be like, he muses, to live in a world where CO2 is an asset, to be embraced?

Separately, the Climate Change and Emissions Management Corporation (CCEMC), an independent agency funded by Alberta's carbon tax revenues, has launched what it calls a "grand challenge" to find ways to "convert carbon dioxide arising from greenhouse gases (GHGs) into valuable carbon-based products." CCEMC says it will invest up to $35m in carbon tax revenues to fund promising technologies with breakthrough potential.

"There's a tremendous amount of activity going on in Alberta," says Nicholas Eisenberger of Pure Energy Partners, a consultancy that works on carbon recycling, among other things. Eisenberger describes carbon recycling as a "compelling, potentially world-changing idea that could create a tremendous amount of value". But, he adds: "We're a far cry from that today."

It's not for lack of trying. Merely capturing carbon-dioxide is expensive: it costs more than $90 to recover a ton of CO2 from the smokestack of a coal or natural gas plant. The US government has spent billions of dollars trying to bring down the capturing CO2 from coal plants. Canada has offset some of the costs by using captured CO2 for enhanced oil recovery. This has economic benefits, but at least one environmental downside: it produces more oil, which ultimately results in more emissions. Meanwhile, China, which burns nearly as much coal as the rest of the world put together, has a dozen carbon capture projects underway. Despite the costs, some environmentalists believe that capturing carbon from power plants is an essential climate solution.

Recycling is essentially a "way to buy down the cost of capture," says Lee Stein of Prize Capital, which has extensively researched the technology. In a 2011 report, Prize Capital identified 136 companies, entrepreneurs, university labs or governments that are seeking ways to use CO2 as a feedstock for valuable products. The report identified three basic approaches to recycling: a biological approach, which uses organisms such as algae to absorb CO2 and produce fuels; a chemical or catalytic process which breaks the carbon-oxygen bond in CO2 and then combines carbon with other elements; and mineralization, which locks CO2 into solid structures to make building materials or plastics.

In a new report, Commercializing the CO2 Asset Industry (pdf), Prize Capital seeks to identify the elements that will be needed to develop a capital-intensive CO2 recycling industry, absent significant government support. The report suggests an international prize; an investment platform to connect startups with financiers; and "integrated energy" test centers, where innovators could try out their technologies in collaboration with potential partners and customers.

Recycling CO2 has proven a lot harder than recycling paper or plastic. But the stakes are higher – and the potential rewards much greater.