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Prime Minister Stephen Harper, in Wabamun, Alta., announces funding for the carbon capture project west of Edmonton. ((CBC))

The federal and Alberta governments pledged $769 million on Wednesday to retrofit a coal-fired electricity generation plant to capture and store some of the carbon dioxide generated from the project.

"Our government is determined that Canada remain a world leader in in the use of this state-of-the-art technology," Prime Minister Stephen Harper said  in Wabamun, west of Edmonton.

"Carbon capture and storage could not only drastically reduce our emissions but by exporting it to other countries we could also make a major contribution to the reduction of global emissions."

The Alberta government has signed a letter of intent with energy company TransAlta to build Project Pioneer at the Keephills 3 plant west of Edmonton, which Premier Ed Stelmach said will be among the first of its kind in the world.

"It'll be the first major CCS project to involve coal-fired power generation and the potential for such a project is enormous," Stelmach said. "Coal is the most abundant fossil fuel and the most commonly used source of electricity in the world."

Not only will the project reduce emissions at the plant, Stelmach said, the technology may also be used to retrofit other coal-fired plants around the world.

Using chilled ammonia

Alberta will spend $436 million over the next 15 years on the project, with most of the money coming from its $2-billion Carbon Capture and Storage Fund. Ottawa is kicking in $343 million from its Clean Energy Fund.

The CO2, which will be captured using a chilled ammonia process, will be injected 2,600 to 2,800 metres underground to permanently store it near the plant. According to the proposal, the technology will capture up to one million tonnes of CO2 a year starting in 2015.

This is the second carbon-capture announcement in Alberta in the past seven days.

On Thursday, Ottawa and Alberta pledged $865 million to the Shell Quest project that will use carbon-capture technology to reduce greenhouse gas emissions at the Shell Scotford upgrader east of Edmonton.