A major Ontario industrial operation is making a bet that algae might solve its greenhouse gas emissions problems.

U.S. Steel Canada announced Tuesday it will partner with Union Gas and Pond Biofuels to test an innovative system that pulls carbon dioxide directly out of its power station's smoke stack in Nanticoke, Ont., and pipes it to a tank that will grow algae.

In addition to keeping that CO2 out of the atmosphere, the algae can later be turned into biodiesel and other useful byproducts.

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Steve Martin, CEO of Pond Biofuels, says 'algae is the solution to the climate change issue.' (MaRS Discovery District)

The announcement is a major coup for Pond Biofuels, a small Canadian company that is alone in the world in operating this kind of technology using industrial emissions.

"Algae is the solution to the climate-change issue," explains Steve Martin, Pond Biofuels' CEO. He says it's not enough to hide carbon underground, as you would with a carbon capture and sequestration project. You need a way to fix the carbon in place.

"And the only thing that does it, to my knowledge, and does it easily and quickly and wants to do it, is algae. Algae enjoys this. This is what its business is," he adds.

Secret to algae success

The secret to the process is the nutritional needs of the slimy plant that blooms naturally in oceans and lakes the world over: sunlight and CO2.

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The Pond Biofuels process pumps industrial emissions through a proprietary tank that contains algae. The algae feeds on the carbon dioxide to grow while producing oxygen. The algae can later be used as a biofuel or animal feed, among other uses. (CBC)

Any industrial smokestack in North America releases tonnes of carbon dioxide a year. For Pond, the key was to get access to one, figure out a way of punching a hole in it and attach a pipe to the hole. The idea is to divert the greenhouse gas from the atmosphere and pump it into the company's algae growing tanks.

Pond found its first willing partner in 2009 when St. Marys Cement let Martin's company set up a pilot project at its plant in St. Marys, Ont. Cement manufacturing is the most carbon-intensive industry in the world. For every 100 tonnes of cement made, 83 tonnes of CO2 are created.

The attraction of the project for St. Marys Cement was the potential to make money from its own pollution. With the Pond Biofuels system, the end product of St. Marys massive greenhouse gas emissions is biodiesel, which, in theory, can be sold for a tidy profit.

"When you've got something that is a question mark on the climate change sustainability of an operation like cement, then solutions that can make it economically sustainable, as well as environmentally sustainable and with that comes the social sustainability side of it, then we're all for that sort of thing," says Martin Vroegh, corporate environment manager for St. Marys.

Not everyone is convinced

But algae technology isn't all slime and dollar signs. There are big technical hurdles for the project.

The biggest one has to do with light, the other major ingredient in the algae recipe. You need lots of it to grow lots of algae. And for a northern country such as Canada, which spends half the year with more dark than sun, that's a big problem.

If, like Pond Biofuels, you are using artificial light to grow your product, that is a major obstacle, argues algae biofuels expert John Benemann.

"The amount of electricity that you would use to grow algae in an illuminated area with artificial lights would be very large. It would not make it worthwhile to do this," he says.

Martin doesn't deny the light issue, but the optical engineer says he's got it beat. He plans to use high-efficiency LEDs that are powered by solar energy and will reduce the price of electricity to make the operation profitable.

The technical barriers have not dissuaded U.S. Steel Canada or St. Marys Cement from joining the pilot projects.

"There is no law that says we have to do that. But that said, there is the sustainability side of it on the social side. Doing nothing is not a solution," says Vroegh.