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The federal government is set to launch a hydrogen strategy that will vault Canada into world leadership in the clean-energy market and help the country achieve net-zero carbon emissions by 2050, Natural Resources Minister Seamus O’Regan said Thursday.

“If Canada is going to continue to prosper, we’ve got to skate to where the puck is going,” the minister told a virtual roundtable hosted by Corporate Knights and the Embassy of Germany. “Hydrogen is where the puck is going.”

While Canadian companies are already major providers of hydrogen-powered trucks and trains internationally, there has been a lack of large-scale projects domestically. That is about to change, O’Regan said. “Canada can lead globally on hydrogen,” he said, suggesting the hydrogen sector could generate 350,000 jobs in the country and reduce greenhouse gas emissions by 190 megatonnes by 2050. That’s equivalent to roughly a quarter of Canada’s current GHG emissions.

Canada is joining a host of other countries in adopting a strategy to commercialize clean-burning hydrogen, with progress required on the production, transportation and end-use of the fuel.

Currently, most hydrogen is made from natural gas in an emissions-intensive process, but it can also be made from water using clean electricity, generating a product known as “green hydrogen.” As well, producers can use natural gas but capture and sequester the carbon dioxide emissions, producing “blue hydrogen.”

Hydrogen is seen as a key solution for reducing carbon emissions in such diverse applications as long-haul trucking, rail and aviation; in heavy industry like steel-making and concrete; and in storing electricity generated from intermittent sources like wind and solar so that it can be sold when the demand requires it.

O’Regan provided no details on the federal strategy, which is due to be released before the end of the year. Corporate Knights has proposed that Ottawa spend $1 billion on research and development efforts over the next five years and another $8 billion over the decade to deploy hydrogen technology across the Canadian economy.

Last month, the Alberta government released a natural gas strategy that includes development of a hydrogen supply chain, starting with the production of the fuel from natural gas while capturing and sequestering carbon emissions.

The European Union, South Korea, Japan, Australia, the United Kingdom and several individual European countries have announced their own hydrogen strategies. Germany has one of the most ambitious plans, aiming to spend €9 billion over the next four years to help its industry and transportation sector transform to a hydrogen economy.

The German government has decided that hydrogen “is key to a sustainable economy and society,” Stefan Kaufmann, the country’s federal commissioner for green hydrogen, told the Building Back Better Together webinar. Germany will have to import up to 80% of the green hydrogen it will need and is looking at sources in Namibia, Australia and now Canada.

“Blue hydrogen” – produced from natural gas, using carbon capture and storage (CCS) technology – can still be a significant source of greenhouse gases that will be inconsistent with the goal of achieving net-zero emissions by 2050, said Raffaele Piria of the Berlin-based think tank adelphi.

He said CCS technologies remove on average only 80% of the CO2 emissions from the flue, while there are also fugitive methane emissions that result from the production and transport of the natural gas from the field to the factory.

Piria noted the industry’s goal is to slash by half the cost of producing hydrogen from water and clean power. “I strongly doubt it is worth pouring billions of dollars into CCS if in 10 years green hydrogen will be more attractive,” he said.

The colour scheme for hydrogen can be misleading, and the focus should be on measurable and certifiable carbon intensity, said Sarah Petrevan, policy director for the think tank Clean Energy Canada, which issued a report on hydrogen last month. European definitions of “green hydrogen” typically exclude the use of nuclear power, though the GHG intensity of that process can be quite low.

Petrevan said hydrogen could be an important fuel source for decarbonizing the sectors with the “toughest third” of Canada’s total emissions to abate. They include heavy industry such as steel and cement, marine transport, aviation and long-haul freight. In each of those sectors, hydrogen will have to compete with other solutions such as battery-powered electric motors.

The Clean Energy Canada report concludes that Canada can be a leader in both the supply of clean hydrogen exported to the world and in the industrial products that facilitate adoption of hydrogen in the modern economy.

However, Petrevan warned Thursday that many in Canada focus on the opportunities in hydrogen production, while the market for the fuel remains undeveloped: “Something is going to have to be done to stimulate demand domestically while we wait for the international markets to mature.”

A range of applications are currently being pursued. Indigenous communities are looking at hydrogen technology to replace their reliance on dirty and expensive diesel and to provide reliable power for their energy-deprived citizens, said Beaver Paul, a founder of SEN’TI Environmental & Indigenous Services, based in the Gaspé region of Quebec.

The company is working with partners on an ammonia plant that will use green hydrogen and is considering switching the community’s fishing fleet from diesel to hydrogen-fuel-cell engine.

“For remote communities, we believe hydrogen will play a big role in our futures,” Paul said.

Canada is fortunate to be among the world’s lowest-cost producers of zero- or low-carbon hydrogen, according to a report from Harvard University.

According to the non-profit Transition Accelerator, in provinces with ample low-carbon electricity (e.g. from hydropower, nuclear or renewables), electrolysis of water can produce “green” hydrogen for $2.50 to $5 per kilogram, and in provinces with low-cost natural gas and the geology suitable for permanently sequestering the by-product CO2, “blue” hydrogen can be produced at a price of $1.50 to $2 per kilo.

However, BloombergNEF forecasts that by 2030, green hydrogen will be cost-competitive with the natural-gas-derived fuel as a result of declining costs of renewables and the scaling up of hydrogen production.

Scores of start-up companies are pursuing innovations across the fledgling sector, from production of hydrogen to its transportation to applications for its end-use, said Farzin Shadpour, managing director for supply chain and logistics at Plug and Play, a major venture-capital provider and technology accelerator.

Global investors are keen to participate, Shadpour said, in the development of a market that BloombergNEF forecasts could supply a quarter of the world’s energy by 2050.

Shawn McCarthy writes on sustainable finance and climate for Corporate Knights. He is also senior counsel for Sussex Strategy Group.

With the support of the Embassy of the Federal Republic of Germany in Canada.

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