Climate Action 2.0 starts with certainty and access to capital green economy leaders

The stakes are getting higher and the time window is getting smaller for reaching our goal of net-zero carbon emissions and avoiding the worst effects of climate change.

Canada and much of the developed world could be regularly torn apart by wildfires, droughts, floods, sea rise, food insecurity and other climate catastrophes if we don’t drastically reduce greenhouse gas emissions by 2030, according to the United Nations Intergovernmental Panel on Climate Change Synthesis Report released March 20.

“Let’s hope we make the right choices because the ones we make now and in the next few years will reverberate around the world for hundreds, even thousands, of years,” said the panel’s chair.

One of the most important steps we must make right now is to deploy our innovation and energy sectors to support Climate Action 2.0 with the goal of reaching net-zero emissions in time to save our children from inheriting a future of climate chaos. In Canada, these sectors have the talent and technology to build a thriving green economy, but they need a network of financial tools, capital investment, infrastructure and certainty to succeed.

Climate Action 2.0 also means acknowledging Canada is now in a competition with other advanced nations that are building their own foundations to attract the top talent of the green economy. In the United States, the Biden administration opened the door to US$368 billion in green economy investment through the Inflation Reduction Act (IRA). When President Joe Biden addressed Parliament last week, he noted that we shouldn’t view the IRA as a threat. But greentech firms here are anxious to know how Ottawa intends to match the U.S. incentives.

Canada risks losing its best and brightest companies and researchers to the U.S. if we don’t have a made-in-Canada plan to support green entrepreneurs, according to the Canada Climate Institute (CCI).

“Investors will move quickly to where there is market certainty and to where expected returns are highest. The Inflation Reduction Act provides certainty for the U.S. market to be competitive in new global markets,” said economist and CCI expert panellist Don Drummond.

Green hydrogen can be a game-changer as a cost-effective, accessible and closed-loop energy source. Using power from renewable energy like wind and solar, green hydrogen is formed by splitting water into two molecules — hydrogen and oxygen — through electrolysis. The oxygen can be released harmlessly into the air or repurposed for industrial processes, while the hydrogen can be burned, stored and transported as an energy source with no carbon emissions.

You may have also heard of blue or grey hydrogen as climate-friendly fuels. While it’s true they are the same end product, it is formed using natural gas, coal or other fossil fuel energy to process the hydrogen molecule, meaning producers emit carbon — a lot of it — that they may or may not store using carbon capture technology.

The IRA essentially made this a viable renewable energy fuel overnight by supporting its makers and researchers with a production tax credit that has a 12-year window.

This is sure to attract a rush of capital investment to further fuel the development and distribution of green hydrogen. But the U.S. is not the only country that is ambitiously supporting green hydrogen development. The United Arab Emirates and Japan are also investing directly in green hydrogen production with the goal of becoming global leaders in supplying this fuel.

Canada has done a credible job of ushering this country through the first phase of climate action to build the foundation of a green economy and jobs. But the IRA was passed in August 2022, which means green hydrogen researchers in Canada have been waiting seven months for a sign that we are serious about helping this fuel become a part of our Climate Action 2.0 response.

Until now, the federal government’s approach has been to direct grants and loans to firms such as electric vehicle battery factories and hybrid car manufacturing facilities, while handing generous tax credits for carbon capture projects favouring giant oil companies that will continue to produce fossil fuels.

The U.S. law levels the playing field because it is company-agnostic and brings high degrees of transparency to the process; it simply incentivizes projects that get commercialized no matter the company or size.

We are hoping this will change following the 2023 federal budget, in which Finance Minister Chrystia Freeland has promised to support a broader and deeper transition to a green economy. To this end, green energy entrepreneurs need more certainty and access to capital. Production tax credits with a sustainable long-term time frame like those applied to green hydrogen through the American law will attract investment and incentivize firms to pursue real Climate Action 2.0 solutions.

Without this effort, it’s not just possible but probable that some of Canada’s most climate-forward entrepreneurs could see greener business pastures in the U.S. or the European Union, which has responded to the IRA with a robust assortment of incentives for Climate Action 2.0.

Brandon Moffatt is co-founder at StormFisher Hydrogen with experience developing regulatory and industry policy in renewable energy. He has led the development, design and construction of several complex renewable gas production facilities across North America and has a detailed understanding of the commercial and operational aspects of power-to-hydrogen and power-to-gas projects. Brandon is also a board member of the Ontario Environment Industry Association, has an MBA from the Odette School of Business and holds a BASc in environmental engineering from the University of Waterloo.