In Canada-Germany hydrogen alliance, the devil’s in the details

An alliance formed this week between the governments of Prime Minister Justin Trudeau and German Chancellor Olaf Scholz revealed a major point of disagreement that could determine the future of hydrogen in the global economy.

At the centre of the disagreement is what counts as “clean” hydrogen. Germany believes the gas — which one day could be used to clean up heavy polluting industries like cement or steel making — must be produced using renewable energy to be a climate solution (called green hydrogen). Canada wants the definition broader to include hydrogen made from natural gas, a fossil fuel, with carbon capture technology to stop most, but not all, of its planet-warming greenhouse gas emissions from reaching the atmosphere (called blue hydrogen).

In the days leading up to the announcement, Canadian officials played up the deal’s climate credentials and its importance to European energy security. They chose to sign the declaration of intent in Stephenville, N.L., where a company called World Energy GH2 plans to build a wind-powered, zero-emission plant to produce hydrogen for export.

On the same day the alliance was inked, EverWind Fuels, a company planning a hydrogen plant in Nova Scotia, and German utility Uniper signed a memorandum of understanding to negotiate a purchase agreement for 500,000 tonnes of green ammonia — a way to transport hydrogen in liquid form — to ship as early as 2025.

In the leadup to Scholz’s trip, an energy deal involving liquified natural gas (LNG) seemed possible given prominent ministers like Chrystia Freeland, Jonathan Wilkinson and Steven Guilbeault had all publicly discussed the role of East Coast LNG exports to Europe in recent weeks. But when the leader’s itineraries were published with no mention of LNG, speculation turned to hydrogen.

The joint declaration signed by Wilkinson, Canada’s natural resources minister, and German Vice-Chancellor Robert Habeck does not guarantee the hydrogen Canada produces will be green.

Nor does it rule out the possibility of other energy agreements, like ones involving LNG.

Rather, the agreement is aimed at building a market “for hydrogen, in particular from renewable sources.” The deal does not come with specific targets, other than aiming to export hydrogen from Canada to Germany by 2025 at the earliest, though it does say the countries will “develop a common methodology” to “help define what clean, low carbon, and renewable hydrogen are.”

“Unlocking the potential of hydrogen is an essential part of our government’s plan for a sustainable economic future — not just for the domestic opportunities for emissions reductions but also for its potential as an export opportunity: to provide clean energy to countries around the globe,” Wilkinson said in a statement.

The joint declaration of intent signed Tuesday is vaguely worded, said Climate Action Network Canada’s national policy manager Caroline Brouillette. At different points, it refers to “renewable hydrogen,” “low-carbon hydrogen,” “ultra-low carbon hydrogen” and “hydrogen” generally. That reveals a key difference between the two countries' preferences, with Germany focused on green hydrogen made from renewable electricity like wind or solar, whereas Canada is interested in advancing both blue and green.

Canada says it isn’t focused on colours, it's focused on emissions. But as previously reported by Canada’s National Observer, as of last summer, Natural Resources Canada was interested in learning how “to persuade financial institutions to invest in blue hydrogen projects” because it believes “Canada’s oil and gas sector is well-positioned to develop domestic hydrogen supply chains.”

“Canada's clean hydrogen definition definitely is cover for continuing dependence on a fossil economy,” Brouillette said.

“Obviously, some of these definitional issues are not settled yet,” she said, referring to what counts as clean. “I think the content of the agreement shows that these are very live conversations between the countries in terms of what kind of hydrogen is accepted, and we very much hope that Germany's strict definitions and categorizations of green hydrogen will prevail over Canada's ‘clean hydrogen’ euphemism.

“We've seen Canada use weasel words to dilute and reduce the ambition and rigour of climate policy in the past, for instance on subsidies, focusing on ‘inefficient’ fossil fuel subsidies,” she added.

Meanwhile, Germany is clear it is only interested in green hydrogen.

“Green hydrogen is an important key for a climate-neutral economy. We must resolutely pursue climate change mitigation in order to secure our prosperity and freedom,” Habeck said in a statement.

“The Hydrogen Alliance between Canada and Germany is a significant milestone as we accelerate the international market rollout of green hydrogen and clear the way for new transatlantic co-operation. Specifically, we aim to build up a transatlantic supply chain for green hydrogen,” he added.

This hydrogen alliance is the capstone to Scholz’s first official visit to Canada. It also was a long time coming: the two countries signed a memorandum of understanding to set up an energy partnership in March last year that specifically referenced collaborating on “clean hydrogen.” Canada also discussed developing a hydrogen market with Germany at last November’s COP26 climate conference, according to briefing materials prepared for a meeting between the two countries. “Creating a Canadian-German market for hydrogen is a key goal for our countries,” the documents, which Canada’s National Observer obtained through a federal access-to-information request, noted.

Beyond this agreement with Germany, Canada is hard at work in international arenas to push its vision of a hydrogen economy. The country is an active participant in initiatives like the International Energy Agency’s Hydrogen Technology Collaboration Programme and its global hydrogen review, the hydrogen initiative under the Clean Energy Ministerial, the Hydrogen Ports Coalition (which includes Vancouver, Montreal and Halifax), Mission Innovation’s clean hydrogen mission and several others. These are essentially all international working groups with other countries and institutions.

Canada’s hydrogen strategy, published in late 2020, outlines eight pillars to guide the growth of a hydrogen industry and counts strategic partnerships, de-risking investments and working with international partners to grow the hydrogen economy as central to its plan.