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A motorist fills their Toyota Mirai, a hydrogen-powered car, at a gas station in Torrance, Calif. on Oct. 22, 2020.Philip Cheung/The New York Times News Service

A collection of environmental and non-profit groups is warning Ottawa against using federal dollars to bolster Canada’s fossil-fuel hydrogen industry, arguing doing so amounts to subsidies for the oil and gas sector.

The federal government has been working on a hydrogen strategy for three years, following in the footsteps of dozens of countries in Europe and Asia as it eyes the fuel source to help Canada get to net-zero greenhouse gas emissions by 2050. That strategy was due for release in the summer, but Ottawa now says it will likely be released this coming month.

Hydrogen as a fuel source is enjoying unprecedented global momentum. It is light, storable, energy-dense and produces no direct emissions of pollutants or greenhouse gases – a boon for countries pursuing net-zero goals. Countries have spent or earmarked billions of dollars to accelerate hydrogen technologies, and Canada’s federal government is expected to attach funding to its own plan.

Provinces are also figuring out how hydrogen can fit into their future energy mix. Last week, the Ontario government released a discussion paper on the development of a provincial hydrogen strategy, following Alberta, British Columbia and Quebec, which have all made a push to pursue hydrogen.

But in a letter to Natural Resources Minister Seamus O’Regan, the group comprising 27 signatories (including Environmental Defence Canada, Greenpeace, the Canadian Association of Physicians for the Environment and Oxfam Canada) says funding technologies for hydrogen derived from natural gas would be a fossil-fuel subsidy and goes against Canada’s G7 and G20 commitments.

“To the extent that any public resources are available for hydrogen development, they should be reserved for renewable hydrogen for the hardest-to-decarbonize sectors that do not have viable decarbonization alternatives. Canada should not be providing any form of financial support for the development of fossil-fuel derived hydrogen,” they wrote.

The group’s main bone of contention is the federal government’s inclusion of so-called blue hydrogen in its strategy.

Blue hydrogen is created by extracting hydrogen from natural gas, then capturing and storing the resulting carbon dioxide through carbon capture and sequestration, or CCS. It’s in that realm where Alberta, which already uses CCS, wants to make its mark in a world focused on net-zero emissions.

Green hydrogen, on the other hand, is created by using renewable power to split the hydrogen atom from water via electrolysis.

The group argues there is “little evidence” that blue hydrogen, which it labels “fossil-fuel hydrogen,” can make a meaningful and cost-effective contribution to achieving a zero emissions economy, relying as it does on what the group calls the “unproven technology” of CCS.

But Mr. O’Regan has been clear that both blue and green hydrogen will be a part of the coming federal strategy. He told The Globe and Mail over the summer that his government would be “foolish not to look at blue,” given that Canada is the world’s fourth-largest producer of natural gas and has established expertise in CCS.

The International Energy Agency also argues that carbon capture technologies – and their integration with fuels like hydrogen – will be a crucial part of the world’s transition to a net-zero future.

Mr. O’Regan’s press secretary, Ian Cameron, did not respond to the group’s criticism, saying only that “hydrogen fuel and technology will be an important part of Canada’s clean energy future, and a source of economic growth and thousands of new jobs.”

“We look forward to sharing our strategy with Canadians soon,” he said in an e-mail.

Not everyone is welcoming hydrogen with open arms.

Saskatchewan Energy and Resources Minister Bronwyn Eyre says governments must take a cautious approach when considering subsidies or royalty credits for the industry.

During a recent virtual event hosted by the Canadian Association of Oilwell Drilling Contractors, Ms. Eyre said the excitement around hydrogen is largely being driven by media and people who are “skeptical about oil and gas.”

Governments must be careful not to “go full throttle” on hydrogen and other burgeoning technologies, she said, or risk depleting provincial coffers.

“We have to be very careful that the hype isn’t about assuaging those voices,” she said. “It’s been important to us that government money follows – it doesn’t lead. Because that way it allows companies to do something innovative, put their own money forward, and then we’ll cautiously assess.”

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