Low-carbon hydrogen standard key to Canada trade, says U.K. minister

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A low-carbon hydrogen standard would help Canada gain a footing in the European market as it looks to take advantage of a growing global appetite for the fuel, says Britain’s Energy Efficiency and Green Finance Minister.

Martin Callanan wrapped up a visit to Alberta last week to talk with various companies working in areas under his purview in the U.K., including hydrogen and carbon capture and sequestration. In a wide-ranging interview in Calgary, he told The Globe and Mail that there are a number of opportunities for both Britain and Canada to attract investment and learn from each other.

One of those is hydrogen.

The U.K. has developed a low-carbon hydrogen standard, which details how emissions are calculated and sets requirements for producers. It’s intended to ensure that new low-carbon hydrogen production makes a direct contribution to net-zero targets. The European Union is considering doing something similar.

“We want to make sure that the standards are interoperable, are equivalents of each other. And ideally we know if Canada introduces a low-carbon hydrogen standard, we want to make sure that yours works in collaboration with ours so the companies who are producing it, who might want to export hydrogen in the future, are working to a common set of standards,” Lord Callanan said.

Hydrogen is light, storable and energy-dense. When burned, it produces no direct greenhouse gas emissions, making it an attractive form of decarbonization. And so, as countries around the world race to reduce their environmental footprints, Ottawa and various provinces are eyeing it as a burgeoning economic opportunity.

Last year, for example, Canada signed a collaboration agreement with Germany to kick-start a hydrogen economy, and Ottawa’s 2023 budget includes an investment tax credit for clean hydrogen production.

One way to produce hydrogen is to use renewable energy to power electrolyzers, which electrically separate water into hydrogen and oxygen. Hydrogen produced this way is referred to as renewable or green hydrogen. Projects being proposed in the Atlantic Provinces are counting on the winds that buffet their coastlines to develop such an industry.

Another way is to crack natural gas into carbon and hydrogen. That’s how the fuel is currently produced in Alberta, to use as feedstock for industrial processes, but it has a significant greenhouse gas footprint because emissions are released into the atmosphere. The province wants to use carbon capture and sequestration to produce a cleaner hydrogen that is more attractive to both domestic and international markets.

The main benefit of a standard that sets out maximum emission levels is that it is production agnostic. So it doesn’t matter if the hydrogen is produced via natural gas in Alberta or with wind power in Nova Scotia, as long as the emissions remain below the set level.

“That seems to me to be the way to go,” Lord Callanan said. “It makes sense to have something similar in Canada.”

While he stressed that the U.K. won’t dictate what Canada should do when it comes to low-carbon hydrogen standards, he’d like the two countries to work together to ensure their programs align.

“It would be madness to have three or four different standards across the world,” he said.

That desire for common ground is reflected in green finance and climate reporting standards, too.

The U.K. refreshed its green finance strategy in April and by 2025 will require companies to file climate financial disclosures in their annual reports, detailing what their emissions are and what their plan is to reduce them in the future.

It’s also developing a green taxonomy, which is essentially a framework that helps determine what activities or products are considered “green.”

In March, Canada’s Sustainable Finance Action Council released a green taxonomy road map report, which included a framework to establish standardized and science-based definitions of climate-compatible investments. It was backed by Canada’s 25 largest financial institutions, but the federal government has yet to draft a taxonomy based on the initial framework.

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For Lord Callanan, alignment among financial disclosures and green finance requirements “makes things clearer and simpler and provides something by which outside investors or shareholders can judge investments.”

Lord Callanan’s file also includes carbon capture and sequestration, in which emissions are trapped and stored deep underground rather than being released into the atmosphere.

Canada is betting big on the technology to help decarbonize the economy, particularly in the oil and gas sector in Alberta, where the geology is well-suited to storing carbon underground.

In the U.K., storage opportunities are located offshore, in depleted fossil fuel wells and saline aquifers in the North and Irish seas.

Although the sector is very much in its infancy, “the capacity is immense,” Lord Callanan said.

Carbon capture won’t be a climate saviour so much as one of the many tools that will be used to reduce emissions, he said. Even so, the British government has earmarked £20-billion over the next decade to develop the technology. The cash will help get initial infrastructure in place, prove that the technology works and get projects off the ground.

“We have very ambitious programs and we’re in negotiations with companies now to take final investment decisions next year,” he said.