Federal watchdog warns Canada's 2030 emissions target may not be achievable

·7 min read
Commissioner of the Environment and Sustainable Development Jerry DeMarco is seen during a news conference, Thursday, November 25, 2021 in Ottawa. (Adrian Wyld/Canadian Press - image credit)
Commissioner of the Environment and Sustainable Development Jerry DeMarco is seen during a news conference, Thursday, November 25, 2021 in Ottawa. (Adrian Wyld/Canadian Press - image credit)

Canada's environment commissioner said Tuesday the country may not be able to reach its 2030 emissions reductions targets because the federal government's current plan is based on "unrealistic" assumptions about the role hydrogen will play in the energy mix in years to come.

The commissioner, Jerry DeMarco, released a series of audits today that document the federal government's environment-related shortcomings — including its failure to produce a meaningful "just transition" plan for energy workers displaced by the transition to a low-carbon economy and the uneven application of a supposedly national price on carbon emissions.

But DeMarco was perhaps most scathing in his assessment of the government's hydrogen strategy, which he said is based on "overly optimistic" assumptions that "compromise the credibility" of the government's entire emissions reduction plan.

Speaking at a press conference, DeMarco said the government's questionable hydrogen emissions targets "raise concerns about their overall approach to climate modelling and emissions reductions in general."

"Canada needs to be more upfront and transparent about their assumptions for what is quite an optimistic view of hydrogen's role," he said. "They need to be realistic."

The federal government has pledged to reduce Canada's emissions 40 to 45 per cent below 2005 levels by 2030 and it is counting on the widespread deployment of hydrogen — a carbon-free energy source that produces no greenhouse gases when burned — to help the country achieve that ambitious target.

Departments disagree on impact of hydrogen

Two federal departments — Environment and Climate Change Canada and Natural Resources Canada — have said that rapid adoption of hydrogen would result in sizeable emissions reductions because it can displace high-carbon fuels. But the commissioner found these departments couldn't agree on the amount of emissions that would be offset by its use.

Environment and Climate Change Canada has said the use of clean hydrogen technologies could lead to an emissions reduction equal to 15 megatonnes by 2030, while Natural Resources Canada estimates a contribution of up to 45 megatonnes.

Darren Calabrese/The Canadian Press
Darren Calabrese/The Canadian Press

The commissioner said both departments are likely off the mark because they used "unrealistic assumptions for modelling the potential of hydrogen."

The commissioner said Natural Resources Canada is expecting an "ambitious technology uptake" in the next eight years — an assumption that he said is not necessarily based in reality.

WATCH: Canada's environment commissioner discusses government's hydrogen modelling

While the government wants to supercharge the use of hydrogen to reduce emissions, it essentially has no plan to make that happen, he said.

High-cost hydrogen

The commissioner said so-called "green" hydrogen — a form of fuel that is produced through electrolysis with no resulting emissions — may not be in widespread use by the end of the decade because it's prohibitively expensive.

According to the commissioner's report, a gigajoule of natural gas costs about $3.79 to produce, while a gigajoule of green hydrogen costs over $60 if it's produced using electricity from renewable sources such as wind and solar.

Because of this massive price discrepancy, there is little incentive for industry to churn out green hydrogen.

Citing government data, the commissioner said the actual annual production of hydrogen in Canada is only about 3 megatonnes — almost all of it being "grey" hydrogen, a dirtier form that produces roughly two times the amount of emissions as natural gas.

The commissioner also said there are doubts about whether hydrogen can play any sort of meaningful role in Canada in the short term because very little of the necessary infrastructure — like hydrogen pipelines and liquefaction plants — is in place.

'Aspirational numbers'

DeMarco also said there isn't enough carbon capture, utilization and storage (CCUS) technology available to produce "blue" hydrogen, a form of fuel that is derived from natural gas through a process of steam methane reforming. CCUS is a process that captures and reuses or stores carbon dioxide emissions.

While Natural Resources Canada has said publicly that hydrogen adoption could account for up to 15 per cent of the emissions reductions needed to meet the 2030 target, the commissioner said the department's own internal numbers, based on "incremental demand reports," suggest hydrogen will contribute only 0.5 per cent to the 2030 target.

The commissioner said the department did not find those lower emissions reduction targets "compelling" and instead chose to use "more aspirational numbers" when drawing up its emissions modelling plan.

"In our view, this plan is not fully transparent because it includes assumptions that are not clear and relies on some policies that are not announced or in effect," the commissioner said.

If the government does "not appropriately project hydrogen's impact on reducing emissions, then there is a risk that Canada will not achieve its emissions reduction targets," he said.

Commissioner chides Ottawa for non-existent 'just transition' plan

DeMarco said the government has done little to prepare for an expected wave of layoffs in the energy sector as the country moves away from fossil fuels like coal, oil and natural gas in the coming years.

DeMarco said the government has long promised to produce some sort of "just transition" plan to help affected workers with income and pension support and job retraining. He said the government has been "slow off the mark," has taken "little action" and is woefully "unprepared" for possible mass unemployment.

Kyle Bakx/CBC
Kyle Bakx/CBC

He said the government's recent approach to job losses in the coal industry — Ottawa is overseeing a full phase-out of coal-fired electricity by 2030 — leaves much to be desired.

Rather than develop a plan to address the specific needs of laid-off coal workers, DeMarco said the federal government relied largely on the existing employment insurance (EI) program. It needs to take a different approach for other emissions-intensive sectors that are expected to see job losses, DeMarco said.

Without further action, the country as a whole could experience something similar to the disastrous cod moratorium in Newfoundland and Labrador, DeMarco said, which resulted in thousands of lost jobs and the hollowing-out of rural regions in that province.

There are an estimated 170,000 direct fossil-fuel jobs in Canada and there needs to be legislation and a plan "to support the future and livelihood of workers and communities affected by the transition to a low-carbon economy," he said.

"The current pace of planning for a just transition will make it difficult to address the upcoming shifts in the labour market."

Commissioner raises red flags about industrial emitters

In a separate report focused on the federal government's price on emissions, DeMarco said Ottawa hasn't done enough to ensure its carbon pricing regime is applied fairly on the country's industrial emitters.

As the carbon pricing system is currently structured, he said, consumers may be shouldering more of the carbon tax burden than big businesses — but it's hard to know for certain because there isn't a lot of transparency about what the provinces are collecting as part of the "output-based pricing system" (OBPS).

The OBPS is the part of the federal carbon pricing regime that puts a price on pollution from large industrial emitters — a price separate from the costs consumers bear when buying fossil fuels like oil, gas, diesel and propane.

There's a patchwork of OBPS policies across the country, the commissioner said, and some provinces have implemented "weak" or "non-existent" systems that have let many big polluters off the hook.

He said the federal government must insist on minimal national standards so that the provinces with their own OBPS policies — Alberta, Saskatchewan, Newfoundland and Labrador, New Brunswick and Ontario — collect a sufficient amount of taxes from these emitters. As it stands, the cost to industries varies widely between provinces, DeMarco said.

The commissioner said the current weakness of the industrial system is undermining the "polluter pays" principle of carbon pricing.

WATCH: Environment minister reacts to environment commissioner's report

In a statement, Environment Minister Steven Guilbeault and Natural Resources Minister Jonathan Wilkinson said they welcomed the commissioner's report and are committed to implementing a carbon pricing system that is "fair and effective."

"We have strengthened the minimum national standards for carbon pricing that all systems will need to meet from 2023 to 2030 and are engaging with provinces and territories on implementing them. A price on pollution not only keeps our air clean, but also puts money back in families' pockets," the ministers said.

As for the commissioner's concerns about the questionable hydrogen-related emissions reduction modelling, the ministers said the government will "develop a standard framework on how certain measures, such as the adoption of hydrogen, contribute to reducing emissions in Canada."

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