Recovery Through Reform: Advancing a hydrogen economy while minimizing fossil fuel subsidies
-
There is a risk that new blue hydrogen projects may, by 2030, be at a competitive disadvantage, at least from that point forward.
-
Funding for carbon capture projects already represents a significant source of fossil fuel subsidies in Canadian jurisdictions.
-
Given Canada's commitment to phasing out inefficient fossil fuel subsidies and reach net-zero by 2050, and the need to rapidly transition to clean energy, a very high bar must be set to justify subsidies for blue hydrogen.
Spending on hydrogen has the potential to significantly influence the direction taken by the world’s energy systems. In December 2020, Canada unveiled a national hydrogen strategy following the announcement of a strengthened climate plan. The strategy emphasized both blue and green hydrogen. As the government considers whether to provide subsidies for hydrogen, we recommend government:
- Ensure that any subsidies for hydrogen are in line with the government’s commitments to phase out inefficient fossil fuel subsidies by 2025 and meet net-zero by 2050.
- Thoroughly evaluate the potential efficiency of subsidies for hydrogen against robust social, environmental, and economic criteria. • Improve transparency by publicly reporting on direct spending and tax expenditures for hydrogen production.
- Follow international best practices being set by Canada’s peers. For example, Germany and Spain have laid out hydrogen strategies prioritizing green hydrogen.
Based on IISD's analysis, subsidies for hydrogen based on natural gas without significant levels of carbon capture and storage (CCS) should not be eligible for government assistance. Subsidies for blue hydrogen should only occur if blue hydrogen can meet the same level of environmental performance (including emission intensity) and is at or below the cost of green hydrogen.
This brief is one of three International Institute for Sustainable Development (IISD) policy briefs in its Recovery Through Reform series, which assesses how efforts to achieve a green recovery from COVID-19 in Canada rely on—and can contribute to—fossil fuel subsidy reform.
Funded by
You might also be interested in
A Canadian senator aims to end the widespread financial backing of fossil fuels
The United Nations climate change conference, COP27, has begun in Sharm el-Sheikh, Egypt. In the lead-up to the conference, UN Secretary General Antonio Guterres said the recent Intergovernmental Panel on Climate Change report revealed "a litany of broken climate promises" by governments and corporations.
A Canadian senator aims to end the widespread financial backing of fossil fuels
The United Nations climate change conference, COP27, has begun in Sharm el-Sheikh, Egypt. In the lead-up to the conference, UN Secretary General Antonio Guterres said the recent Intergovernmental Panel on Climate Change report revealed “a litany of broken climate promises” by governments and corporations.
CCUS Mostly Shut Out, Renewables Get Tax Credit in Federal Economic Statement
A pitch for private investment in emission reduction projects, including tax credits for renewable energy, low-carbon heating, and clean hydrogen, is one of the highlights of the fall economic statement released Thursday by Finance Minister Chrystia Freeland.
Fall Economic Statement Today Raises Spectre of New CCS Subsidy
With Finance Minister Chrystia Freeland set to deliver her fall economic statement later today, climate and energy analysts are watching closely to see whether she sweetens the already lavish subsidies the Trudeau government extended to carbon capture and storage (CCS) in its 2022 budget.