German Chancellor Olaf Scholz has done his part to light a fire under Canada so that it becomes a major clean-energy exporter.
Now, it’s up to Prime Minister Justin Trudeau, his ministers and his provincial counterparts to prove they’re capable of overcoming this country’s inertia in building new industries – and fast enough to compete for the business of nations trying to secure a sustainable long-term energy supply.
Despite lots of public discussion around Canada’s potential to supply natural gas to replace Russian imports, Mr. Scholz’s visit the past couple of days was designed by both countries to first and foremost highlight hunger for Canadian-produced green hydrogen – the emerging fuel source, especially for heavy industry, that Germany is counting on to reduce its reliance on fossil fuels altogether.
That demand is not exactly new: Germany has been less showily signalling it since even before Russia’s invasion of Ukraine upped the urgency. But heading into this week, officials from both countries suggested that a stronger message was needed to get through layers of Canadian government moving at an oddly leisurely pace, given the stakes.
The hydrogen agreement signed in Newfoundland on Tuesday by Mr. Scholz and Mr. Trudeau, revolving around a highly ambitious target for Canadian exports to start in 2025, should help with that. So, too, should the flurry of aspirational announcement by project proponents – such as a non-binding offtake agreement between Everwinds Fuels, which wants to produce hydrogen in Nova Scotia, and the German energy company, e.ON – that surrounded the signing of the intergovernmental accord.
The same goes, to some extent, for Germany’s thirst for critical minerals for electric vehicles and other manufacturing, with memorandums of understanding between Ottawa and German automakers Mercedes-Benz and Volkswagen unveiled during the visit.
But for the moment, such plans remain mostly theoretical. Whether they become real will be contingent on this proving a pivot point for Ottawa and the provinces, for better tailoring government supports and especially fixing regulatory processes that have been a barrier to resource-sector investment.
In an interview at the visit’s outset, Natural Resources Minister Jonathan Wilkinson readily owned up to that failing to date and gave some indication of how he hopes to seize the moment to address it, without in the process compromising environmental and ethical standards that are supposed to offer a competitive advantage when trading with countries such as Germany.
“If we want to seize the opportunities that are associated with the energy transition, we need to be more nimble,” Mr. Wilkinson said. “It cannot take us 12 years to get new mines into production. It just can’t.”
One of the ways he wants to speed things up is by better synchronizing federal and provincial permitting for major projects, minimizing the hoops through which companies have to jump.
There may be some early cause for hope on that front in Newfoundland and Labrador, which could be the biggest source of Canadian hydrogen exports to Europe – both because of its relative geographic proximity, and because of its untapped capacity for wind power. (Germany’s preference for so-called green hydrogen requires an energy-intensive production process contingent on large amounts of renewable electricity, as opposed to other methods of using fossil fuels to produce it.)
Newfoundland’s government only just recently lifted a provincial moratorium on new wind-energy development. But it is one of the first participants in new federal-provincial working groups to help develop low-carbon industries, and Mr. Wilkinson said that streamlining regulatory processes for those projects has come up early in discussions.
Even aside from overlap with the provinces, though, Ottawa has in and of itself earned a reputation for very slow approvals, whether under the old Canadian Environmental Assessment Act or the Impact Assessment Act with which Mr. Trudeau’s government replaced it.
Mr. Wilkinson said that some of the slowness comes not from ensuring that considerations such as ecological protection and engagement with Indigenous communities are prioritized, but from needless overlap and lack of co-ordination within the federal government. So Ottawa is starting a review of its internal processes, he said, to avoid departments tripping over each other.
Another need that he indicated is now rising to the fore is ensuring project proponents are adequately prepared for the regulatory process before they enter it. Too often, Mr. Wilkinson acknowledged, companies get many months into it before learning they’re expected to provide information they hadn’t expected, forcing restarts. For priority projects, he said, he wants to work more closely with applicants and provide them with additional resources, to avoid blindsiding them later.
Not that it’s just on the regulatory side where Ottawa may need to be quicker and more targeted.
As Tuesday’s agreement with Germany noted, there are fairly new federal programs – the $8-billion Net Zero Accelerator and the $1.5-billion Clean Fuels Fund – to help subsidize hydrogen and other clean-energy investment. But there have already been laments from industry that Ottawa is slow to award funds under them, in some cases blowing past its target dates.
There are also complaints that such programs are too broad, with the federal government simply making pots of money available to any and all low-emissions industries. That may be a competitive disadvantage next to competitor countries – including the United States, especially after the landmark climate legislation passed this month – that tailor supports to sectoral capital needs.
And the Canadian funds tend to be geared toward awarding a relatively small number of large subsidies, rather than being nimble enough to provide small grants or loans to overcome more specific obstacles to scale-up.
It all speaks to a need to make up for lost time.
Part of the failure has been political. Some of it has been bureaucratic, with ministers such as Mr. Wilkinson – who is known for extremely bullish on hydrogen himself – struggling to impart urgency on their departments.
Trying to build off this week’s momentum, the government will have to be careful not to get bogged down in developing overdue strategies. Finding ways to speed up its processes can’t itself become a long process.
Customers with very pressing needs are now eagerly knocking on Canada’s door. They’re not going to wait around for us to laboriously work through our own issues before turning elsewhere.
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