Canada’s deal to export hydrogen to Germany awaits more federal funding decisions

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This article was published 20/03/2025 (373 days ago), so information in it may no longer be current.

OTTAWA – A deal to send Canadian green hydrogen exports to Germany is awaiting Ottawa’s final decision on funding and a verdict from European regulators on whether the project has adequate competition.

Canada and Germany made a big show of signing a hydrogen agreement in August 2022, and former prime minister Justin Trudeau and outgoing German Chancellor Olaf Scholz flew to the west coast of Newfoundland to finalize the deal.

Last July, Canada and Germany jointly pledged $600 million to the project. Global Affairs Canada said the money was intended to “help Canadian companies access German markets” and “ensure Germany has access to competitively priced clean energy products” from Canada.

A Global Affairs director general said last month the project might need more money.

“There are some funding decisions that need to be concluded, that need to be made,” Stéphane Lessard, Global Affairs Canada’s acting director general for European affairs, told a Feb. 26 panel on German-Canadian trade.

“The government remains committed to this and we look forward to progress on this important initiative.”

The department would not say whether this means the project requires spending votes in Parliament — which was deadlocked last fall by a Conservative filibuster over government spending and was prorogued by Trudeau on Jan. 9.

The House of Commons is set to resume sitting on March 24 but an election call is now widely expected the day before. An election campaign would delay any House vote on funding until at least May.

The project could rely on expenditures already approved. Global Affairs referred questions to Natural Resources Canada, which did not answer whether the project requires spending votes in Parliament.

The project also requires a competitive auction process to allow Canadian firms to bid for the right to supply Europe with clean hydrogen. That hydrogen would then be auctioned off to buyers — a model that’s meant to drive down the cost of hydrogen.

Current prices for hydrogen are too high to compete with other forms of energy, so Canada and Germany agreed to a process to help bring the price down.

Global Affairs said last July it expected the auction process to launch by the end of 2024, after a European Commission review of the proposed auction parameters. The auction still has not happened.

German Ambassador to Canada Tjorven Bellmann said during the Feb. 26 panel that the project is proceeding but European regulators must “be assured that enough competition is provided by the framework, and that’s something that has to be clarified with the Canadian side.”

Natural Resources Canada spokesperson Maria Ladouceur said Ottawa has answered all of Europe’s questions.

“The European Commission review of the proposed auction parameters was launched in September 2024. Canada has been actively supporting Germany in expeditiously advancing this review process, and provided all requested information to date,” she wrote in an email to The Canadian Press.

“Natural Resources Canada is confident, given the numerous projects in development and the significant production capacity of these projects, that the bilateral H2Global window will generate significant competition from Canadian producers.”

European Commission competition spokesperson Luuk de Klein would not say whether Canada had answered all questions and said the commission’s role is to see whether projects receiving government funding lead to unfair competition in the EU market for unsubsidized companies.

“State-aid control ensures that scarce taxpayer money is spent wisely, and that public money does not crowd out private spending,” wrote de Klein in an email to The Canadian Press.

Under the terms of the deal, Canada is largely responsible for ramping up production of hydrogen and Germany will mainly focus on creating a shipping corridor to transport it across the Atlantic.

Germany’s hydrogen strategy includes a plan to replace its coal-fired power plants with hydrogen over the next 15 to 20 years. It needs to get most of that hydrogen from imports.

The shift is part of Berlin’s efforts to untangle itself from Russian energy in response to Moscow’s war on Ukraine.

Green hydrogen is generally considered to be the most climate-friendly form of hydrogen fuel; it’s extracted from water through electrolysis powered by renewable electricity. Several hydrogen extraction projects have been proposed for Atlantic Canada that would involve building new wind farms to generate power to produce green hydrogen.

Hydrogen also can be produced from natural gas, but that process produces greenhouse gases.

If those greenhouse gases are allowed to escape into the atmosphere, the product is called grey hydrogen. If those greenhouse gases are collected and stored through carbon capture, the product is called blue hydrogen. Germany generally only wants green hydrogen.

This report by The Canadian Press was first published March 20, 2025.