The Canadian government’s hydrogen strategy is not rooted in reality and therefore increases the likelihood that the country will not be able to meet its 2030 emission reduction target, according to a scathing report by the federal watchdog.

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The document — written by the Commissioner of the Environment and Sustainable Development to the Parliament of Canada and published by the Office of the Auditor General of Canada — devotes most of its 38 pages to point-by-point criticisms of government projections about the emissions reductions possible from green and blue hydrogen uptake over the next eight years.

Assumptions used for forecasts are variously described as “unfounded”, “unrealistic”, “overly ambitious”, “distorting” and “questionable” by the commissioner, Jerry DeMarco.

And this was just one of five critical reports he released on Tuesday.

“Canada needs to be more upfront and transparent about their assumptions for what is quite an optimistic view of hydrogen’s role,” DeMarco told a press conference. “They need to be realistic.”

The unrealistic H2 targets “raise concern about their overall approach to climate modelling and emissions reductions in general”, he added.

The government has pledged to slash emissions by 40-45% (compared to 2005 levels) by 2030, prompting DeMarco to say that if Ottawa does not “appropriately project hydrogen’s impact on reducing emissions, then there is a risk that Canada will not achieve its emissions reduction targets”.

DeMarco begins his report begins by pointing out that the two key federal government departments could not even agree on an approach to assess the role H2 should play in reducing emissions.

Environment and Climate Change Canada expected to achieve a carbon-dioxide-equivalent (CO2e) reduction of 15 million tonnes in 2030, while Natural Resources Canada, which published the national hydrogen strategy in December 2020, projected that CO2e would fall by up to 45 million tonnes.

Yet both departments used “unrealistic assumptions”.

Environment and Climate Change Canada based its forecasts on “assumptions that are not clear and relies on some policies that are not announced or in effect”, while Natural Resources Canada “prioritized a transformative approach… [that] assumed the adoption of aggressive and sometimes nonexistent policies”.

In addition, the latter department used “unrealistically low production cost assumptions”, “overly ambitious assumptions of technology uptake”, and did not consider the costs of supporting infrastructure.

“The Hydrogen Strategy for Canada stated that the transformative scenario should be viewed as the potential size of the hydrogen opportunity and should not be used as a forecast for future hydrogen demand,” the report states. “Despite this, we found that the department used the transformative scenario as a projected demand of hydrogen... without knowing how to get there.”

The commissioner adds that while “Natural Resources Canada projected that hydrogen could represent up to 15% of the emission reductions needed to meet the 2030 target... we found that one of Natural Resources Canada’s incremental demand reports projected that in 2030, hydrogen will contribute only 0.5% of the 2030 target.

“The department did not find this estimation compelling and chose to use more aspirational numbers.”

Meanwhile, the ministry’s hydrogen strategy “assumed that zero-emission vehicle mandates that apply only in British Columbia and Quebec would be adopted in all provinces in a similar way... [and that] the federal government would implement a zero-emissions buses mandate similar to the one in California”.

“These assumptions were unfounded because they were not backed up by either provincial or federal policies.”

An electricity price of C$40 ($31) per MWh was assumed across all provinces, well below the C$52-124 seen in 2020 for large-power customers.

“This meant that the department overestimated the opportunity of electrolysis to produce hydrogen at a low cost.”

The environment ministry used an “inadequate approximation” in its modelling, the report continues, namely a “hydrogen-natural-gas blending obligation [for 7.3% H2] that was not based on any existing policy at the provincial or federal level”.

It also failed to note that such blending would be “uneconomical” and of “questionable economic feasibility”, resulting in a “distorting effect” on calculations.

“To blend hydrogen with natural gas, natural gas providers face many technical hurdles, such as the weakening of pipes, the lack of measurement standards, and the lack of end-use equipment,” the report points out — issues that Environment and Climate Change Canada did not take into account.

“According to analysis provided to Natural Resources Canada, a more stringent carbon price of at least $500 per tonne would be needed to encourage businesses to adopt blending at this level,” it adds.

The commissioner makes several recommendations to improve modelling and therefore decision-making at the two federal departments, including improving consistency across all government ministries and increasing transparency of emissions and climate change projections through “enhanced peer review, formal consultations with stakeholders, formal periodic quality assurance control [and] public scrutiny”.

The two government departments fully accepted all the recommendations.

“We’ll see whether they’ll follow up those words with actions,” DeMarco told the press conference.

Natural resources minister Jonathan Wilkinson responded to the commissioner’s report by saying that the criticisms do not mean that the overly optimistic hydrogen targets cannot be met.

“We think it’s feasible,” he told a hydrogen conference in Edmonton later on Tuesday. “We will be launching a process with the provinces over the next several weeks to align on some of these economic issues.”