Canada's two main parties have clashed on the carbon pricing system ahead of the general election, but there is also common ground, writes Jasmina Kelemen
Industrial carbon pricing has become one of the key issues in the run-up to Canada's forthcoming general election on 28 April, and the future course on this is expected to affect the country's nascent clean hydrogen sector.
Prime minister Mark Carney's first major act after assuming office in early March was to scrap the consumer carbon tax. The tax had become the focus of popular anger against former prime minister Justin Trudeau after Conservative leader Pierre Poilievre blamed Liberal climate policies for rising household costs.
But Carney, who served five years as the UN Special Envoy for Climate Action, left the federal carbon pricing system on industrial emissions intact and has vowed to keep it. In contrast, Poilievre has said he will eliminate it, arguing the system raises costs for consumers while merely shifting emissions abroad.
Scrapping the federal carbon pricing system would not mean that emissions immediately become free of charge across Canada. The federal law serves as a "backstop" for provinces that do not have their own carbon pricing mechanisms in place, and sets minimum standards for others.
Most provinces have their own systems in place for now, but they could alter or altogether eliminate these if the federal law on carbon pricing is removed.
Climate activists say retaining the carbon pricing would be crucial for meaningful emissions cuts. "Without the signal industrial pricing systems send, other types of incentives... will not be enough to meaningfully drive down carbon pollution from big industry or deliver on Canada's climate goals," Canadian Climate Institute president Rick Smith said in March.
Under the federal system, the minimum carbon tax is currently set at C$95/t ($68.60/t) of CO2 and is set to increase by C$15/t each year, plateauing at C$170/t in 2030. If such pricing is retained, it could help drive a shift towards cleaner hydrogen production, including from natural gas with carbon capture and storage (CCS), compared with existing production pathways with unabated emissions.
For now, it seems likely that the federal carbon pricing system will survive the election. The Liberals were ahead in a rolling three-day Nanos poll released on 21 April, with 43.7pc favouring Carney compared with the Conservatives' 36.3pc.
Corridor train
Carney and Poilievre appear more aligned on other energy issues and policies that could have implications for the hydrogen sector.
Both have embraced Canada's potential for fossil fuel output. Carney wants to turn the country into a "superpower in both clean and conventional energy", and has vowed to build out pipelines, trade corridors and other infrastructure — including electricity grids — to diversify energy exports away from the US.
Some of this could support hydrogen ventures, such as in British Columbia where a slew of proposed renewable and CCS-based projects have failed to advance, partly because of high power prices and limited gas infrastructure.
Despite the support for conventional energy, Carney and Poilievre have also stressed their commitment to retain investment tax credits for clean technologies and manufacturing. Renewable and CCS-based hydrogen projects can benefit from these, with tax credits depending on the carbon intensity of production.
Both have vowed to streamline and accelerate permitting processes for large infrastructure projects, which could benefit hydrogen ventures if realised.
Canada's clean hydrogen ambitions will also be dependent on the sector gaining traction elsewhere. Eastern Canada's goal to leverage its renewable resources and help meet what was expected to be burgeoning demand in Europe has stalled as the transatlantic market has failed to materialise as anticipated.
