Canada and Germany sign MOU on clean energy

Dentons

On March 16, 2021, Canada and Germany signed a memorandum of understanding (MOU) to work together on the clean-energy transition, focusing on innovation and trade. The objective of the MOU is to provide a framework for Canada and Germany to cooperate in the energy sector and to accelerate the shift toward clean energy. Germany has pinned much of its clean-energy transition plan on the use of hydrogen, and sees Canada as a key supplier to meet its hydrogen needs. The partnership between the two countries underlines the role that the private sector will play as a driver of the energy transition and aims to promote business-to-business exchanges between Canada and Germany.

The MOU lists a number of areas of cooperation, which include:

  • Energy policy, planning and regulations: sharing approaches to energy policies and practices to attract investments in the energy sector and to foster a transition to net-zero economies.
  • Resilient electricity systems that can integrate high shares of renewables: supporting the development of robust electricity grids to foster the transition toward low carbon energy sources.
  • Energy efficiency: supporting the uptake of energy efficiency solutions while improving competiveness, employment and market access.
  • Sector coupling and low carbon fuels: fostering the transition toward low carbon fuels and increasing usage of renewable energy in the transport, heating and industrial sectors through, among other measures, collaborations on the production, usage and trade of clean hydrogen.
  • Innovation and applied research: facilitating innovation, applied research, and development to deliver clean energy solutions.

The MOU lists a number of cooperative activities in which Canada and Germany can engage, including information exchanges, joint participation with industry organization and international events, bilateral conferences, study trips, and communications initiatives, policy coordination, and the encouragement and support of private sector trade and investment.

The two countries will create a High-Level Steering Committee which will serve as a forum at the ministerial level to oversee the implementation of the MOU, to discuss energy-related issues, consult on the means of cooperation, and evaluate and improve upon the results of cooperation.

The MOU clearly explains that it is not a legally binding document, and its primary focus is on providing a basis for further cooperation between Canada and Germany on reaching net-zero emissions.

In a press conference following the signing of the agreement, German Economy Minster Peter Altmaier praised Canada's abundance of natural resources, focus on clean hydrogen, and similar climate goals to Germany as making Canada a promising partner for clean energy trade. In the same press conference, the export of Canadian liquefied natural gas (LNG) to Germany was referenced as part of a "bridge technology" toward hydrogen, with Germany planning to integrate LNG imports along side hydrogen into its energy strategy.

The MOU emphasizes that as part of the countries’ mutual commitment to achieving net-zero emissions, specific focus and mention is to be given to cooperating on the development of clean hydrogen as a key energy source. This is not surprising given that both the governments of Germany and Canada came out with their respective national hydrogen strategies last year, noting hydrogen’s potential and role in achieving their commitments on reducing greenhouse gas emissions. Copies of those strategies can be found here (for Germany) and here (for Canada).

Another key observation from the MOU is an area of cooperation with respect to supporting the development of robust electricity grids to foster the transition toward low carbon energy sources. This is a significant challenge that policy makers for electricity markets have been grappling with for the past number of years. As countries, such as Canada and Germany, aggressively pursue ambitions of a net-zero carbon economy, the intergenerational tensions to achieving this goal will continue to persist. The challenge for policy makers is finding the most efficient solutions to encourage the massive amounts of infrastructure spending (whether through carbon pricing, subsidy or other means) required to achieve these goals by not over burdening current generations through initial higher energy prices and losses to the economy resulting from lower hydrocarbon resource wealth so as to allow future generations to reap the benefits of a net-zero carbon future.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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