Developing the Technology to Decarbonize Canada: Q&A

By Richard Stubbe, BloombergNEF. This article first appeared on the Bloomberg Terminal.

Climate scientist Phil De Luna has a big assignment — the decarbonization of Canada, which emits more than 700 million tons of carbon dioxide equivalent annually.

De Luna, 29, is the director of the Materials for Clean Fuels Challenge Program at Canada’s National Research Council, the federal research and development organization. The task is to discover and develop early-stage technologies that can reduce and eventually zero out the footprint, a greater challenge given the nation’s reliance on natural resources like oil and gas. He is also scheduled to discuss his efforts in a TEDx Toronto talk on Feb. 4.

“Our primary resource-driven economy emits so much carbon dioxide and it’s very difficult to abate with technology that exists today,” De Luna said in a mid-January interview with BloombergNEF. “If we’re serious about getting to net zero by 2050, we absolutely must be investing in developing and scaling technologies that underpin transformative change in our energy systems.”

This interview has been edited for clarity and brevity.

BNEF: Where do you start in trying to decarbonize Canada?

De Luna: Canada has traditionally been either a primary or tertiary industry economy. We have a lot of natural resources that we extract and we export, and then we have a lot of housing, banking, finance sector and service industry. We don’t have as much in the middle anymore, and one of the biggest issues facing Canada is how to decarbonize our economy based on the fact that our primary resource-driven economy emits so much carbon dioxide and it’s very difficult to abate with technology that exists today. Canada’s electricity grid is relatively clean, with 75% from non-emitting sources, 60% of which is hydroelectricity.

BNEF: What are the hard parts?

De Luna: The hard sectors are our industrial processes, which include oil and gas and other natural resource extraction, and transportation. These are the two areas where Canada really needs to invest. The national hydrogen strategy was announced in December of 2020, last month, and the government announced plans to increase the price on carbon emissions from $30 per ton of CO2 today to $170 by 2030. Canada is large geographically and demographical, so the technology needed to decarbonize will need to be very specific to the jurisdiction.

BNEF: Your writings lean strongly toward the idea that transformative technology will save the day. What’s the role of incremental changes?

De Luna: Incremental technologies are needed but we won’t ‘efficient’ our way out of this problem. If we’re serious about getting to net zero by 2050, we absolutely must be investing in developing and scaling technologies that underpin transformative change in our energy systems.

BNEF: What are some of the technologies?

De Luna: Carbon capture, utilization and storage, next-generation battery, hydrogen – these are all things that have moved incrementally, but have yet to come onto the market in the same way that solar or wind or even electric vehicles with lithium-ion have in recent years. But they are what we need to decarbonize the hardest part of our economy – transportation, manufacturing and industrial emissions.

BNEF: What about policy changes?

De Luna: The policy changes are happening, whether that’s countries and companies around the world committing to net zero, or the implementation of the clean-fuel standard in Canada, or the announcement of a rise in the carbon price. These things are happening.

BNEF: Anything else?

De Luna: You also have private investment signals – Blackrock, for example, announcing that climate and social considerations will become key to their investment thesis. Venture capitalists are investing more in the space. Tech companies that have no real stake in this are developing funds for carbon removal.

BNEF: So what moves the needle?

De Luna: It’s a combination of three things – technology, policy, and finance. While I’ve lived in primarily the technology space for most of my career, I actually think it’s the easiest piece – it either works or it doesn’t. Policy and finance are more difficult because they rely on relationships, on geopolitical considerations and public opinion. But the trend toward tackling climate change is only becoming more and more serious, especially as the younger generation has become more politically active.

We do need finance to create the environment with which the best technologies are actually successful and can scale. Governments have a huge role to play in procurement, to kick-start this. Private industry has a huge role to play in taking risks and then being more patient with waiting for returns and actually looking at climate disclosures in a more meaningful way.

BNEF: Who in the world is the leader, and what’s happening that other countries should copy?

De Luna: I’m looking at the European Union, specifically at Germany and Norway. Norway is showing leadership on carbon capture, specifically on the Northern Lights project. Last year their electric vehicle sales surpassed gasoline-powered, which I think is quite impressive. Germany is interesting because of the amount of investments both monetarily and in policy in transitioning to a hydrogen-based economy. Europe has a huge role to play in terms of setting examples and being leaders with respect to green hydrogen, for example.

And California has been at the forefront in a lot of ways, whether it’s the clean fuel standard or their plans to do away with gasoline-powered vehicles.

BNEF: President Biden was inaugurated just a few hours before we started talking. What are you expecting from the new administration?

De Luna: The world has been waiting to see what role America will play in leadership in coming back to the Paris climate accord, and in the international cooperation and collaboration that’s needed to set standards and guidelines around decarbonization.

BNEF: Are you optimistic?

De Luna: I’m extremely optimistic. John Kerry, the special envoy on climate, is one of the most seasoned political actors that I know of. There’s also the left wing of the Democratic caucus demanding more and more action on climate change – the Green New Deal, Alexandria Ocasio-Cortez, Bernie Sanders and those folks. It only makes sense for climate change and clean technologies to be central to the Biden administration agenda.

One tremendous move in the Trump administration was the 45Q tax credit, which was a credit for capturing carbon that was immensely helpful in getting some companies in carbon capture and carbon engineering into commercial reality.

BNEF: Carbon capture is much newer than solar and wind energy, which are now having significant commercial success after decades of development. How promising is that technology?

De Luna: It is in its nascent stage. It’s a lot more difficult for it to scale the same way that wind or solar have, just because the cost of building one plant is so much larger than the cost of building a solar cell or a wind turbine.

BNEF: How important is it?

De Luna: It will be essential for us to reach our goals. Based on the amount of emissions that humanity has released into the atmosphere, we may already be over our carbon budget. It will be extremely difficult to remain below the 1.5-degree or even 2-degree Celsius global temperature increase without carbon capture. And it will need to be in multiple forms, too – like ocean-based carbon capture, and carbon capture in soils.

BNEF: What are the scalable possibilities of hydrogen?

De Luna: The technology has been around for a long time. The first wave of excitement around hydrogen in the late 1990s was driven by the view that we were going to need hydrogen because we’ll run out of oil and gas reserves. With the revolution of shale, that is no longer the case. Today, the talk is more sticky because of the need for decarbonization and the impact of those fuels on climate change, which is not going to be a problem that we’re going to be able to solve in the long or medium term. So there’s certainly a lot of potential for hydrogen.

BNEF: What are hydrogen’s best applications?

De Luna: Hydrogen makes a lot of sense in hard-to-abate sectors where the energy density of a battery does not meet the application – like trains, planes and heavy-duty transportation, especially when coupled with a fuel cell. It doesn’t make the most sense in light transportation. Electric vehicles and lithium-ion batteries have cornered the market. But in trucking or public transportation or airport people and luggage movers, it makes a lot of sense.

BNEF: What are the challenges?

De Luna: The issue is the cost of manufacture and the infrastructure for moving it. It’s very expensive to produce hydrogen with renewables and water alone – what we call green hydrogen – but it can be much cheaper when produced from fossil fuels. So this is where carbon capture and hydrogen meet – blue hydrogen combines the traditional route of making hydrogen from methane but also creates CO2. If we take that process and couple it with carbon capture and utilization and storage, you can generate hydrogen and capture the CO2 before it hits the atmosphere. This is one of the most cost-effective ways to produce hydrogen just because natural gas is so cheap and abundant now.

BNEF: What’s the opportunity for Canada in hydrogen?

De Luna: There are debates about the best way to produce hydrogen in different parts of Canada, but the promise is that Canada could become an exporter of hydrogen and low-carbon fuels around the world.

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