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Germany and Canada have signed a cooperation agreement for the production and transport of hydrogen on the second day of German Chancellor Olaf Scholz's inaugural trip to Canada.

German Economics Minister Robert Habeck and Canadian Energy Minister Jonathan Wilkinson signed the agreement at a ceremony on Tuesday in the remote town of Stephenville, in Newfoundland and Labrador, attended by Scholz and Canadian Prime Minister Justin Trudeau, dpa news agency reported.

Trudeau spoke of a "historic step forward for our shared future".

"Our target is clear: Working towards initial exports of Canadian hydrogen to Germany by 2025," Trudeau said. "Our outcomes are clear as well: Creating middle class jobs and local growth while delivering clear energy that will help fight climate change."

Scholz said that the deal will take the partnership between the two countries to a more strategic level.

The German chancellor, who was accompanied on his trip by his deputy Habeck and a large delegation of business and industry leaders, called the agreement "an important step not only for strengthening our bilateral economic relations, but also for a sustainable energy supply for the future."

Newfoundland is considered a favourable location for the production of renewable hydrogen. The region is very windy and sparsely populated.

The use of hydrogen does not produce greenhouse gases. To produce it, water has to be split into hydrogen and oxygen by electrolysis, which is only climate-friendly if sustainable energy is used.

Currently the cost of producing low-carbon hydrogen is more expensive than buying natural gas, but experts believe that hydrogen has the ability to reduce energy bills in the medium term.

Industrial hydrogen production hubs have yet to be completed, however.

German energy companies Eon and Uniper said on Tuesday that they had signed a memorandum of understanding with Canada's Everwind on the sidelines of the German-Canadian talks with the aim of importing climate-neutral hydrogen from Canada on a large scale from 2025.

Accordingly, the companies are each seeking a purchase agreement for up to 500,000 tonnes of ammonia - the chemical used to transport hydrogen - per year.

A green hydrogen and ammonia production plant is to be built in the village of Point Tupper in the Canadian province of Nova Scotia. "It is in an advanced stage of development and is expected to start commercial operation in early 2025," Eon said.

Also on Tuesday, German carmaker Mercedes-Benz and the Canadian government signed a memorandum of understanding to promote cooperation and economic opportunities within the Canadian supply chain for electric vehicles.