The federal government recently published its revised requirements for project sponsors related to the consideration of climate change issues when the sponsors of designated projects undergo environmental assessment. Under the new Impact Assessment Act, each project on the designated project list must undergo first a review in principle to ensure its compliance with the federal government’s climate policy framework and indigenous reconciliation goals before undergoing a more traditional project review that examines the specific local environmental impacts. The actual reviews are to be carried out either by the Impact Assessment Agency of Canada (IAAC) or the “lifecycle regulators” such as the Canada Energy Regulator (the successor to the National Energy Board), the Canadian Nuclear Safety Commission (CNSC) and the Offshore Petroleum Boards.
The project list includes the construction, operation, decommissioning and abandonment of many kinds of projects in the energy, mining, and transportation industries. The same review process requirements can potentially apply to an oil pipeline, a diamond mine, a new powerplant, an airport or a railway, or significant additions to any of these.
The regulations demand not only that a proponent identify the carbon-dioxide equivalent greenhouse gas emissions directly associated with the construction and operation of the project, but impose additional emission-related information requirements related to upstream emissions, downstream emissions, “net emissions”, acquired energy GHG emissions, carbon dioxide captured and stored, avoided domestic GHG emissions, and offset credits.
The legislation approved by Parliament set no specific GHG emission targets for Canada. The Trudeau government, however, has superimposed on the legislative requirements additional ones that derive from its political objective that Canada meet a “net zero emissions goal” by 2050. Further, the government has interpreted this goal to mean that every new or expanded project must itself adhere to a net zero emissions goal.
Surprisingly, given their potential impact on projects in a wide range of economic sectors, the new regulations have received almost no news coverage or commentary by think tanks and other expert sources in Canada.
There are four main problems with the regulations.
- First, the federal government expects firms to devise a “credible plan” to achieve net-zero emissions when the government has not released details of its own plan or even a cost-benefit analysis demonstrating how reaching this target would be in the best interests of Canadians. In the process, the federal government is obliging companies to commit to things they cannot possibly predict, such as technological breakthroughs and changes in input costs.
- Second, the new requirements will substantially increase regulatory compliance costs as firms must now calculate emissions-related information at every stage of the application process. This will add considerably to the number and range of consultants and lawyers that firms will have to hire at a time when the affected industries are already reeling from changes in market conditions and government-imposed shutdowns.
- Third, the regulations add more to uncertainty, the great investment-killer.
- Finally, the wide range of projects covered by the regulations (including, for example, the addition of a runway at an airport) will expose many investments to burdensome regulatory scrutiny and increased vulnerability to cancellation due to the opposition of public-funded and politically-inspired environmental and Indigenous groups. For those projects that make it through the impact assessment gauntlet, their costs will be sharply raised, and they will have to pass these on to their customers in other industries and ultimately to the Canadian consumer. This will have large but difficult-to-estimate effects on the competitiveness of Canadians firms.
Federal and provincial governments in Canada have already implemented 237 different GHG emission-reduction measures. Some include carbon dioxide pricing (i.e. taxes, emissions trading systems, and output-based pricing systems). The federal government is now layering on to these the costs of the Clean Fuel Standard. It has imposed many restraints on the construction of new oil and gas pipelines, and increasingly discouraged investments in the hydrocarbons industries in Alberta, Saskatchewan and Newfoundland and Labrador. It has politicized the pipeline project review process so that it is no longer guided by objective, expert assessments of the public interest. The new Impact Assessment regulations convert the impact assessment process into an onerous and blunt instrument for discouraging any new economic project that causes GHG emissions to rise.
Applying such a standard would constrain almost all economic activity and job creation in Canada, contrary to what the government claims are its objectives.
About the Author
Robert Lyman is an economist with 27 years’ experience as an analyst, policy advisor and manager in the Canadian federal government, primarily in the areas of energy, transportation, and environmental policy. He was also a diplomat for 10 years. Subsequently he has worked as a private consultant conducting policy research and analysis on energy and transportation issues as a principal for Entrans policy research group. He is a frequent contributor of articles and reports for friends of science, a Calgary-based independent organization concerned about climate change-related issues. He resides in Ottawa, Canada. Full bio.