The year 2020 featured significant legal developments in Canadian climate change regulation, characterized by (a) continued changes to the approach to climate change regulation, particularly with respect to the management of greenhouse gas (GHG) emissions; (b) ongoing legal challenges by various provinces to the federal government’s Greenhouse Gas Pollution Pricing Act (GHG Pricing Act); and (c) a challenge to the federal Impact Assessment Act (IAA), another recently enacted federal environmental statute. Each of these areas demonstrates the continued jostling by the provinces to take the lead with respect to the division of legislative powers between the federal Parliament and the Canadian provinces in the sphere of energy and environmental law.

As a result, there remains a lack of alignment – and continued uncertainty – with regard to the scope of federal constitutional authority to regulate climate change and the environment. The anticipated release of the Supreme Court of Canada’s decision in 2021 on the constitutionality of the federal GHG Pricing Act could provide much-needed clarity.

The continued evolution of federal and provincial climate change regulation

Canada’s current approach to curbing climate change includes the implementation of a national strategy at the federal level, while still allowing for provincial initiatives that meet or exceed federal standards.

On the national front, Canada continues to work towards the realization of the plan set out in the 2016 Pan-Canadian Framework on Clean Growth and Climate Change. The federal government has introduced various legislative and policy measures to implement this framework plan, including the GHG Pricing Act to price carbon emissions, GHG reporting requirements for large emitters, plans to phase out coal-fired electricity generation by 2030 and the Strategic Assessment of Climate Change (SACC). The SACC is a notable measure finalized in 2020 that imposes additional climate change and GHG planning requirements on resource projects assessed under the federal IAA. In September 2020, Canada also announced a new Climate Action and Awareness Fund (CAAF), which will invest $206 million over five years to support Canadian-made projects to reduce GHG emissions in Canada.

The federal GHG Pricing Act is one measure that has continued to attract significant attention throughout 2020 – from both supporters and critics. Under the GHG Pricing Act, the federal government imposed a Canada-wide minimum price on carbon emissions through two mechanisms:

1. a fuel charge of $30/tonne (for 2020) that will continue to increase annually to reach $50/tonne in 2022
2. an output-based pricing (OBP) system, which is a cap-and-trade carbon pricing regime that applies to facilities if their emissions exceed 50,000 tonnes per year or more of carbon dioxide equivalents. Smaller facilities can also voluntarily opt into the system

The federal pricing system applies in provinces that do not implement their own carbon tax or cap-and-trade system that meets the minimum federal pricing and emissions reduction standards.

In November 2020, Canada’s Environment Minister tabled climate accountability legislation to formally commit Canada to its target of net-zero GHG emissions by 2050. If passed by Parliament, Bill C-12, An Act Respecting Transparency and Accountability in Canada’s Efforts to Achieve Net-Zero Greenhouse Gas Emissions by the Year 2050 (Bill C-12) would require that national targets for the reduction of greenhouse gas emissions in Canada be set by the Environment Minister for 2030, 2035, 2040 and 2045, with the objective of attaining net-zero emissions by 2050. To reach those targets, emission reduction plans will need to be established and progress reports submitted to Parliament. The Bill would also establish an advisory body to advise on, among other things, measures and sectoral strategies to achieve net-zero emissions by 2050. The Minister of Finance would also be required to prepare an annual report respecting key measures that the federal public administration has taken to manage its financial risks and opportunities related to climate change.

Bill C-12 does not currently include a mechanism that legally binds the federal government to reach the targets, nor any enforcement “teeth” to hold Canada (or others) to account if those targets are not met. Rather, if the Environment Minister concludes that Canada has not achieved its target for a milestone year, or by 2050, the Minister must explain the reasons why Canada failed to meet the target and what actions Canada is taking to address that failure.

It is anticipated that some provinces may seek to challenge Canada’s constitutional authority to pass such legislation, as they have in relation to the GHG Pricing Act (discussed below).

We understand that the introduction of Bill C-12 was delayed due to the pandemic and that it may be the first in a series of federal measures in the short term that will focus on meeting Canada’s commitments under the Paris Agreement. Such further initiatives could include (a) new standards for cleaner-burning fuels; (b) sector-by-sector consultations to set reduction targets; and (c) incentives to increase the use of clean energy and develop the market for electric vehicles.

The provincial regulatory landscape in relation to climate change and GHG emissions reduction continues to shift on an almost monthly basis. Currently, some provinces have their own systems for carbon pricing that match or exceed the federal minimum. Others have in place either the federal fuel charge or the OBP system, or both. As of the date of writing, the federal fuel charge applies in Alberta, Saskatchewan, Manitoba, Ontario, Nunavut and Yukon.

The federal government has also recently announced its acceptance of certain provincial programs as an alternative to the federal OBP. For instance, on September 21, 2020, the federal government accepted (a) Ontario’s Emissions Performance Standards program for large industrial facilities, and (b) New Brunswick’s carbon pollution pricing system, both as alternatives to the federal OBP system. At the same time, aspects of the federal scheme are subject to ongoing court challenges, as discussed below.

Osler’s infographic provides a summary of the current status of emissions legislation across Canada.