The Climate Policies in Canada: Past, present and future

This article is Part 1 of the DECARRBONIZATION POLICY series for 2023.

According to Kilpatrick (1), “Public policy can be generally defined as a system of laws, regulatory measures, courses of action, and funding priorities concerning a given topic promulgated by a governmental entity or its representatives.” Dye (2) posited a simpler definition of public policy as, “everything that governments choose, or choose not, to do”. In Canada, public policies on climate have had a checkered history over the last three and half decades, with varying implications for businesses, including the construction industry. The semblance of calm around the current climate policy in Canada stems from the spring 2021 Supreme Court decision on the constitutionality of federal carbon pricing when, in a majority ruling, the court said that, “The federal government is free to impose minimum pricing standards because the threat of climate change is so great that it demands a coordinated national approach.” This effectively ended (or so it appears) the debate about whether Ottawa can impose carbon pricing on provinces that choose otherwise or even lead a coordinated national strategy on decarbonization and climate change. But how did Canada get here, and what did past approaches on climate policy look like?

Surprisingly, the Progressive Conservatives under Brian Mulroney heralded Canada’s environmental leadership. At the Toronto Conference on the Changing Atmosphere in 1988, Mulroney proposed an international “Law of the Atmosphere” like the “Law of the Sea.”

The conference’s closing recommendation was for nations to reduce carbon dioxide emissions by 20 per cent by 2005. By 1992, Canada became the first industrialized nation to ratify the creation of the United Nations Framework Convention on Climate Change (UNFCCC). That year, the federal Green Plan, developed in 1990 to stabilize Canada’s greenhouse gas, or GHG emissions at 1990 levels by 2000, was submitted to the UNFCCC by the Mulroney government. Although commitments to the UNFCCC were voluntary and non-binding, Canada appeared prepared to lead on climate issues.

The subsequent Liberal governments of Jean Chrétien/Paul Martin then launched a series of consultations through their National Action Plan on Climate Change with multiple stakeholders – communities, businesses and the provinces. This led to the development of a Voluntary Challenge and Registry (VCR) program in 1995 requiring heavy emitters to voluntarily report their emissions publicly. The voluntary nature of the VCR made it somewhat ineffective, with Canada later aligned with the powerful JUSCANZ bloc, comprising Japan, the U.S., Australia and New Zealand, who opposed binding commitments. Then, without consulting the provinces, two years later at the Conference of the Parties (COP 3) in Kyoto, a six-per-cent reduction in GHG emissions by 2012 compared to 1990 levels was pledged by Canada; this was known as the Kyoto Accord. The battle over ratification of the Kyoto Accord dragged on towards the end of the Chrétien administration, with Kyoto finally ratifying in December 2002. Strong opposition from industry groups and the provinces meant that the implementation of these pledges was next to impossible. This largely explained why the Martin administration that took over had to abandon any effort to implement a cap-and-trade carbon pricing program. Reports by researchers from HEC Montréal and MIT suggest that a suitable price on carbon is an effective way to reduce pollution and lower emissions. By 2006, when Canada hosted COP 12 in Montréal, emissions had risen 27 per cent above 1990 levels rather than decrease, and a new Conservative government under Stephen Harper was then in charge.

Harper’s administration (2006-2015) would go on to roll back many of the climate and environmental plans, including rewriting Canada’s Environmental Assessment Act and putting the PM’s office in control of where and when the Act is enforced. The changes also included the rollback of the Kyoto Implementation Act and cancellation of the National Roundtable on the Environment and the Economy. A $4.5 Billion subsidy program/tax initiative was, however, provided for climate initiatives when it appeared there was significant public interest in climate action. But for all intents and purposes, the federal government mostly kept away from strengthening climate policies during this period.

As the federal government stepped back from climate action, the provinces took the mantle with British Columbia starting North America’s first revenue-neutral carbon tax program in 2007 against its target of 33-per-cent in GHG by 2020 compared to 2007 levels. Some Canadian provinces and U.S. states banded to launch Western Climate Initiative, a cap-and-trade system for carbon emissions. As provinces stepped up, the Liberal federal government under Justin Trudeau took up the charge to lead a coordinated climate agenda for Canada, starting with the Pan-Canadian Framework on Clean Growth and Climate Change. The current carbon pricing system started under this framework with eight provinces (except Man. and Sask.) and three territories agreeing to implement a carbon pricing system. Since that landmark 2021 Supreme Court ruling, it appears national carbon pricing has come to stay.

The positions of industries and businesses also seem to have shifted from what they were in the three decades prior to 2018. Climate action through carbon pricing is no longer the bigger threat. Climate change itself is now seen as an existential risk for many businesses. As Munroe (4) explained, “When survival is perceived to be threatened, company officials adapt their decision-making to mitigate the threat, and therefore are more likely to support higher cost policies.” Therefore, it is no surprise that even heavy-emitting industries, such as the Canadian Association of Petroleum Producers (CAPP), now support carbon pricing.

The Net Zero Emissions Accountability Act passed in 2021 and commits Canada to achieve net zero GHG emission by 2050. Its implementation is currently guided by the 2030 Emissions Reduction Plan, which roadmaps how to get to 40 per cent reduction in GHG against 2005 levels by 2030. The hallmark of the plan is enhanced funding for environmental, social, clean energy initiatives, etc., as well as carbon pricing, with rates designed to 2030 to offer businesses certainty.

Overall, when it comes to climate policies, the action of any one government is not the most important for industries and businesses. Rather, prudent organizations would consider how long-term outlook with changing policies, turnarounds and externalities could impact productivity, as well as business goals.

Further reading

MacNeil, R. (2019). Thirty years of failure: Understanding Canadian climate policy. Fernwood Publishing.

References

[1] Kilpatrick, D. G. (2000). Definitions of public policy and the law. National violence against women prevention research center.

[2] Dye, T. R. (2013). Understanding public policy Pearson.

[3] Caron, J., Cohen, S. M., Brown, M., & Reilly, J. M. (2018). Exploring the impacts of a national US CO2 tax and revenue recycling options with a coupled electricity-economy model. Climate Change Economics, 9(01), 1840015.

[4] Munroe, K. B. (2017). Business in a changing climate: Explaining industry support for carbon pricing. University of Toronto Press.

Ayo Daniel Abiola, PQS, is an Independent Consultant offering cost consulting, facility assessment and appraisals for commercial and institutional properties in the Prairies and across Canada.

Ayo is licensed to practice engineering in Alberta, Ontario and Saskatchewan. He is also a Certified Energy Manager and a WELL Accredited Professional, having the skills and experience to foster health and wellness in the built environment.

Ayo lives in Regina, Sask.