Changing climes, changing times

Legislative and policy shifts in climate change environmental regimes, both federally and provincially, have all affected the energy sector, which must adapt to those changes

In late September, the Supreme Court of Canada heard references on the constitutional validity of the federal Greenhouse Gas Pollution Pricing Act, which establishes minimum national standards for greenhouse gas pricing in Canada to meet emission reduction targets under the Paris Agreement.

Three provinces — Alberta, Saskatchewan and Ontario — have challenged the federal carbon pricing system. Saskatchewan’s and Ontario’s appellate courts upheld the constitutionality of the act, while Alberta’s court ruled it unconstitutional. Quebec, Manitoba and New Brunswick all intervened in favour of the provincial challenge, while British Columbia, which has had North America’s first broad-based carbon tax since 2008, intervened on the side of the federal government.

“If I had to guess, I would guess that the Supreme Court of Canada will uphold the constitutionality of the Greenhouse Gas Act for the same reason that the Ontario and the Saskatchewan courts of appeal upheld it — essentially, on the basis of the federal government's powers to make laws for the peace, order and good government of Canada, and in particular, to regulate matters of national concern,” says Joanna Rosengarten, counsel at McCarthy Tétrault LLP in Toronto

In split decisions from the three provincial appellate courts, eight of the judges found the federal legislation was constitutional and seven found it unconstitutional, says Kimberly Howard, a partner at McCarthy Tétrault’s Calgary office.

“It’s hard to predict the outcome of Supreme Court constitutional cases,” especially in federalism cases, of which there are few, but it’s anticipated that the validity of the act will be upheld, says Howard.

Legislative and policy shifts in climate change environmental regimes, both federally and provincially, have all affected the energy sector.

Then and now

Twenty years ago, the focus was on quantification and verification of greenhouse gas emissions, says John Georgakopoulos, co-managing partner and a certified environmental law specialist at Willms & Shier Environmental Lawyers LLP in Toronto. Now the public policy focus is also on influencing corporate behaviour around greenhouse gas activities, he says.

“Different provinces have taken various approaches, and the reference that's going to be before the Supreme Court is going to be an interesting and pretty pivotal decision.”

The act is divided into two parts: Part 1 is administered by the Canada Revenue Agency, provides for 12 types of registrations and applies a fuel charge on 21 types of fuel and combustible waste. Part 2 is administered by Environment and Climate Change Canada and introduces an output-based pricing system for industrial facilities. It applies limits on greenhouse gas emissions from prescribed large industrial emitters, allows for emissions credits to emitters that operate within their limits and applies a charge on those who exceed the prescribed limits, says Georgakopoulos.

Across the provinces, British Columbia has had a broad-based carbon tax since 2008. Alberta eliminated its carbon levy on fuel and replaced its Specified Gas Emitters Regulation with a new Carbon Competitiveness Incentive Regulation, an output-based pricing system under which large industrial emitters of greenhouse gases must report and reduce their carbon dioxide and equivalent emissions since 2007.

Ontario and Manitoba have already phased out their use of coal for generating electricity; New Brunswick’s and Alberta's phaseouts are expected by 2030; and Nova Scotia has established a regulatory framework to transition to clean electricity from coal.

Alberta’s Technology Innovation and Emissions Reduction regulation came into force Jan. 1. Ontario’s cap-and-trade program was revoked in 2018 and replaced with a Made-in-Ontario Environment Plan that November, which includes an emission performance standard for greenhouse gas emissions but not a carbon tax. Quebec has had a cap-and-trade program since 2012.

Federally, the current government campaigned on climate change as a platform, says Rosengarten, and since coming to power in 2015, it has made legislative and policy changes to more stringently regulate climate change in Canada.

The government’s first big policy move was signing on to the Paris Agreement in 2016, which sets out the global framework for limiting global warming to 2C. Under the agreement, Canada committed to reducing greenhouse gas emissions by 30 per cent below 2005 levels by 2030.

When the federal government brought into force the Greenhouse Gas Pollution Pricing Act in 2018, it introduced to the provinces and territories a charge on fuels consumed and an output-based performance standard for industrial emitters. The GGPPA required all provinces to place a minimum price of $20 a tonne of greenhouse gas emissions by Jan. 1, 2019, which rose to $30 per tonne for 2020 and will increase again to $50 per tonne by 2022.

“The intent for the GGPPA is to apply in provinces that don't have their own regime, which sets the price on carbon, or to supplement provincial regimes,” says Rosengarten, “and it's been in effect in a number of provinces, including Ontario, until now.”

On Sept. 21, Ontario announced that the federal government had accepted that its Made-in-Ontario Emissions Performance Standards program will satisfy the federal requirements, and so Ontario’s own program would apply rather than the federal program.

“Ontario's approach does not enforce a blanket cap on emissions across Ontario and takes into consideration specific industry and facility conditions while allowing for economic growth,” the provincial government said in its news release.

“This program is . . . a more tailored program for Ontario's environment and economy because it helps us achieve emission reductions from big polluters and achieve our share of Canada's 2030 emissions reduction target without driving away business and job creators.”

In introducing its Made-in-Ontario plan to regulate industrial emitters, the Ontario government challenged, along with a number of other provinces, the federal government's ability to regulate greenhouse gas emissions via the GGPPA. In the meantime, the federal legislation had stayed in effect in Ontario.

“We'll see how that rolls out in the next little while in terms of changing from the federal program to a provincial Ontario emissions intensity-based program,” says Rosengarten.

A significant policy platform both in Alberta and federally has been to phase out coal-fired electricity generation by 2030, says Howard, creating a shift, including in investment, “in how electricity is generated and with respect to emission.”

Alberta was the first Canadian province to have a climate change policy and climate carbon market, implemented in 2008, she adds.

“Although it's gone through different iterations between governments, we have had a price on carbon and targets and limits for large emitters since that time. It started with the PC government and switched over to the NDP — they tweaked it and the new PC government again tweaked it, but . . . it’s been pretty stable. What has changed is the [anticipated] phaseout of coal-fired electricity.”

In British Columbia as well as federally, there is new environmental legislation that requires consideration of a project’s impact on climate change, says Sam Adkins, a partner at Blake Cassels & Graydon LLP in Vancouver.

Adapting to change

“On the opportunity side, how are we going to produce energy going forward?” says Adkins. “Global energy needs will increase and fossil fuels included. We have a world-leading energy sector that’s been highly innovative, world-leading Indigenous rights and governments that are committed to addressing climate change.

“If we're looking at quantifying greenhouse gas impacts for projects, that'll force companies to propose new technologies, new mitigations — whether it's carbon sinks or electrification or what have you — all of that will drive innovation,” Adkins says. “We’ve got the industry and the expertise in this country that are necessary for that transition to a low-carbon energy mix, and so I think there's a real opportunity there.”

The various policy shifts over the years — from quantifying emissions and understanding the expense of greenhouse gas emissions some 20 or so years ago and “then adding on different regulatory drivers to help incentivize greenhouse gas emission reductions in various sectors including the energy sector” — have all affected that sector by increasing investment in clean technology and transitioning to renewables, says Georgakopoulos.

“The energy sector has had to adapt and will have to continue to do so to respond to the varying policy shifts across Canada in order to combat climate change,” he says. “So, for example, in 2018, Canada committed to phasing out its coal-fired electrical plants by 2030. The shift has commenced and will continue [to] in order to reduce greenhouse gas emissions across the country.”

Howard sees government carbon policy and legislation playing into what is called “the green recovery.”

“Whether Alberta uses it . . . to market itself and . . . how it will factor into the stimulus, I think, will be an important area to watch.”

That’s true for Ontario as well, says Rosengarten. Since Ontario phased out coal-fired electricity generation years ago, “there is quite a bit of renewable energy power generation in the province” since development has been underway for some years.

Substantial renewable energy development in Alberta is on the horizon, says Howard. “There's been a lot of media coverage and attention” and predictions of a renewable energy boom.

“I don't know if I'd go that far, but [Alberta] is showing a lot of interest in renewable development.”