Four principles for streamlining regulatory review to accelerate Canada’s clean energy transition

The Institute has produced a series of papers on ways to streamline regulatory review for competitive, transition-accelerating clean growth projects

A well-constructed regulatory system is foundational to constructing the clean energy, critical minerals, and other clean growth projects necessary for Canada’s climate and economic ambitions. Clean growth projects need to be able to efficiently proceed through the country’s 604 federal regulations, which impose 150,569 distinct requirements. At the same time, clean growth projects also need to proceed in a way that preserves public engagement, meaningfully engages with Indigenous Peoples, and respects sustainability safeguards.

To inform progress, the Canadian Climate Institute has produced a series of papers on ways to streamline regulatory review for competitive, transition-accelerating clean growth projects. Drawing on this new research, this blog articulates four principles that should be reflected in regulatory reforms.

1. Prioritize transparency over discretion

Discretionary regulatory processes make the system more unpredictable for clean growth project proponents, which can cause delays. Greater transparency gives these proponents a clearer understanding of what to expect from the regulator, which empowers them to plan ahead. Establishing precise triggers for regulatory reviews exemplifies transparency. As explored in our scoping paper “Streamlining clean growth project approvals with strategic assessments”, strategic assessments are a promising tool for regulating impacts stemming from policies and systemic problems, but governments have implemented them with varying levels of transparency. In Canada, strategic assessments are only initiated at the government’s discretion, whereas the European Union employs a set of more formalized conditions that could trigger such reviews.

Beyond clear triggers for regulatory review, transparency extends to the processes through which regulatory reviews evaluate projects. Frameworks like the one developed in our scoping paper “Expediting Clean Electricity Projects in Canada: A framework for new fast-track permitting,” for example, delineate the specific criteria that clean energy projects must fulfill to undergo expedited regulatory review, adding a layer of predictability to the approval process. Meanwhile, as our case study “Permitting Reform for Clean Energy Projects in New York and California” shows, New York State goes so far as to give clean energy projects automatic approval if regulators exceed their time limits for evaluating projects.

2. Optimize interactions in regulatory review processes

Regulatory reviews often touch upon many different issues, with each being regulated in its own self-contained way. By reforming processes to break silos, governments can reduce and simplify interactions with clean growth project proponents, boosting efficiency and effectiveness. A concrete way to optimize regulatory review interactions is by establishing a single, centralized “one-stop shop” regulator that clean growth projects can go through. California now does this with the California Energy Commission, which handles all major wind and solar project permitting.

Furthermore, processes can be optimized around elements shared between projects to simplify interactions during the regulatory review. For instance, “Expediting Clean Energy Projects in Canada” sorts projects based on commonplace elements, like the technology used or the scale of its impacts. New York City also previously conducted a regulatory review of waterfront development broadly, which has been used to exempt conventional buildings from redundant regulatory scrutiny.

3. Commit to meaningful and early engagement

Communities can delay regulatory review if they feel like the process is neglecting their interests or the Crown’s legal duty to consult Indigenous Peoples. Regulators can anticipate and mitigate the risk of local resistance by collaboratively designing processes with communities from an early stage. A regulatory process in Nunavut showcased meaningful engagement by including steps like joint report writing, Indigenous knowledge advisory committees, and information tours for members of Indigenous communities. 

Meaningful engagement tends to involve proponents demonstrating value to communities. As of 2022, New York State and California require clean energy projects to implement benefit agreements. These agreements set the terms for how projects will tangibly benefit communities, which usually involves spending. For example, one New York solar project committed to giving US$20,000 annually to local initiatives and another will distribute US$1.25 million to be spent on local utility bills. Alternatively, projects are innovating beyond engagement by giving communities direct ownership. The Canadian utilities company Hydro One, for instance, has committed to offering 50 per cent equity ownership to First Nations in all future large scale electrical transmission projects.

4. Get ahead of the projects

Ultimately, regulatory reviews can be sluggish when they are set up to be reactive to projects of national strategic importance, rather than proactive. Regulators can be proactive by acting before a regulatory review is triggered. In Canada and Japan, nuclear waste regulators prefer engaging with communities long before a project is in the pipeline, so that stakeholders are sufficiently informed by the time decisions are made. Similarly, the Build-Ready program in New York preemptively files permits for promising sites. Upon acquiring the site, clean energy projects can then immediately start construction.

In addition to being proactive about projects, regulators can also be proactive about outcomes. The United Kingdom is exploring Environmental Outcomes Reports as a way to evaluate impacts relative to a desired outcome, rather than relative to the status quo. For instance, an Environmental Outcomes Report could evaluate whether a mine is detrimental given Indigenous reconciliation objectives. Standard regulatory reviews, meanwhile, would only evaluate whether a mine would harm current conditions, absent any greater context.

Crafting a regulatory system that accelerates clean growth

The way regulators review projects constitutes the backbone of tomorrow’s economy and will determine whether Canada succeeds in the global energy transition. Based on the Institute’s research on regulatory system design, fundamental principles for designing good systems are making them more transparent, more optimized as a whole, more engaged with the public, and more proactive. If Canada is skillful enough in its reforms, regulatory review can go from being a potential barrier to clean growth projects to being a potential boon.