Time to rethink how the Impact Assessment Act weighs climate concerns

Canada’s regulatory review process can do a lot of things. Policing future climate emissions doesn’t need to be one of them.

Streamlining Canada’s regulatory review process — the reviews, permits, and approvals required before a major project can go ahead — will be crucial to building clean growth projects at the speed and scale necessary to achieve the country’s climate and economic objectives. The Canadian Climate Institute has set out to explore this challenge, focusing on how to create a regulatory review system for clean growth initiatives that is both efficient enough to speed-up competitive, transition-accelerating projects and effective enough to allow for public input, meaningful engagement with Indigenous Peoples, and environmental protection.

A central question in this research is how to streamline projects that will accelerate and enable the clean energy transition — the battery plants, solar installations, lithium mines, and geothermal drilling sites that will power our future prosperity. 

As we continue to advance this research, however, the evidence is pointing to an unexpected conclusion: while reducing heat-trapping pollution from all sectors is paramount to Canada’s climate commitments and long-term competitiveness, Canada’s regulatory review process is simply not the best tool for enforcing Canada’s climate targets at the project level.   

Streamlining the regulatory review process

We recently published a series of papers identifying ways to effectively streamline the regulatory review process for clean growth projects, including harnessing the power of strategic assessments, fast-tracking certain low-impact clean energy projects, and drawing on lessons from recent permitting reforms in New York and California. All of this research focuses on how to accelerate low-carbon projects through the regulatory review process.

One challenge these papers did not address, however, is the growing regional opposition over federal authority to regulate project approvals for emissions-intensive projects, such as major energy and mining projects, that threaten Canada’s climate commitments. This political tug-of-war recently saw the Supreme Court deem parts of the 2019 Impact Assessment Act unconstitutional, and the conflict as a whole has left a cloud of uncertainty over the entire regulatory review process that threatens the build-out of all projects.

This raises a big-picture question: Is Canada expecting too much of its regulatory review system? Our research suggests case-by-case impact assessments may not be the best way to determine whether and how new projects will comply with Canada’s legislated emissions reduction pathways. Instead, overarching policies and regulations like industrial carbon pricing and the recently announced oil and gas emissions cap are much better positioned to ensure development of projects within various sectors is compatible with Canada’s climate goals.

Problems the regulatory review system can’t solve

While the regulatory reform conversation in Canada is complex and too often defined in political terms, substantive criticisms are driving some of the tension. The subjectivity and lack of strategic direction of the regulatory review system at the federal level, for example, has become a major sticking point. The Impact Assessment Act uses a set of five criteria to determine whether a project undergoing impact assessment is in the public interest, one of which is a project’s impact on Canada’s climate change commitments. Other criteria include a project’s contributions to sustainability, its adverse effects within federal jurisdiction, the appropriateness of its mitigation measures, and its impacts on Indigenous groups and the rights of Indigenous Peoples.

Various policy measures play a role in holding proposed projects accountable to these criteria and managing potential adverse impacts to ecosystems, communities, and the economy. But attaching them to the Impact Assessment Act under a“public interest” test has added an additional burden to regulatory approvals, risking projects being delayed or abandoned. 

The decision on whether projects are in the public interest or not, and under what conditions, inherently requires value judgments about how to weigh a project’s adverse effects (such as emissions, environmental degradation, or impacts on Indigenous rights and nearby communities) against its benefits (such as economic development and jobs). The recent ruling from Canada’s Supreme Court made it clear that these criteria — in their current form — are too subjective and poorly defined to ensure they stay within federal jurisdiction.

Solutions from beyond the regulatory review process

If we are correct that Canada’s regulatory system is trying to do too much, it’s worth recalling how the country got here in the first place. Canada has historically lacked consistent approaches to regulating sustainability impacts from major projects, and successive governments did not implement the policies necessary to deliver on key policy objectives — with climate as the prime example. In some cases, governments explicitly weakened environmental rules to speed up project approvals. A major overhaul of the regulatory reform system in 2018 set out to address that (and compensate for ineffectual policy in other areas) by adding to the list of considerations that factor into project decisions. But, as noted above, the recent Supreme Court ruling has the federal government revising its approach. 

If the current regulatory review system is a product of historical policy gaps, we should step back to consider what regulatory review can — and should — achieve within Canada’s broader climate policy approach. For example, can regulators and elected officials effectively determine whether a singular project’s emissions are unacceptably high? Or is that better left to broader policies that are purpose-built to keep overall emissions in line with Canada’s climate goals?  

Where possible, addressing the root cause of the policy problem is far more effective than trying to fix it through the regulatory review process—an idea that’s not new in Canada (see here, here, and here). The imperative to consider project-level emissions through Impact Assessments has shifted as Canada’s policy landscape has evolved, making it far more effective to reduce emissions using targeted policies to ensure projects align with net zero. 

Take Suncor’s proposed Base Mine expansion in Alberta. This project has been undergoing an impact assessment since 2021 with climate impacts being a major source of contention, and that assessment may not conclude anytime soon given the recent uncertainties in regulatory review. If Canada had had an oil and gas cap in place at the time the project was proposed, its climate impacts could simply have been assessed according to its ability to comply with that cap.  

The importance of climate policy 

Project-by-project regulatory approval processes are — and will always be — invaluable for averting specific environmental harms. In fact, setting high standards around public input, sustainability, and meaningful engagement with Indigenous Peoples are a boon for competitiveness as more international investors seek to align financial returns with social returns. 

When it comes to enforcing national greenhouse gas emissions reductions for emissions-intensive projects, however, regulatory review processes are the wrong tool for the right job.  

This finding underscores the importance of leveling up climate policy outside of the regulatory review system to ensure Canada’s emissions-reduction targets are met even as clean growth project approvals are streamlined. Following through with key policies such as climate-related financial disclosures, the Clean Electricity Regulations, methane regulations, and a cap on oil and gas emissions can ensure that greenhouse gas emissions are reduced through clear and predictable policy. 

Doing so could make space for a simpler and more transparent regulatory review system to accelerate the clean growth projects that will drive Canada’s energy transition. That’s good both for reducing emissions and for reaching emissions targets. It’s also critical for attracting investment and keeping Canada’s economy competitive in the global energy transition.   

Jonathan Arnold is Acting Director for Clean Growth at the Canadian Climate Institute.