With the review of the federal environmental assessment process well under way, along with the ongoing controversy over major fossil fuel infrastructure projects in Canada, a previously much neglected issue, that of climate change in EA, is starting to take center stage.
Of course, the question how the consideration of climate change implications of proposed projects should be incorporated into EA in Canada is not new. The issue had bubbled to the surface from time to time in the past, such as in the context of offshore oil and gas projects, oil sands developments, liquefied natural gas facilities, and the use of hydraulic fracturing to extract fossil fuels.
In all those situations, project EAs struggled and ultimately largely failed to integrate climate change into the process or project decisions. The unique challenges involved in incorporating climate change into EA, while clearly illustrated by the failure to adequately consider the issue in the past, have until now not received adequate attention. As a result, EA processes continue to struggle to resolve how climate change should affect whether an EA is required, what information about the climate change implications should be gathered in EA processes, and how climate change implications should factor into project decisions.
With the successful conclusion of the UN climate negotiations in Paris, its ratification by Canada and its entry into force on November 4, 2016, Canada is now committed to making all reasonable efforts to reduce and eliminate GHG emissions and to complete a transition to a GHG emission neutral society within the next few decades. EA is a critical tool to meeting Canada’s global commitments for a number of reasons. EA has become the main decision making tool for proposed major new activities, and is currently the main public forum for dialogue among proponents, government, and the public. It seems to offer the best hope of ensuring that proposed new activities are consistent with Canada long-term environmental, social and economic aspirations and commitments generally and those related to climate change specifically.
Integrating climate change into EA requires consideration of mitigation, adaptation, and the impacts not prevented through effective mitigation and adaptation efforts (sometimes referred to as loss and damage, or impacts and vulnerability to climate change). In this post, I will explore the mitigation element, and specifically the consideration of direct and indirect GHG emissions of a proposed project at three critical stages of EA, the trigger, the process, and the project decision.
With respect to climate change mitigation and the fundamental transitions required in Canada to address it effectively, the stakes are high. We are in the process of making significant decisions, for example, about our energy infrastructure for decades to come. The wrong decisions on proposed large scale energy infrastructure projects can lead to emissions being locked in for many decades, or alternatively will lead to stranded assets in the billions of dollars for project proponents plus problems for individuals, communities and economies that will become dependent on these activities. Changes in policy after project approval will risk exposing Canada to NAFTA challenges by foreign investors affected by subsequent policy decisions that affect the viability of approved projects.
A signal of the recognition of the importance of EA dealing effectively with climate change is the federal governments decision in early 2016 to implement interim requirements for the consideration of GHG in EA, while more specific law and policy direction is expected to be developed as part of the reform of the federal EA now under way. The inadequacies of these interim measures have, however, been highlighted by the ongoing battles over the various pipeline proposals for transporting oil from the Alberta oilsands to domestic and oversees markets.
Climate change is unlike most environmental impacts, and a challenge to incorporate into EA. This is due in part to three key characteristics: i. the effects of climate change are felt globally, ii. they are cumulative, and iii. the effects generally cannot be traced back directly to individual projects. Conversely, those affected by the GHG emissions of projects proposed in Canada include citizens around the world and future generations. As a result, EA practitioners can perhaps be forgiven for either ignoring climate change all together, or dismissing the climate change effects of proposed projects as insignificant. This approach, however, has contributed to the neglect of climate change, and the urgency of not only limiting, but progressively eliminating emissions.
Initial recognition of the need to consider how to integrate climate change into EA in Canada in some manner date back to 2004, when the Canadian Environmental Assessment Agency initiated a multi-jurisdictional process to develop a basic guide on the consideration of climate change in EA (CEA Agency, 2004). The guide has since been endorsed by a number of jurisdictions, but its use has not been widespread or effective.
More recently, some provinces, particularly British Columbia, Ontario, Quebec and Nova Scotia, have initiated internal efforts to develop their own guidance on climate change in EA. The federal government began reconsidering its own guidance by announcing interim measures for considering upstream GHG emissions in project EAs earlier this year, and is likely to continue this reconsideration through its EA law reform initiative. These various efforts to more effectively integrate climate change into EA are very much in their infancy, but they provide an opportunity to fix a major shortcoming of EA.
In the remainder of this post, I will share some current thoughts on three key issues that have to be resolved to effectively integrate climate change mitigation into EA. First, how should climate change mitigation affect what activities are assessed? Second, how is the climate change mitigation impact of an activity assessed during the course of an EA? Finally, how does the climate change impact of a project factor into the project decision and post decision processes?
- Climate Change and EA Triggers
When the original version of the Canadian Environmental Assessment Act (CEAA) initially came into force in 1995, it triggered the assessment of thousands of projects per year. The numbers were gradually reduced to about 1000 per year by 2010, using exclusion lists and other regulatory means to exclude projects deemed environmentally sound without assessment. In 2012, CEAA was fundamentally changed, and the number of assessments has been reduced significantly. Over the past 12 months, 16 project assessments are listed on the CEAA registry as having been initiated under the Act (http://www.ceaa.gc.ca/050/index-eng.cfm).
It seems clear, therefore, that the existing triggering process will not ensure that the thousands of new initiatives approved by federal decision makers each year are sound from a climate mitigation perspective. There have been suggestions to use GHG emission thresholds as a basis for determining what additional activities should be assessed. Other suggestions include the use of strategic and regional assessments to deal with GHG emissions from activities not covered at the project level.
Triggering needs to be designed to ensure that all activities that are not likely to assist in the transition to GHG emission neutrality are assessed before project decisions are made. Arbitrary GHG emission thresholds do not serve this purpose, as they ignore the duration of the activity and the alternatives its approval displaces. Some projects with significant short term GHG emissions may be quite compatible with a transition to GHG neutrality. Other projects, even though the direct GHG emissions are small, may nevertheless put us on a track that is incompatible with the transition to GHG emission neutrality.
The goal of ensuring that activities with the potential to hinder the transition to GHG neutrality get assessed, can be met through a combination of tools. First, from a project EA perspective, I would recommend that a project list be developed in each of the key sectors involved in the transition to GHG emission neutrality, including electricity, resource extraction, transportation, manufacturing, forestry, and agriculture. For each sector, a list of projects that warrant an assessment in light of their potential to hinder the transition should be developed. The list should be developed with a reverse onus approach, so that activities get listed unless they are demonstrated to be consistent with the transition without the need for an EA. In addition, strategic environmental assessments (SEAs) of these key sectors can serve to offer clear guidance to prospective proponents to encourage innovation to help with this transition rather than propose projects that will hinder it. Depending on the outcome of the SEAs, they can serve to shorten the list of activities to be assessed at the project level. SEAs should therefore be carried out in each sector identified. In some cases, they can be carried out at a national level. In other cases, a regional approach may be warranted in light of regional circumstances.
This strategy would work best if based on a credibly developed (and regularly updated) national climate change mitigation policy and schedule with delineated pathways. The pathways implications would then guide sectoral allocations, and implications for particular categories of projects. That would make identification of undertakings on or off the path, more feasible. In the absence of such a policy, or set of policies, EA should apply to all undertakings that might not be compatible with achieving the necessary reductions overall. That approach would add pressures on the relevant authorities to develop the needed overall plan.
- Scope of Information Gathering and Assessment
The key issues here are the scope of the information gathering component of the EA, and the nature of the assessment needed to ensure the EA offers a sound basis for decision making. If the starting point is that the EA needs to be able to quantify the direct GHG emissions of the proposed activity over its life cycle, the question then becomes what else is needed to be able to inform decision makers.
It would seem that a good starting assumption might be that the GHG emissions from the proposed activity are additional. In other words, the default conclusion would be that the life cycle direct emissions from a proposed activity are solely attributable to the proposed activity as a negative environmental effect. This would then raise the question whether there is a case to be made that the proposed activity will offset emissions under likely alternative scenarios including the no project alternative. If the proponent seeks to make such a case, additional information would be needed on the GHG emissions associated with alternatives and with the upstream and downstream GHG emissions associated with the proposed activity. Under this scenario a credible assessment of societal needs, alternative ways of meeting those needs and cumulative effect will be particularly critical. But the burden of making the argument would be on the proponent (again adding to the likelihood of proponent pressure on governments to engage in needed policy development).
A project may be responsible for an increase (or decrease) in upstream or downstream emissions independent of whether the proponent is claiming that the direct project emissions are warranted on the basis that they avoid emissions elsewhere. These upstream or downstream emissions may occur within the jurisdiction in which the assessment is carried out, or outside. A key question arises as to when the consideration of potential indirect emissions associated with a proposed activity should be included in the assessment. The potential for upstream or downstream GHG emissions implications of the project to undermine the transition to GHG emission neutrality in affected jurisdictions will have to serve as the ultimate test.
As a starting point, the default presumption should be that these broader implications are included in the information-gathering phase of a project EA so that appropriate decisions can be made at the assessment stage. With experience we may learn that this is not needed for certain types of activities. EAs should, however, always remain open to intervenors making the case that a project will have undesired consequences for Canada’s transition to GHG neutrality. This is a key function of EA, and one that distinguishes it from regulatory processes. Finally, SEAs can serve to identify more specifically situations where this broader exploration of indirect GHG emissions associated with a proposed activity is not warranted.
The next related question is how the information gathered about the proposed activity’s GHG emissions is used during the assessment phase of the EA. I have already proposed that the default should be that any GHG emission levels that would hinder the transition to GHG neutrality would preclude approval of a proposed project, and that the burden should therefore be on the proponent to demonstrate that the proposed activity actually contributes to this transition in spite of its life cycle emissions.
Such justification could be made in a number of ways, such as:
- The proposed activity (or the GHG emissions associated with the activity) has a short life span and is compatible with Canada’s short term obligations to reduce emissions.
- The emissions are necessary to build infrastructure to assist with the transition.
- The emissions are necessary to replace activities whose emissions are even higher, the proposed activity is the lowest emissions replacement, and it does not lock Canada into unnecessary future emissions.
- The emissions are being offset by investing in emissions reductions elsewhere in Canada that would not be achieved without the project induced investment.
A related issue that will require more work is the methodology for determining whether the proposed initiative will have a positive, negative or neutral effect on Canada’s global commitments. So far, I have expressed this determination in terms of Canada’s transition to GHG emission neutrality. Of course, there is no clear date in the Paris Agreement itself or in Canada’s nationally determined contributions (NDCs). What we do have are Canada’s emission reduction targets for 2020 and 2030 in combination with the quantified 2030 global emissions gap of upward of 15 Gt in combination with the long term temperature and GHG neutrality goals.
What all this means for Canada is unclear. What we do know is that Canada’s 2020 and 2030 targets are a floor, not a ceiling, and that Canada will have to contribute more. We also know that Canada is among the Parties with the highest capacity, the highest per capita emissions, the highest historical emissions and the highest potential to reduce emissions. Under any measure of equity, Canada will be expected to lead the effort to bridge the 2030 emissions gap and the global effort to reach GHG emissions neutrality. All this points to the importance of a sound policy context for GHG emissions, one that recognizes that current provincial, national and international commitments are a floor, not a ceiling, and that built into the Paris Agreement is the clear recognition that there needs to be a progression of ambition from Canada.
In short, more work is needed to turn these basic elements into a standard against which the GHG emission implications of individual projects can be measured. Federal-provincial negotiations can assist with this process, as can SEAs of key sectors that need to lead the transition to GHG emissions neutrality. In the end, there will be some basic options on how to develop the standard against which projects can be measured. One approach would be to develop national, provincial and sectoral carbon budgets (possibly with a domestic trading mechanism for provinces and sectors) for key stages in the transition, such as 2020, 2030, and 2040. Projects would then essentially have to compete against other existing and possible future activities for the limited carbon budget.
An alternative would be to use best available information to set prices for a ton of GHG emissions at 5 or ten year intervals for the life of the project that would include the social cost of carbon, and require projects to internalize this cost in demonstrating the project’s economic viability. A third option would be to require project proponents to purchase offsets (within Canada, on the assumption that the goal is still to achieve GHG emission neutrality in Canada), either for all emissions, or for any that are deemed to be in excess of the budget allocation granted. Performance standards for sectors, or based on the social need being served would be further alternatives to explore.
- Sound Decision-making
The final stage of the EA process considered briefly in this post is the decision-making stage. It is here that the information gathered and the assessment carried out is translated into decisions about whether specific proposed activities are permitted to proceed, and, if so, under what conditions. The focus here is on project EA, as the general assumption is that SEAs inform project EAs, and that while certain types of activities might get eliminated at the SEA stage (and the SEA should result in early policy decisions not to proceed with projects that are clearly not consistent with Canada’s climate goals), it is at the project EA stage that project decisions ultimately get made.
The approaches explored in the previous section with respect to information gathering and assessment suggest a range of possible scenarios at the decision making stage of the project EA. They in turn result in a broad range of possible conclusions about the proposed project’s contribution to Canada’s climate mitigation, such as:
- The project does not involve GHG emissions.
- The project involves GHG emissions that are lower than all viable alternatives.
- The project will assist Canada in meeting its climate mitigation commitments and goals without undermining other Nations’ efforts.
- The project hinders efforts to meet or exceed Canada’s 2020 and 2030 targets.
- The project hinders efforts for Canada to achieve GHG emission neutrality before 2050.
- The project involves GHG emissions that are higher than viable alternatives, but it also involves greater net benefits in other areas.
- The project is/is not economically viable once it has fully internalize the cost of its GHG emissions over the life cycle of the project.
In addition to identifying whether the project is predicted to help or hinder Canada’s efforts to mitigate climate change, it will be important to quantify the positive or negative contribution the project is predicted to make, and the risks and uncertainties associated with the predictions made in the EA. Regardless of the ultimate approach adopted, some basic principles for sound decision-making can be identified. They include the following:
- Full transparency about the project’s impact on Canada’s commitment to work with other Nations toward the long term goal of keeping global temperatures to well below 2 degrees and striving for 1.5 degrees, including:
- Canada’s 2020 commitment under the UNFCCC.
- Canada’s 2030 NDC under the Paris Agreement.
- Canada’s contribution to the global 2030 emission reduction gap of 15 GT.
- Canada’s contribution to GHG emission neutrality in Canada and globally in light of the aspiration to keep temperatures to well below 2 degrees while striving to keep them below 1.5 degrees.
- Clear rules and accountability (for applying the decision making rules) for decisions to approve projects that represent something less than Canada’s best efforts to reach its global commitments and make an equitable contribution to the global goals in the Paris Agreement, and opportunity to approve such projects only under very clearly defined and very limited circumstances.
- Decision-making criteria and full transparency about choices to allocate limited carbon budgets to approved projects while preserving the ultimate accountability for making the decision at a political level.
- Decision-making criteria to encourage principled decision making in case of conflict between climate change mitigation goals and other societal values and benefits of proposed activities, and accountability in cases where decisions are demonstrably inconsistent with decision-making principles and criteria.
- Careful and thorough consideration of all viable alternatives to any project that hinders Canada’s transition to GHG emission neutrality, and a clear and demonstrable preference for alternative ways to meet societal needs, with approval only on strict conditions that ensure minimal impact and only as a last resort under clearly defined circumstances.
- Full transparency about the GHG emissions performance of approved projects during the full life cycle of the project.
- Clear rules that hold proponents accountable for any negative GHG emission consequences of approved projects that are beyond those predicted during the course of the EA.
- Conditions for approval that preserve the rights of governments to impose more strict limits on GHG emissions of the project in the future, to require full offsetting, and to hold the proponent liable for the life cycle emissions of the project, with a view to preserving the flexibility for approved projects to contribute to the progression of ambition required under the Paris Agreement, and to prepare for possible investor challenges in case of more stringent future requirements.
Ultimately, there are many difficult choices that will have to be made at a political level, and for which decision makers will have to be accountable as part of the democratic process. The role of EA is to minimize the need for political choices by seeking mutually supportive solutions, and where difficult choices are unavoidable, identify clearly such political choices and provide clarity about the decisions being made and the implications for Canada’s climate change commitments and for Canada’s contribution to the global effort.
More thought will have to be given to how to adequately guide those responsible for the process and ultimate project decisions to ensure progress toward Canada’s climate commitments is facilitated and not hindered. Sound climate policy, rigorous and transparent SEAs and project EAs with clear guidance for decision makers are all critical elements in this regard. Only through a coordinated approach can we hope to redirect innovation toward integrated solutions that meet societal needs for energy, employment, health, education, and general wellbeing, while accelerating our transition to GHG neutrality.
Professor, Schulich School of Law
To download some of my other publications on EA and climate change, see http://ssrn.com/author=715387.