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Taking on risk

Environmental regulation is not where it needs to be, if we don't want to take on growing liabilities.


Regulation is coming, eventually; and risk is increasing, now. That’s the clear message coming out of this year’s CBA Environmental, Energy and Resources Law Summit.

Kicking off last week’s conference was Scott Vaughan, former Commissioner of the Environment and Sustainable Development and current President of the International Institute for Sustainable Development, followed by Gordon McBean, Professor at the University of Western Ontario and Policy Chair at the Institute for Catastrophic Loss Reduction.

Vaughan, as former environmental watchdog for the federal government, didn’t exactly have a rosy outlook for the future of environmental regulation in Canada.

Not going to make it

For Canada to meet its commitment of avoiding the internationally-recognized temperature increase of two degrees, past which damage to the environment would likely be irreparable, Ottawa would need to curtail CO2 emissions by somewhere between 40 per cent to 70 per cent, by 2020, under 1990 levels. The Harper Government has committed to 17 per cent under 2005 levels.

Even those modest goals are likely unattainable, says Vaughan  “We’re not going to meet those goals,” he told the room.

But while the federal government figures out its course of action, lawyers will be picking up much of the slack.

Pipeline politics, Vaughan noted, have now become “symbolic” of the broader fight against climate change, meaning that court challenges and regulatory processes have muddled the entire process. Complicating matters is the difficult working relationship between development and the rights of First Nations.

Indeed, no one really agrees on the legal definition of the duty to consult and how it should shape royalties and benefit agreements. Until those points are settled, if they are ever settled, First Nations will hold a quasi-veto power over development — as is being played out over the Northern Gateway project in British Columbia.

And as the former chief environmentalist explained, some are using the legal system in a much broader way. Several cases from the past decade have tried to leverage international law to go after states that they feel haven’t respected their obligations to fight climate change. One case from 2005 involved an Inuit woman challenging the United States through the Inter-American Commission on Human Rights. Since then, various international bodies, including the United Nations Human Rights Council, recognized that climate change could infringe on human rights.

Vaughan told the plenary that the use of international soft-law mechanisms: “will only increase.”

He underlined that NIMBY — Not In My Back Yard — attitudes will prove to be a crucial motivator in whipping up political and legal action in the future.

McBean, as a former deputy minister at the Meteorological Service of Canada, underlined the specifics of just what can go wrong when climate change really gets going.

“As the ex-head of a weather service, I always had an umbrella,” McBean joked. “If I didn’t, I would look silly if it rained.”

It all fits into McBean’s message of calculating disaster risk — the intersection of the event itself, a company’s vulnerability, and its exposure. Calculating the financial and human loss from Canada’s environmental disasters over recent years — which are steadily increasing in frequency — is staggering.

Corporations could be on the hook for billions — $700 million for the Slave Lake fires, he noted, $1.7 billion for the Calgary floods, $5 billion for the Montreal ice storm. And liabilities continue to grow, McBean says, because people insist on taking on more risk.

“If someone insist on living in a flood plane, do we have a societal or legal requirement to bail them out?” He asked.

According to McBean, storm claims have been rising fast, while homeowner claims for fire damage have been dropping. That should lead Canadians towards more water-and-wind-resistant homes, he says, but that so far isn’t happening.

It has, however, led provinces — especially those along the coasts — to implement climate change mitigation plans to deal with the increasing number of storms, and the possibility of a rise in sea levels.

After Vaughan set up the inherent challenges in regulation, and McBean laid out the enormous costs and risksassociated with continued inaction, a panel of experts chimed in on just what is being done, and what more is left to do.

Time to price carbon

Gray Taylor handles emissions trading at Bennett Jones. Chris Forbes is an Assistant Deputy Minister at Environment Canada. David Sawyer works at EnviroEconomics and Duncan Rotherham is a vice-president at management firm ICF International.

The panel bounced around the current regulatory schemes on various levels of government. Ottawa, Forbes said, is taking on a sector-by-sector approach to reducing greenhouse emissions, but confessed that the government’s own targets are almost certainly unattainable.

Surprisingly, given the federal government’s aggressive opposition to the idea, Forbes noted that pricing carbon is “nominally” a good idea. But it’s a tricky endeavour, especially as the provinces try to figure it out on their own.

“In 2012 the carbon policy Lego was strewn across the floor waiting to be built. In 2013 we walked on it with bare feet,” Sawyer said.

Quebec and California are in the process of getting their cooperative carbon cap-and-trade market up and running, while British Columbia has implemented a carbon tax and, like Ontario and Manitoba, are mulling a cap-and-trade system. Alberta has priced carbon — Sawyer says the cost is, roughly, “a Timbit per barrel of oil” — and requires the funds to be diverted into a technology fund. Ontario has mostly focused on shuttering coal-fire power plants and improving fuel efficiency standards.

Rotherham noted a rising problem in Alberta’s technology fund. As it generates more investment capital, it may lack green technology vehicles to invest in. It currently stands at around $80 million, and will only increase. And given that some of the heralded technology — like carbon capture — hasn’t performed as well as expected, there is a brewing issue down the line.

Pressure from the U.S.

The conference timed itself well — this, President Barack Obama announced long-anticipated rules for coal-fired electricity plants. Taylor says the plans are a big improvement, and they leave room for some form of carbon pricing — even if it’s only applies to coal-fired plants.

Nevertheless, Taylor says it could serve as a model for the provinces. “You’re going to be able to picture this,” he says. “It makes it easier to envision how this thing could look.”

Obama’s plans are essentially the opposite of the Canada experience trying to root out the dirty power plants. Ottawa’s plan has been blasted as inadequate. But as Taylor points out, the province have picked up the slack: Ontario banned coal-fire plants, while Alberta introduced emissions standards. But it’s not a case of cooperation, he says, it’s just another example of a lack of unity from the various levels of government.

“They really do need to harmonize,” he says.

As all the panelists pointed out; equivalency is a problem.

The provinces have been trying to move towards some sort of unified language to bring their regulatory frameworks in line, as instructed under the federal Canadian Environmental Protection Act. As Taylor says, that’s remarkably difficult, but it needs to be done. Even if it’s not perfect.

“I don’t think it matters whether it’s equivalent in any sort of meaningful way, so long as the provinces and federal governments think it’s equal,” he said.

All the panelists came to essentially the same conclusion: things, right now, are stalled.