In 2021, there were a number of developments on climate action, which will no doubt continue to take shape in 2022 and beyond. While the Supreme Court of Canada gave the final word on the carbon tax in upholding the federal Greenhouse Gas Pollution Pricing Act, the Government of Canada continued to push forward with a combination of regulatory and incentive measures to accelerate Canada’s progress toward its net-zero emissions target, and reaffirmed its commitments in advance of COP 26. Both the federal government and the Alberta government announced significant investment in carbon capture use and storage (CCUS) developments, a critical tool in reaching those targets. While we can expect that 2022 will almost certainly be the year that a national low carbon fuel regime becomes law.
The Canadian Net-Zero Emissions Accountability Act and COP 26
In June of 2021, in advance of the COP 26 meetings and Canada’s obligation to state its 2021 National Determined Contribution under the Paris Agreement, the federal government enacted the Canadian Net-Zero Emissions Accountability Act, the first of its kind federally in Canada in setting legal requirements on the government to plan for and report on its efforts to achieve net-zero emissions.
The Canadian Net-Zero Emissions Accountability Act mandates national targets for the reduction of greenhouse gas emissions in Canada, with a net-zero emissions objective by 2050, as well as reduction plans, progress reports and assessment reports to hold the federal government accountable. At present, the act sets a 2030 target of 40-45 per cent below 2005 levels. The due dates for the minister to set the remaining GHG emissions reduction targets are as follows:
- 2035 target due by December 1, 2024
- 2040 target by December 1, 2029
- 2045 target by December 1, 2034
The Government of Canada subsequently affirmed the target as its Nationally Determined Contribution in July 2021. In advance of COP 26, the government has continued to promote a combination of regulatory and incentive measures aimed at accelerating Canada’s progress towards these ambitious targets.
Carbon capture use and storage (CCUS) developments
“World wide, carbon capture use and storage (CCUS) technologies are gaining recognition as a valuable tool in GHG emission reductions and climate action. In Canada, CCUS is expected to play a significant role in meeting net zero targets.” To that end, the federal government is developing a federal CCUS strategy that recognizes the importance of CCUS and growth of the CCUS industry as not only a climate change action but also an economic opportunity. Further, in its 2021 budget, the federal government announced a significant investment into research, development and demonstrations to advance the commercial viability of CCUS technologies as part of the Energy Innovation Program. At the same time, the Government of Alberta is investing heavily in new CCUS projects.
Carbon capture storage projects have been operating in Alberta for several years including the Alberta Carbon Trunk Line System and Shell’s Quest project, which together represent an Alberta government investment of $1.24B through 2025. In addition, new CCUS projects are being funded through a $131 million investment under the Industrial Energy Efficiency and Carbon Capture Utilization and Storage Grant Program, seven of which were announced in November. 2021 also saw a number of announcements of private investment in CCUS projects, including the planned Alberta Carbon Grid project announced in June by Pembina Pipeline Corporation and TC Energy Corporation and Shell’s planned Polaris project announced in July.
Currently Alberta’s CCUS regulatory regime is based largely on the existing oil and gas framework as amended, and includes the 2011 Carbon Sequestration Tenure Regulation. The Alberta government signalled in May 2021 that it was not contemplating changes to the existing legislation and regulations at that time, but it may in the future if necessary. Looking ahead, as the CCUS industry and technologies continue to develop and expand, we can expect additional regulation to support this growing technology.
Clean Fuel Standard
The landmark federal Clean Fuel Standard (CFS) remains at the proposed regulation stage with an expectation that the final regulations will be released in spring 2022 with a compliance start date of December.
In anticipation of the final regulations, Environment and Climate Change Canada has finally released the Life Cycle Assessment Tool, which will allow all participants in the CFS to better understand the crediting opportunities associated with various activities and the related financial returns.
While some last minute adjustments to the overall CFS program may occur, 2022 will almost certainly be the year that a national low carbon fuel regime is implemented in Canada.
GHG emissions reference cases
In March 2021, the Supreme Court of Canada released its decision in the three reference cases brought by Saskatchewan, Ontario and Alberta challenging the constitutionality of the Greenhouse Gas Pollution Pricing Act, S.C. 2018, c. 12, s. 186 (the GGPPA). In a 6-3 decision, the Supreme Court upheld the GGPPA as a valid exercise of the federal government’s power to legislate for the peace, order and good government of Canada (the POGG power). For a detailed analysis, please see our earlier article here.
In summary, the court found the true subject matter of the GGPPA as “establishing minimum national standards of GHG price stringency to reduce GHG emissions.” The court classified the GGPPA as a matter of national concern and thus subject to federal legislation under the POGG power. It found that the matter was of sufficient national concern; that there was a provincial inability to deal with the matters at the core of the GGPPA and finally that the impacts by the GGPPA on provincial jurisdiction was acceptable.
This decision provided clarity with respect to federal and provincial jurisdiction over climate policy and may have implications in future disputes in relation to division of powers in the energy space. Further, the court’s reasoning may have impacts on the decision of the Alberta Court of Appeal in relation to the Government of Alberta’s challenge to the federal Impact Assessment Act, a reference case heard by the Alberta Court of Appeal in February 2021.