The new strategic assessment of climate change imposes additional requirements on project ‎proponents

On July 16, 2020, the federal government published the Strategic Assessment of Climate Change (“SACC”), which will be used by the Impact Assessment Agency of Canada (the “Agency”) to evaluate the anticipated impact of a proposed project on Canada’s commitments in respect of climate change. This newly released strategic assessment establishes additional information requirements that must be complied with by proponents of “designated projects” required by regulation or ministerial designation to undergo a formal impact assessment in accordance with the federal Impact Assessment Act (“IAA”). Designated projects are those that have been determined by the Government of Canada to have the greatest potential for causing adverse environmental effects in areas of federal jurisdiction that are not easily mitigated.

Strategic assessments may be ordered by the Minister of the Environment and Climate Change to assess any current or prospective federal policy, plan, or program that is relevant to impact assessment, or any issue that is relevant to conducting impact assessments. The SACC focuses on how the Government of Canada’s commitments to combat climate change – specifically Canada’s obligations under the Paris Agreement, Canada’s 2030 target (i.e., a 30 percent reduction below 2005 levels of greenhouse gas emissions), and the goal of Canada achieving net-zero emissions by 2050 – will be incorporated into the impact assessment process.

Background to this strategic assessment

The SACC has been under development for over two years, an indication of the importance placed by the current federal government on attempting to reconcile action on climate change with the facilitation of major projects with positive economic and employment impacts. Environment and Climate Change Canada (“ECCC”) first introduced a discussion paper on July 15, 2018 outlining the overarching framework within which the strategic assessment would be conducted. After several public comment periods, stakeholder and provincial working group meetings, and the publication of terms of reference defining the scope and timing of the assessment, the ECCC released a draft strategic assessment on August 8, 2019.

The draft assessment prompted expressions of concern from several environmental advocacy groups, which viewed the assessment process as insufficiently rigorous. They commented that the strategic assessment document did not go far enough in developing a clear and robust framework for the assessment of proposed projects. The Pembina Institute and Environmental Defence Canada, in their submissions to ECCC on the draft SACC, objected to ECCC conducting the strategic assessment. In their view, an independent expert panel would have been better placed to impartially translate Canada’s climate policies and commitments into a framework that obligates proponents to provide useful climate change-related information to the Agency or review panel tasked carrying out the impact assessment. A number of environmental groups also raised concerns about the exclusion of downstream emissions from energy and industrial projects. According to these groups, omitting consideration of emissions related to the use of the end product manufactured by the project (e.g., emissions from the combustion of petroleum), the draft assessment inappropriately constrained the scope of impact assessment.  In their view, it meant the overall carbon intensity of a project would not be considered when deciding whether to permit a project to proceed. Another frequently voiced criticism of the draft assessment was that it failed to provide clarity on how the Agency and the final impact assessment decision maker (the Minister or federal cabinet) would use the information provided to them by a project proponent to determine whether the project under review “contributes or hinders” Canada’s ability to meet its emissions reduction objectives.

Many of the reservations expressed by these groups are likely to be levied against the final version of the strategic assessment as well, as it only departs slightly from the August 2019 draft assessment. Nevertheless, because the strategic assessment is an “evergreen” document that will be updated at least every five years, it is possible that some of the concerns raised by environmental groups will be addressed in future iterations of the strategic assessment.

New requirements for project proponents

Since entering into force on August 28, 2019, the IAA has required the Agency or review panel (if appointed) to consider a number of factors when evaluating an impact assessment, including “the extent to which the effects of the designated project hinder or contribute to the Government of Canada’s ability to meet its environmental obligations and its commitments in respect of climate change”. With the aim of ensuring that the Agency or review panel is able to properly assess this factor, the SACC identifies with greater precision the climate change-related information that must be collected or calculated by a proponent of a “designated project”. In particular, a proponent will be required to:

(i) quantify the greenhouse gas (“GHG”) emissions associated with its project, updating its estimates as more information becomes available;

(ii) set out all project activities that will have a negative impact on carbon sinks that store GHGs (such as forests, peatlands, and oceans);

(iii) discuss the GHG emissions associated with alternative means of carrying out the ‎project‎; and

(iv) describe the GHG mitigation measures it intends to implement, including the Best Available Technologies/Best Environmental Practices (“BAT/BEP”) proposed by the proponent to minimize direct GHG emissions from the project.

In addition to the above-mentioned information on emissions, project impacts on carbon sinks, and mitigation measures, all proponents are required to explain in their Impact Statements the risks associated with climate change that may impact their proposed projects (such as the impact of extreme weather events on project infrastructure). After identifying the current and future impacts of climate change on the project, proponents must explain the measures they propose to take to ensure the project is resilient to these impacts.

Finally, proponents of projects with a proposed lifespan beyond 2050 must provide a “credible” plan in their Impact Statement describing how the project will achieve net-zero emissions by 2050. This plan can, in addition to outlining proposed mitigation measures and offsets, describe supportive actions by the Government of Canada that the proponent believes are needed for the project to achieve the net-zero emissions target.

Emissions estimates

Three emissions estimates may be required as part of impact assessment: a net GHG emissions estimate, an emissions intensity estimate, and an upstream GHG emissions estimate. All proponents are required to provide an estimate of the maximum net GHG emissions for each phase of the project, taking into account:

• the direct emissions from the project (e.g., emissions from changes to land use, machinery and vehicle emissions, stationary combustion sources);
• emissions associated with the generation of energy purchased or acquired from third parties;
• CO₂ generated by the project that is subsequently captured and stored;
• any emissions avoided within Canada as a result of the project; and
• ooffset credits sourced from an offset project that verifiably reduces or removes GHG emissions and which is registered in a Canadian regulatory offset program.

An estimate of the annual emissions intensity of the project for each year it operates will also be required where it is possible to calculate such a figure. This estimate, which approximates how much CO₂ equivalent is produced per unit, will be compared to national and international projects of a similar scope and nature by the Agency or review panel in order to determine the effectiveness of mitigation measures proposed by the proponent.

An upstream emissions estimate will be required for projects likely to generate over a certain annual threshold of production-related emissions that will increase each decade until 2050. For 2020-2029 this threshold is set at 500 kt CO₂ equivalent/year. To put this number in context, in 2018 the emissions from energy and industrial facilities in each of PEI, Nunavut, and the Yukon were reported to be below 500 kt CO₂ eq. per year. According to ECCC’s April 2020 publication entitled “Facility greenhouse gas reporting: overview of 2018 reported emissions”, only 339 Canadian facilities in 2018 reported emissions over 100 kt.

Forthcoming guidance

The principles and objectives upon which the SACC is based will inform future guidance for the review of non-designated projects on federal lands and outside Canada under sections 82 and 83 of the IAA, respectively. The SACC also confirms that ECCC will publish technical guidance documents later in 2020 and 2021 to provide additional details about specific elements of the SACC. These guides will set out further details about:

• how to quantify net GHG emissions, upstream GHG emissions, and carbon sinks;
• GHG mitigation measures, BAT/BEP, and plans to achieve net-zero emissions by 2050; and
• climate change resilience.

Proponents who intend to construct new projects that may trigger the application of the IAA are encouraged to consider how the SACC may change their information collection obligations under the IAA and its regulations.