Climate Change Regulation 2024

Last Updated July 25, 2024

Canada

Law and Practice

Authors



Blake, Cassels & Graydon LLP is one of Canada's leading and largest full-service law firms, with offices in each of the major Canadian commercial and regulatory centres (Montréal, Ottawa, Toronto, Calgary and Vancouver), and internationally in New York and London. The firm draws on the legal specialisation and resources from each office to advance the business objectives of clients in Canada and around the world. Blakes is one of very few Canadian firms with a significant and substantial environmental law practice across Canada. In addition to advising on national compliance obligations, the team has the specialised regional expertise to advise on distinct provincial environmental law requirements. The Blakes environmental group finds solutions to environmental law challenges by navigating the layers of environmental regulation, advising on environmental reviews, devising risk management strategies and resolving disputes, all while advancing clients' business objectives.

The following chapter featured in Climate Change Regulation 2023 and is awaiting update from the firm.

Canada participates in the multilateral climate change regime, and is engaged in 123 international environmental agreements and instruments. Canada signed and ratified the United Nations Framework Convention on Climate Change (the “Framework Convention”) in 1992. The primary goal of the Convention is to collectively stabilise greenhouse gas (GHG) concentrations in the atmosphere and to encourage the adoption of adaptation measures by signatories.

Canada is engaged in 29 co-operative bilateral and regional agreements regarding environmental issues, including 22 Canada-US agreements.

Regionally, Canada is party to the Canada-United States-Mexico Agreement (CUSMA), the Environment Chapter, the CUSMA parallel Environmental Cooperation Agreement (ECA) and numerous bilateral environmental co-operation treaties with countries in the Americas, including Chile, Mexico, Panama, Costa Rica, Peru, Colombia and Honduras. The North American Agreement on Environmental Cooperation (NAAEC) came into force in 1994, creating a platform for Canada, Mexico and the United States to encourage pollution prevention policies and promote compliance with environmental laws and regulations. The ECA superseded the NAAEC when it came into force in 2020, but continued many of the institutions created by the NAAEC. Canada also has several treaties and co-operative arrangements with the United States concerning shared bodies of water (eg, the Great Lakes Water Quality Agreement), endangered species and information sharing (eg, the Canada-US Agreement on Cooperation in Environmental Science and Technology).

Canada’s regional bilateral agreements allow for a certain measure of co-ordination over environmental protection and sustainability measures.

Nationally determined contributions (NDCs) are a key feature of the Paris Agreement. In July 2021, Canada updated its NDC, increasing its GHG emissions reduction target from 30% to 40–45% below 2005 levels by 2030. While Canada’s emissions reduction target is focused on domestic emissions, its NDC submission indicates an openness to supporting global mitigation efforts through internationally transferred mitigation outcomes. Canada’s NDC is primarily focused on mitigation by reducing GHG emissions, and Canada’s national clean growth and climate plan – the Pan-Canadian Framework (discussed in 1.1 Multilateral Climate Change Legal Regime, 2.2 National Climate Change Legal Regime, and 3.1 Policy/Regulatory Instruments and Spheres of Government/Sectors) – is modelled around achieving this goal.

Canada has adapted its national climate change policies in response to the UN Intergovernmental Panel on Climate Change (IPCC) assessments, changing climate science and evolving elements in international climate change regimes. In 2019, Canada’s Changing Climate Report (CCCR) was released, assessing the science underlying Canada’s changing climate, echoing the data and conclusions drawn in the IPCC’s sixth report summary for policymakers. Across the country, various municipalities and Indigenous communities have developed adaptation plans and strategies, in response to the CCCR and similar reports.

Canada has also acknowledged the significance and necessity for communication of climate-related scientific knowledge in helping devise adaptation and mitigation plans. One example is Canada’s Climate Science 2050: a national synthesis of climate change science and knowledge. Canada has also developed the Environment and Climate Change Canada Policy on Scientific Integrity to create a reliable source of scientific climate-related information and to inform government policy and decision making.

In Canada, environmental issues including climate change are regulated by both provincial and federal governments. As the environment is not specifically assigned to either level of government in the Canadian Constitution, different aspects of the environment are regulated based on other specified powers, including natural resources, fisheries, criminal law, property and “peace, order and good government”. Municipalities are not a constitutionally recognised level of government but they have delegated powers assigned from the provinces. As a result, all levels of government have enacted legislation to mitigate and adapt to climate change.

Federally, Canada enacted the Pan-Canadian Framework in 2016, establishing an umbrella framework under which federal action to mitigate climate change has been clustered (also discussed in 1.1 Multilateral Climate Change Legal Regime, 2.1 National Climate Change Policy and 3.1 Policy/Regulatory Instruments and Spheres of Government/Sectors). In 2018, Canada enacted the Greenhouse Gas Pollution Pricing Act, which among other things put a price on carbon and carbon emissions. In 2021, Canada also enacted the Canadian Net-Zero Emissions Accountability Act (“Net-Zero Act”), which enshrines its goal of net-zero GHG emissions by 2050. Provincial governments and municipalities have also adopted climate mitigation targets and legislation to achieve them. These statutes, regulations and bylaws are discussed in 3.1 Policy/Regulatory Instruments and Spheres of Government/Sectors.

Since 2015, Canada has entered into bilateral agreements with several countries pursuant to Article 6.2 of the Paris Agreement.

The Canada-France Cooperation Agenda, originally established in 2013, was renewed in 2016, with France and Canada reaffirming the 2030 Agenda for Sustainable Development and committing to assist poor and vulnerable people in achieving their emission reduction goals. This included helping developing countries and marginalised groups fight climate change (Canada-France Enhanced Cooperation Agenda). Before the renewal of the agreement in November 2015, Canada had pledged CAD2.65 billion over five years to help developing countries reduce carbon and GHG emissions (Canada’s Approach for Implementing the Paris Agreement).

In October 2016, Canada also entered into a Strategic Partnership Agreement with the European Union, in which Canada and the EU committed to creating clean growth strategies and reducing carbon emissions. Both parties agreed that immediate action needed to be taken to stabilise GHG emissions in the atmosphere, and committed to support international efforts under the United Nations Framework Convention on Climate Change (Strategic Partnership Agreement between Canada, of the One Part, and the European Union and its Member States, of the Other Part).

In February 2021, Canada and the United States announced the U.S.-Canada Partnership Roadmap, under which both jurisdictions committed to uphold the implementation of the Paris Agreement and work towards the goal of net-zero emissions by 2050.

The primary federal regulator is Environment and Climate Change Canada (ECCC), which has the power to manage federal acts and regulations that establish standards relating to environmental preservation and pollution reduction. Acts under ECCC’s control include the Canadian Environmental Protection Act 1999 (CEPA) and the Impact Assessment Act (IAA), which assesses environmental and other impacts of major projects prior to their approval. ECCC also requires and assesses data and information from owners of operators of facilities that emit specified pollutants. Fisheries and Oceans Canada regulates Canada’s oceans and waterways, while Transport Canada oversees the safe storage and transport of dangerous and hazardous goods and substances across Canada.

The Impact Assessment Agency was created in 2019 by the IAA to review proposed major projects and consider their positive and negative environmental, economic, social and health impacts. The Net-Zero Advisory Board was created in February 2021 as an independent panel made up of business, science and policy experts, and was created to provide advice to ECCC in its pursuit of achieving net-zero emissions by 2050.

Each province has its own regulators for environmental protection and enforcement. For example, in British Columbia (BC) the Ministry of Environment and Climate Change Strategy regulates the environment and climate change, and the Ministry of Energy, Mines and Petroleum Resources regulates permitting for major mineral exploration projects. In Ontario, the Ministry of Environment, Conservation and Parks regulates environmental protection while the Ministry of Energy, Northern Development and Mines regulates Ontario’s mining and energy industry.

Given the shared constitutional jurisdiction over the environment between provinces and the federal government, there is a patchwork of regulations and regulators across Canada, which have struggled to address the breadth of climate change. It can be challenging to determine which agency has power to regulate a given area, leading to potential uncertainty in both climate regulation and major project approvals.

The federal government had previously adopted a minimalist approach, and allowed provinces to advance their own climate change measures on an ad hoc basis over time. This has created technical challenges with linking provincial systems, and has increased the operational challenge of complying with different legislation.

As climate change has emerged as a key issue globally in Canada, the federal government’s introduction of federal carbon pricing standards (see 3.1 Policy/Regulatory Instruments and Spheres of Government/Sectors) has signalled a move towards a more systemic set of climate change strategies. Although the constitutionality of these policies was challenged by provinces, the Supreme Court of Canada recently upheld the federal government’s actions.

Both federal and provincial legislation governs climate change mitigation policy in Canada. Both levels of government have adopted climate goals and a series of statutes and regulations to meet them.

The federal regime is structured around the Net-Zero Act and the Pan-Canadian Framework (discussed in 1.1 Multilateral Climate Change Legal Regime, 2.1 National Climate Change Policy and 2.2 National Climate Change Legal Regime), which establish Canada’s climate goals and overall strategy. The Greenhouse Gas Pollution Pricing Act (the GGPPA) is the primary federal statute aimed at climate change mitigation. It establishes minimum standards for carbon pricing but allows provinces to enact individualised regimes that meet or exceed these minimum standards. This sort of regime was necessary to address the constitutional division of powers issues addressed in 2.4 Key Policy/Regulatory Authorities. Most provincial regimes meet the federal standards, but to the extent that they do not, the federal carbon pricing system applies.

The federal carbon pricing system comprises two parts: a fuel surcharge and an output-based pricing system. The fuel surcharge is a tax that applies to greenhouse gas-emitting fuels and combustible waste, whereas the output-based system establishes a tradeable carbon credit system for large industrial emitters.

Pursuant to the GGPPA, the federal government may create financial incentives, like the Greenhouse Gas Offset Credit System, and disincentives, like Fuel Charge Rates for Carbon Pollution, to regulate substances and activities that contribute to international air pollution.

In addition to the carbon pricing regime, Canada has adopted federal regulations to mitigate climate change. The federal Clean Fuel Regulations require gasoline and diesel providers to gradually reduce the carbon intensity of the fuel they produce and sell in Canada. These regulations establish a credit market wherein each credit represents a lifecycle emission reduction of one tonne of carbon dioxide equivalent. In general, a primary supplier must demonstrate they have complied with set carbon intensity reduction targets for their fuels each year by creating or acquiring credits and using the required number of credits toward their compliance obligation. Credits can be acquired through a credit clearing mechanism or through direct trading with other participants.

Moreover, Canada has proposed a regulatory framework to reduce methane emissions, and has promulgated Clean Electricity Regulations to incentivise electrical grid decarbonisation.

Beyond these direct attempts at climate mitigation, Canada has integrated climate change concerns into its project review process. The IAA and the Canadian Energy Regulator Act explicitly recognise the federal government’s commitment to combatting climate change, and set out climate impacts as a criterion for approving, adding conditions to or rejecting applications for major project approvals.

Legacy environmental legislation has also been updated to conform with climate change concerns. CEPA is the main federal environmental statue regulating activities that may impact the environment and contribute to climate change. It allows the federal government to collect data and create guidelines for the disposal of toxic substances that contribute to global warming. In June 2023, CEPA was amended to recognise that every Canadian has a right to a healthy environment. It is not yet clear what impact, if any, this will have on future climate change action.

Each province of Canada has its own regime for environmental protection. For example, in BC the provincial government has had a Climate Action Plan since 2008, which recognises the importance of mitigative measures. It has introduced the Climate Change Accountability Act to set provincial targets for reductions of GHG emissions in specified sectors by 2050. BC’s Greenhouse Gas Emission Reporting Regulation requires industrial operations that emit more than 10,000 tonnes of CO2e annually to report on their emissions. In legislation similar to the federal Clean Fuel Regulations, the British Columbia Renewable and Low Carbon Fuel Requirements Regulation sets minimum standards for renewable fuel content in the province and prescribes a progressive annual reduction of 30% by 2030. In addition, the Greenhouse Gas Industrial Reporting and Control Act has established a provincial emission offset regime and process for validating and verifying GHG emissions reductions.

Ontario (Canada’s most populous and industrialised province) has established emissions performance standards for large industrial emitters and a Cleaner Transportation Fuels Regulation to mandate renewable content in gasoline. It has also updated municipal planning legislation and policies to require the consideration of climate risk and adaptation.

Municipalities in Canada may also regulate limited aspects of climate change by passing by-laws. For example, the city of Toronto has adopted the TransformTO Net Zero Strategy to become net zero by 2040.

In 2022, the Canadian federal government released Canada’s National Adaptation Strategy (CNAS), which combines provincial, territorial and Indigenous perspectives to create common climate goals and foster co-ordinated action to plan for anticipated impacts of climate change. CNAS establishes adaptation measures in preparation for climate change events across five key spheres:

  • disaster resilience;
  • health and wellbeing;
  • nature and biodiversity;
  • infrastructure; and
  • economy and workers.

CNAS will be implemented through federal and provincial-level action plans. Federally, the government will streamline federal adaptation initiatives and include adaptation considerations in broader policies. The federal government will also work with the provinces and territories to create regional action plans in line with the different risks and states of adaptation across the country. Provinces and territories have jurisdiction over critical areas for achieving climate change resilience goals. Thus, provincial and territorial action plans will be key in implementing CNAS.

Indigenous nations are also developing action plans for their communities through the Indigenous Climate Leadership initiative (co-led by Crown-Indigenous Relations, Northern Affairs Canada and ECCC to identify and support Indigenous communities’ adaptation priorities).

Canada’s NDC guides CNAS’ long-term transformational goals and medium-term objectives. Short-term adaptation action plans outline climate action priorities for the next five years. These will be updated every five years to account for progress made and to keep up with the changing climate (through CNAS’ monitoring and evaluation framework).

Permits issued by ECCC take climate change adaptation into consideration because they directly relate to environment conservation. For example, permit applications for activities taking place within National Wildlife Areas require disclosure of the activity’s potential environmental impacts and mitigation measures and alternatives to the proposed activity. This constitutes adaptation by regulating the scope and extent of activities on protected lands to change human activities, halt and reverse biodiversity loss and enhance ecosystem resilience.

At the provincial level, climate impacts and adaptation are often considered as part of the permitting process, particularly in the land use sphere. Municipalities are also involved in climate adaptation/resilience initiatives; many Canadian cities have adopted Action Plans and/or created Resilience Officers to address climate change and adaptation issues.

Canada has assisted in the development of Article 6.4 of the Paris Agreement by providing submissions during COP26 to attempt to improve the operation of the article and avoid double counting. However, relatively little domestic attention has been directed towards Article 6.4, which is geared towards voluntary markets. The extent to which Canada intends to take actions pursuant to the Article 6 Rulebook remains uncertain.

Canada and its provinces have developed domestic offset systems to encourage the development of projects to reduce GHG emissions. Alberta was the first jurisdiction in North America to implement a domestic offset regime, which has been in place since July 2007. As noted in 3.1 Policy/Regulatory Instruments and Spheres of Government/Sectors, BC has also introduced a provincial emission offset regime. Quebec introduced a cap-and-trade system in 2011, which initially applied to approximately 100 different firms and is linked to California’s cap-and-trade system. In Ontario, the provincial government recently introduced a clean energy credit regime based upon the production of electricity from renewable energy.

Canada has not prohibited participation in the voluntary carbon market, and some large Canadian corporations have participated in the market. In particular, given the significant number of forests in Canada, there has been an increase in forestry carbon offset projects. In December 2022, Quebec adopted an offset protocol to allocate credits for carbon sequestration through afforestation or reforestation on private lands in Quebec. BC is also in the process of developing a carbon forest offset protocol, pursuant to its provincial regime.

The CBAM will increase the administrative burden for Canadian companies looking to export certain goods to the EU, including iron, steel, aluminium, metal by-products such as screws and bolts, cement, fertilisers, electricity and hydrogen. These companies will be required to submit a report including the estimated direct carbon density of their products, and will have to purchase CBAM certificates to offset the carbon content of their goods as there are currently no exemptions in the draft.

Canadian producers will be eligible to receive rebates on the costs of purchasing CBAM certificates as Canada has established a domestic carbon pricing scheme. However, the current minimum price of the Canadian scheme is CAD65/tonne, which is significantly below the minimum price under the CBAM of EUR85/tonne (approximately CAD123/tonne). It is not yet clear if Canada will enter into a bilateral agreement with the EU to clarify how the Canadian federal carbon pricing scheme outlined above would work with the CBAM.

The CBAM may result in Canadian exporters being able to find competitive advantages compared to countries that do not have domestic carbon pricing schemes, or whose carbon pricing rates are significantly lower than Canada’s. This could result in a growth in Canadian exports. The CBAM is also likely to increase the costs of exporting for Canadian exporters and will increase the administrative burden for exporters. The total impact of the CBAM will not be known until it becomes clear what, if any, discounts on CBAM certificates Canadian exporters will receive for the Canadian carbon pricing scheme.

The TCFD has significantly influenced public policy and regulatory actions regarding climate change liability and reporting in Canada.

In Canada, each province and territory has authority under the Canadian Constitution to introduce its own laws, regulations and rules, and there is no overarching federal securities regulator. However, the provincial regulators are all members of the Canadian Securities Administrators (CSA), which works to achieve consistency in securities rules across Canada by introducing various National Instruments. The provincial regulators usually adopt these National Instruments.

In 2021, the CSA published proposed climate-related disclosure requirements in National Instrument 51-107 Disclosure of Climate-related Matters (NI 51-107). The proposed NI 51-107 is largely consistent with the TCFD’s recommendations for disclosure and is designed to improve the comparability of the information disclosed by issuers, and to help investors make more informed investment decisions.

If passed, issuers would be required to disclose information related to the following four core TCFD recommendations:

  • governance: how the issuer’s board oversees and management assesses climate-related risks and opportunities;
  • strategy: the issuer’s short-, medium- and long-term climate-related risks and opportunities;
  • risk management: how the issuer assesses and manages climate-related risks; and
  • metrics: the metrics and targets an issuer uses to manage climate-related risks and opportunities.

Under the proposed NI 51-107, an issuer would not need to disclose TCFD recommended “scenario analysis” considering the resilience of its strategy within different climate-related scenarios, including a 2°C or lower scenario.

In March 2023, the Superintendent of Financial Institutions (OSFI) issued Guideline B-15: Climate Risk Management, which sets out OSFI’s expectations related to management of climate-related risks by Federally Regulated Financial Institutions (FRFIs). OSFI is an independent Canadian government agency that supervises over 400 FRFIs (banks and insurers). Guideline B-15 is consistent with the framework proposed by the TCFD.

Directors can be liable for environmental matters in their capacity as directors of a corporation or in their personal capacity if the company breaches a permit or general environmental law, but this is rare. Directors could be potentially responsible for environmental offences, and civil liability may be imposed by law and administrative orders.

In general, directors’ liability requires that a corporation has committed an offence, and that the director authorised, permitted or acquiesced to the offence.

Directors will not be found liable for environmental offences if they can show that they exercised appropriate due diligence. This will involve showing that they took reasonable steps to prevent the prohibited act from occurring; they are not required to take all possible steps.

Canadian securities legislation recognises any information that would reasonably be expected to have a significant effect on the market price or value of a security as material. If the omission of information would affect a reasonable investor’s decisions regarding securities in an issuer, that information is also considered material. This can include environmental information. If a corporation fails to disclose material information, provincial securities commissions can ban individuals from trading or acting as a director or officer of a public company.

There has been an increase in negative public attention towards financing and infrastructural investments for pipelines and other projects that are perceived as having negative climate change impacts.

Major projects in Canada are required to undergo environmental assessments. During that process, the government will consider the impact of the project on climate change as well as its general positive and negative environmental, economic, health and social impacts and the impact of the project on Indigenous nations. Through this process, members of the public are able to comment on, object to, bring challenges and ask questions regarding the project and its potential climate impacts. At the end of its review, the government may decline to approve a project, or approve it subject to numerous conditions. For example, the government recently approved a proposed lithium mine in Quebec subject to 271 conditions, including several relating to measures designed to reduce GHG emissions.

In addition, there have been direct protests against banks and insurance companies that have provided funding to projects perceived as having a negative impact on the climate, pushing them to divest from fossil fuel industries.

In Canada, shareholders and parent companies will not generally be liable for climate change damage or breaches of climate change law caused by entities they own.

As shareholders and corporations are separate legal entities, shareholders are not generally liable for the operations or decisions of the corporation unless they take an active role in managing the corporation. This limited liability is made explicit in federal legislation (see Section 45 of the Canadian Business Corporations Act) and in various provincial legislation (see Section 92 of the Ontario Business Corporations Act or Section 87 of the British Columbia Business Corporations Act).

Under general corporate law, the corporate veil will only be pierced to hold parent companies liable in rare circumstances. Under some environmental laws, parent companies can be found liable if they are found to “control” the actions of the subsidiary. The authors are not aware of any Canadian examples to date of a parent company or shareholder being held liable for climate damage.

ESG reporting for climate change risks is not yet specifically required under Canadian securities regulation, unless there is a material risk to the issuer. This can include a disclosure of climate change impacts. Disclosure will depend on an individual issuer's assessment of the potential impacts of climate change on their business. There is no bright-line rule.

As noted in 6.1 Task Force on Climate-Related Financial Disclosures (TCFD), the CSA is proposing the introduction of climate-related disclosure. In addition to National Instruments, the CSA provides guidance through Staff Notices regarding when information may be material and should be disclosed. There has been a number of environment and ESG specific Staff Notices in recent years as a result of Canadian investors being increasingly interested in the ESG performance of the companies in which they invest.

Staff Notice 51-333 outlines considerations for issuers when determining whether environmental information is material. These include assessing:

  • the risk of the issuer being subject to litigation regarding its climate change performance;
  • the likelihood of the issuer being affected by physical risks and damage;
  • the actual and expected impacts of current and likely environmental regulation on the issuer’s business and strategy;
  • whether the issuer’s ESG actions are impacting the issuer’s intangible assets; and
  • whether there have been legal, technological, political and scientific developments that create new material opportunities or risks for the issuer.

Staff Notice 51-358 provides further guidance to issuers on improving their disclosure of material climate change risks. It notes that issuers may wish to conduct risk assessments in accordance with various international standards to identify whether they should provide climate change-related disclosure.

In January 2022, CSA published Staff Notice 81-334 for investment funds on their disclosure practices that relate to ESG considerations.

Canadian regulators have followed the development of the International Sustainability Standard Board (ISSB) and are generally in support of establishing international standards. The proposed NI 51-107 was introduced prior to the ISSB issuing its two international standards for ESG-related disclosure:

  • IFRS S1 – General Requirements for Disclosure of Sustainability-related Financial Information; and
  • IFRS S2 – Climate-related Disclosures (collectively, the “ISSB Standards”).

However, the CSA has publicly indicated that it was reviewing the ISSB Standards when first proposed, as well as recent standards proposed by the United States Securities and Exchange Commission (SEC) and how they may interact with NI 51-107.

Although all these measures are based on the TCFD recommendations, the CSA noted that there are substantive differences between the measures. When issuing the ISSB Standards in June 2023, the ISSB expressed a desire to work with regulators to promote adoption of the ISSB Standards. The CSA is expected to continue to refine NI 51-107 to minimise differences, and to work closely with the SEC and ISSB before introducing NI 51-107.

As discussed in 6.1 Task Force on Climate-Related Financial Disclosures (TCFD), OSFI has developed Guideline B-15 to ensure that FRFIs effectively disclose and manage climate-related risks. OSFI has indicated that it intends to update Guideline B-15 as practices and standards change, and will consider incorporating the disclosure standards proposed by the ISSB.

Environmental due diligence has been a key part of M&A, finance and property transactions in Canada for many years. There has been an increased focus on the impacts of climate change in recent years, particularly for transactions involving oil and gas, power, mining and heavy industry.

Due diligence will often include consideration of a company’s ESG policies. A company’s reputation for environmental impacts can be a factor in obtaining shareholder approval for a transaction.

Generally, diligence could include compliance with emission reduction and reporting requirements, capital programmes to address climate laws and potential liabilities associated with climate change regulation and impacts, energy supply and energy transition costs.

Companies operating in Canada may also be required to obtain a variety of environmental permits from federal, provincial and local regulators. These permits may include regulations regarding air effluent, waste or hazardous waste discharge, disposal or storage of goods, the use of water and other natural resources, and carbon emissions. Most environmental permits can be transferred to a purchaser, but in some cases government consent may be required prior to completing the transaction. A purchaser will generally confirm that the seller has obtained and holds all permits required by the relevant regulators, has not violated those permits, and can transfer them to the purchaser.

In addition, purchasers will review a number of public databases to identify more information about the seller. For example, ECCC operates the National Pollutant Release Inventory, which is a registry of pollutants released to the air, water and land in Canada. It tracks more than 300 substances. Owners and operators that meet specified limits must report their emissions annually, and this information is made publicly available.

Many provincial governments also maintain records of environmental compliance, including any infractions committed by a company. These include Ontario’s Environmental Compliance Reports, British Columbia’s Natural Resource Compliance and Enforcement Database, and Alberta’s historical environmental enforcement search. These databases can provide information regarding the seller’s historical performance, and may identify potential contingent liabilities.

Due diligence will also consider whether there are any Indigenous nations in the area that could be affected by the sellers’ operations. This is most common in mining, oil and gas, and natural resource transactions, but the scope of industries that interact with Indigenous nations has increased in recent years. If there are relevant Indigenous nations, purchasers will seek information regarding the seller’s relationship with that Indigenous nation. Depending on the specifics of the transaction, purchasers may contact the Indigenous nation directly prior to the close of the transaction. The seller may have signed agreements with Indigenous nations that should be transferred to the purchaser. Depending on the terms of the agreement, either notice to or consent from the Indigenous nation may be required prior to the transfer.

The Canadian federal and provincial governments have introduced a wide variety of different tax incentives, policies and regulatory measures to support the development of different forms of renewable energy technologies.

The Canadian federal government has proposed several green-energy tax incentives to encourage the development of a green economy in Canada and reduce emission from greenhouse gases. These include a refundable Hydrogen Credit of up to 40% available to businesses investing in eligible equipment that produce hydrogen using either electrolysis or natural gas if carbon capture utilisation and storage (CCUS) is used to abate resulting emissions. There is also a 30% refundable Technology Credit available to businesses investing in:

  • electricity generation systems, including solar photovoltaic, small modular nuclear reactors, concentrated solar, wind and water (small hydro, run-of-river, wave and tidal);
  • stationary electricity storage systems that do not use fossil fuels;
  • low-carbon heat equipment, including active solar heating, air-source heat pumps and ground-source heat pumps;
  • industrial zero-emission vehicles and related charging or refuelling equipment; and
  • geothermal properties using equipment to generate electrical energy or heat energy from geothermal energy.

Similar credits have been introduced for non-emitting electricity generation systems, for the manufacture of specified industrial machinery, equipment and vehicles for extracting critical minerals, and for CCUS technologies. These tax credits also require that at least 10% of the labour in a year is performed by registered apprentices and that all workers are paid a specified minimum wage.

Many provincial governments have introduced incentives to promote the growth of clean energy. For example, Quebec has introduced a Quebec Green Hydrogen and Bioenergy Strategy 2030, which provides high-level details on how Quebec plans to increase the development of green hydrogen and bioenergy production and distribution in the province. In the short term, Quebec intends to focus on developing infrastructure to support green hydrogen production and pilot projects; in the medium term, Quebec intends to support the development of green hydrogen in priority sectors; and in the long-term after 2030, Quebec plans to provide support for large-scale green hydrogen production projects.

The Canadian federal government has recently announced a Critical Minerals Strategy to support the extraction of specified minerals that are required to construct products like solar panels, electric vehicle batteries, medical and healthcare devices, and other goods that will support a transition towards green energy. The Critical Minerals Strategy will provide a 30% tax credit to support exploration for nickel, lithium, cobalt, graphite, copper, rare earth elements, vanadium and uranium. The Canadian Strategic Innovation Fund has been provided with CAD1.6 billion to support the development of critical minerals projects through direct funding. The Canadian federal government has further announced that it will work to avoid duplication, streamline requirements and ensure early Indigenous consultation and engagement in a manner that respects the parameters of the United Nations Declaration on the Rights of Indigenous Peoples Act to assist critical projects in proceeding through the environmental assessment process.

Through the Clean Growth Hub, the federal government provides information on the numerous funding, loans, wage subsidies, collaboration opportunities and tax credits it and the provincial governments offer to support the development of clean tech. These measures include a 50% reduction in income tax rates for businesses that manufacture zero-emission technologies. The province of Alberta has created Alberta Innovates, a research and innovation agency that provides CAD286 million in annual investments to support applied research and innovation programmes, early phase development of technology, and de-risking the process of bringing promising technologies to commercialisation.

In its 2023 budget, the government of Canada allocated CAD15 billion for investment in low carbon projects. The monies will be made available to encourage technologies, businesses and supply chains involved in such carbon projects.

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Blake, Cassels & Graydon LLP is one of Canada's leading and largest full-service law firms, with offices in each of the major Canadian commercial and regulatory centres (Montréal, Ottawa, Toronto, Calgary and Vancouver), and internationally in New York and London. The firm draws on the legal specialisation and resources from each office to advance the business objectives of clients in Canada and around the world. Blakes is one of very few Canadian firms with a significant and substantial environmental law practice across Canada. In addition to advising on national compliance obligations, the team has the specialised regional expertise to advise on distinct provincial environmental law requirements. The Blakes environmental group finds solutions to environmental law challenges by navigating the layers of environmental regulation, advising on environmental reviews, devising risk management strategies and resolving disputes, all while advancing clients' business objectives.

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