In Canada, all levels of government share responsibility for the protection of the environment – federal (national), provincial/territorial (regional), municipal (local), and indigenous (over reserve lands and certain lands granted pursuant to treaty agreements).

In general, federal laws apply to projects and operations on federal lands or in relation to certain subjects within federal jurisdiction, such as fisheries, ports and federal works and undertakings (often projects crossing multiple provinces/territories – for example, interprovincial pipelines or railways). Key federal laws governing environmental protection include:

• the Canadian Environmental Protection Act 1999;
• the Fisheries Act;
• the Impact Assessment Act;
• the Migratory Birds Convention Act 1994;
• the Transportation of Dangerous Goods Act;
• the Species at Risk Act; and
• the Canadian Navigable Waters Act.

Provincial/territorial laws generally apply only to those projects or operations located within the specific province or territory. Examples of legislation includes British Columbia’s Environmental Management Act, Ontario’s Environmental Protection Act and Alberta’s Environmental Protection and Enhancement Act. Practically speaking, owing to Canada’s division of powers, most businesses will be primarily regulated by provincial or territorial environmental law rather than by federal law.

Municipalities have narrower jurisdiction to enact environmental laws within their boundaries, as – unlike provincial and federal governments, which are provided legislative authority in Canada’s constitution – municipalities are only allowed to pass by-laws where specifically authorised to do so under statute. The specific details of these powers vary by jurisdiction; however, in general, municipalities often regulate in respect of waste disposal and hazardous materials, building codes, and business licences.

Increasingly, First Nations are also taking an active role in regulating with regard to the environment on reserve lands and sometimes on lands granted pursuant to treaties with the federal and provincial/territorial governments. This jurisdiction may arise either independently or through partnerships with provincial or federal authorities (eg, via stewardship agreements).

The key federal regulatory authorities in Canada include:

• Environment and Climate Change Canada;
• Fisheries and Oceans Canada;
• the Impact Assessment Agency of Canada;
• Crown-Indigenous Relations and Northern Affairs Canada;
• Transport Canada;
• Parks Canada; and
• Natural Resources Canada.

Other key regulatory authorities exist in each province or territory – many of which will co-ordinate regulation and enforcement with their federal counterparts. This includes, for example, provincial Ministries for the environment or for the protection of wildlife, as well as regulatory agencies such as provincial impact assessment agencies and provincial enforcement agencies.

The federal and provincial regulatory bodies often co-operate with one another. In the context of impact assessments, this typically occurs through equivalency agreements or similar mechanisms. In the context of enforcement, joint inspections or investigations may occur, as well as co-ordination on prosecutions.

There are also partnerships between federal and provincial governments and First Nations across Canada.

In general, environmental assets are protected through statutory law and associated regulations. Activities that may harm those assets are typically prohibited unless authorised through a licence or permit, which may include requirements to reduce the likelihood of harm, monitor whether harm is occurring, and mitigate any harm that occurs.

Consequences for breaching environmental statutes and regulations may include compliance orders, administrative penalties, fines and even imprisonment. Many statutes also allow for creative sentencing, which can include measures customised to the particular circumstances of a case.

In general, acting outside the scope of a permit, authorisation or licence will constitute a breach of the underlying statutory scheme. As such, such actions will potentially be subject to the above-mentioned penalties, as well as the potential revocation of the permit, authorisation or licence.

Most regulatory authorities employ officers or other enforcement personnel, who are often granted the power to conduct inspections and investigations. These inspections and investigations may be routine or occur in response to suspected regulatory breaches. By way of example, a federal fisheries officer may enter and inspect a facility or vessel if they have reasonable grounds to believe that federal fishery regulations are being breached, and during this inspection may open containers, examine fish or take samples of them, conduct tests, or take copies of documents. The scope of an officer’s search powers depends on the enabling statute and in some cases search warrants will be required.

The level of enforcement for the breach of environmental laws varies according to the severity of the incident, as well as the government agency involved and the underlying statutory scheme. Regulatory authorities often prefer to seek compliance with environmental law through voluntary agreements to address and mitigate the harm caused rather than escalating enforcement mechanisms.

Environmental permits are commonly issued by federal and/or provincial/territorial governments, with the specific permit required varying based on the nature and location of the activity at issue. As part of increasing governance and stewardship over the environment, some First Nations also have their own permitting process or may have a process co-ordinated with the federal or provincial governments. Some activities will also require municipal or regional permits and authorisations. Environmental permits are generally obtained by applying to the appropriate authority with responsibility over the permitting scheme.

The same project may require multiple permits from different government authorities, including across multiple levels of government. By way of example, work on or near a fish-bearing waterway may require a permit under the federal Fisheries Act from Fisheries and Oceans Canada, as well as an authorisation from the appropriate provincial authority (eg, in British Columbia, it may also require a permit under the Water Sustainability Act). In some circumstances, the various environmental permits required for a project may be obtained through a harmonised process, but this is not always the case. Depending on the nature of the project, a federal or provincial environmental assessment (or both) may be required before permits can be issued.

Environmental permits are usually time-limited, but the duration will depend on the nature of the activity being permitted. Permits can often be renewed, but an additional regulatory process may be required to secure renewal. Permits typically contain conditions that accord with the requirements of the legislation under which they are granted.

In many cases, the applicable legislation explicitly states that environmental permits will only be granted to individuals or businesses that can show they are qualified to hold them. As an example, the federal Nuclear Safety and Control Act forbids transfers of licences unless the licensee can show that they are authorised to carry out the particular activity granted under the licence.

Some, but not all, permitting regimes will provide for appeal rights if a permit is denied or if the permit-holder is not satisfied with the permit conditions. Typically, such appeals are made to a quasi-judicial authority (often an administrative tribunal) or a member of the federal government (a minister). The decision to grant or refuse a permit may also be reviewable by the courts through an application for judicial review.

Where indigenous rights have the potential to be impacted by a permit or authorisation, the federal and provincial governments have a constitutional obligation to consult with impacted indigenous groups prior to issuance. Although this legal obligation rests with the government, consultation is often initiated by project proponents in order to avoid delays in permitting. The extent of the duty to consult has been the subject of considerable litigation in Canada and remains an area of ongoing legal development.

In general, Canada is moving towards a more proactive approach to enforcing environmental policy ‒ although this depends in large part on the specific agency responsible. Environmental prosecutions are increasingly common and many agencies publish enforcement decisions as a form of both specific and general deterrence. Penalties are often increased for repeat offenders, whereas penalties may be reduced for those who co-operate with enforcement activities and voluntarily remediate any environmental harm caused.

Most environmental permits can be transferred, but governmental consent may be required to do so. The permit transfer process can be lengthy in some circumstances and may trigger consultation obligations with impacted indigenous groups, and may depend on the manner in which the proposed acquisition is structured. Usually, a change of control will not trigger the need for governmental consents, but the language of the permit and the underlying legislation should be carefully reviewed to make that determination. In some cases, transfers may be prohibited unless the transferee can show that they are authorised to carry out the particular activity granted under the licence.

The consequences for breaching an approval or permit are set out in the governing legislation; additional consequences may also be set out in the authorisation or permit itself. Consequences can include compliance orders, suspension or revocation of the approval or permit, administrative penalties, fines and imprisonment.

See also 3.2 Breaching Protections.

The key types of liability faced by project proponents or operators in Canada for environmental damage or breaches of environmental law include monetary fines, remediation orders, the loss of environmental permits, and prosecution. Where environmental harm can be pursued through civil action (eg, with regard to contamination), there is also a risk of court-ordered damages.

Environmental legislation typically includes a provision that makes it an offence to fail to comply with the legislation. Environmental legislation also often provides that any non-compliance occurring over time constitutes a separate offence for each day the breach occurs. The result is that offenders are at risk of multiple convictions and large monetary fines if environmental breaches continue for a period of time.

Employees, agents, directors and officers may be held personally liable for environmental offences. However, this is uncommon.

There are requirements to self-report environmental incidents or damage to regulators in Canada ‒ although the specific contours of these requirements vary by statutory scheme. In general, mandatory reporting requirements may arise in relation to spills or releases of environmentally harmful substances such as oil, sewage and ozone-depleting substances, but may also apply to “near misses” where no substance is actually spilled into the environment. Larger spills or releases may also be required to be reported to the public at large.

Failure to comply with incident disclosure obligations may be an offence itself or may be used against an offender as an aggravating factor on sentencing.

Permit- and authorisation holders also often have annual reporting requirements. Failure to meet these requirements may be a breach of the permit conditions and, by extension, the underlying statute or regulation.

Liability for contaminated land typically falls to current and former landowners and/or the person responsible for the contaminating substances – not on federal or provincial governments. However, depending on the specific statutory scheme, non-owners may also be liable where they had certain types of involvement in the site or with the contamination or damage. For more detail on this, see 6.3 Types of Liability and Key Defences.

Remediation of historical environmental damage typically comes about at the direction of government or on the initiative of current landowners, who may be barred from developing a property until remediation occurs. The government may impose reporting requirements during the course of remediation, so as to ensure progress is being made and applicable standards are being met. Failing to report as required may be a violation of environmental law. See also 3.2 Breaching Protections.

Most environmental legislation in Canada is based on the “polluter pays” principle. This provides that the party causing the harm should be the one who bears the associated cost.

There are several types of liability for environmental incidents or damage in Canada. Project proponents, operators, or suppliers and transporters of products may face liability for:

• pollution or harm to the environment;
• failing to comply with specific environmental regulations or permits;
• the ownership, operation or control of contaminated sites; or
• the supply of products to contaminated sites.

A defence of due diligence is usually available to parties accused of breaching environmental legislation. The due diligence defence contains two branches: reasonable care (ie, the accused took all reasonable care to avoid the incident and it occurred in any event) and mistaken belief of fact (ie, the accused reasonably believed in a set of facts that, if true, would render the conduct innocent). Other common-law and equitable defences may be available, depending on the offence alleged. In some cases, no defence is available at all (absolute liability).

In addition, contaminated sites regimes in some Canadian jurisdictions provide for broad statutory liability for historic environmental incidents or damage. For example, in British Columbia, liable persons may include both current and former operators or owners of the contaminated land, even if that person did not cause or contribute to the contamination (though certain statutory exemptions exist). Statutory contaminated sites claims are often brought alongside claims for nuisance, negligence and/or trespass from private parties affected by contamination.

Recovery of costs associated with the remediation of contaminated sites is typically pursued through private law claims. For further details, please see 11.1 Civil Claims.

Corporate entities that damage the environment or breach environmental legislation can be held liable for the harm caused. Among other things, this can include damage caused by oil spills and sewage pollution, as well as breaches of regulations around wildlife, fisheries, the transportation of dangerous goods, the disposal of hazardous materials and contaminated sites.

Canada has environmental taxes in place, which are imposed on activities or products that have a negative impact on the environment. They are designed to limit environmentally harmful behaviour through a price incentive and are levied on the tax bases of energy, transportation, pollution and natural resources, among other things. Examples include federal and provincial fuel consumption taxes and provincial taxes on mineral use, waste management and carbon emissions. Other provisions may allow businesses to recoup costs or receive accelerated depreciation write-offs for pollution control or energy conservation equipment and machinery.

In Canada, many government programmes at both the federal and provincial levels offer incentives for companies seeking to improve their environmental performance and reduce emissions. In some cases, where compliance with new environmental obligations will require significant changes to processes or facilities, exemptions may be granted.

It is uncommon in Canada for the shareholders or the parent company of a polluting corporate entity to be held liable for the environmental damage. However, certain Canadian contaminated sites statutes contains broad liability provisions that could capture shareholders or a parent company that owns, controls or manages a contaminated piece of property. Also, in very rare circumstances, a party or government may seek permission from the court to “pierce the corporate veil” and sue the parent company or shareholders for actions taken by the subsidiary.

At a high level, there is no blanket mandatory ESG reporting in Canada. The federal financial institution authority recently mandated climate-related reporting for federally regulated banks and insurance companies, with the first reports due in 2024 and 2025 (depending on the size of the institution). Other ESG-related subjects, including corporate diversity and human rights in supply chains, are subject to mandatory reporting in some circumstances.

Environmental audits are generally not required by law in Canada, but are promoted by governments as a tool for organisations to identify compliance concerns and environmental risk. In recognition of the value of environmental audits, regulators will generally not request access to environmental audit results during the course of routine inspections, but may seek access if the regulator believes that an offence occurred.

Environmental regulators may also refer to routine inspections as “compliance audits” or similar. For more detail on this type of audit, see 4. Environmental Incidents and Permits.

Environmental legislation often allows for pursuing personal liability against directors and officers of an organisation for environmental breaches. Penalties for environmental damage or breaches of environmental law can include:

• being fined or imprisoned for the corporation’s pollution, even if the corporation has never been prosecuted or convicted;
• being fined for the corporation’s failure to obtain the necessary permits or approvals, follow required environmental processes or report spills;
• being prosecuted for failure to take all reasonable care to prevent the corporation from causing or permitting pollution;
• being heavily fined or imprisoned for the corporation’s contempt of court where there are repetitions of events that led to a previous environmental conviction; and
• being personally liable for the costs of remediating historic and current property contamination associated with any real estate that the corporation owns, controls or occupies, or formerly owned or controlled.

However, practically speaking, personal liability against directors and officers is still relatively uncommon in Canada. Historically, it has typically only been sought where the individual is seen to have engaged in morally blameworthy conduct that contributed to the breach.

Most directors and officers in Canada rely on director and officer insurance to insure them against any errors and omissions made in the course of their duties. However, the standard terms of these policies often exclude pollution liability. Given the serious consequences of potential environmental breaches, it is not uncommon for directors and officers to seek additional coverage for this risk – although such coverage may be expensive.

Directors and officers may seek further indemnification from the company itself for any liability that arises from their role in the company; however, this is of little practical utility if the company has become insolvent as a result of environmental penalties.

Most commercial general liability policies in Canada exclude pollution liability. Organisations can purchase optional pollution liability extensions, which are subject to strict exclusions, or can seek out broader environmental liability policies. These policies can provide coverage for liability arising from – among other things ‒ a sudden or gradual pollution event, waste management services, storage tanks and contractors.

It is unlikely that financial institutions or lenders would be liable for environmental damage caused by one of their clients. However, in some jurisdictions, contaminated sites legislation contains broad liability provisions that could ‒ in theory ‒ apply to a lender who owns, controls or manages a piece of property. By way of example, a lender that realises on security taken on real property assets that are contaminated may have sufficient “control” over the property to incur liability.

To protect themselves from liability risk, lenders should investigate the potential environmental liabilities inherent in an undertaking before investing and should ensure that money is allocated for meeting environmental contingencies. Further, lenders can make it a term of any lending agreement that the owner or operator of a site meets and/or exceeds any applicable environmental regulations. Finally, lenders may seek indemnities or the provision of an insurance policy naming them an additional insured in order to mitigate potential environmental liability.

For the reasons discussed in 10.1 Financial Institutions/Lender Liability, lenders should also exercise caution when realising on security where the underlying property may be contaminated.

Civil claims for compensation or other remedies can be brought through common-law causes of action, such as nuisance, negligence, trespass or loss of property value, or through statutory causes of action set out in environmental legislation.

As discussed in 6.3 Types of Liability and Key Defences, in certain Canadian jurisdictions, cost allocation for remediation of contaminated sites is dealt with through civil claims based on statutory causes of action. Such claims are often pursued alongside claims for nuisance, negligence and/or trespass.

Canadian courts of inherent jurisdiction almost always have jurisdiction to award exemplary or punitive damages. However, generally speaking, courts are unlikely to award such damages unless the conduct in question is high-handed, malicious, arbitrary or highly reprehensible. The bar for awarding punitive damages is high, yet punitive damages have been awarded for breaches of environmental responsibilities in certain Canadian jurisdictions.

Class actions are available for environment-related civil claims. However, class actions in Canada must first be “certified” by a court in order to proceed. This process ensures that the claim raises common issues and that a class proceeding is the preferred way to resolve those issues. Few environment-related cases have made it past this initial threshold.

Two appellate decisions, released in 2013 and 2014, confirmed that class action regimes are not often appropriate to remedy environmental harms: Canada (Attorney General) v MacQueen, 2013 NSCA 143 and Windsor v Canadian Pacific Railway Ltd, 2014 ABCA 108. Although environmental causes of action may seem to involve common issues among class members, proof of those claims is often an individual issue and therefore ill-suited to class-based determinations.

With regard to contaminated sites, JI Properties Inc v PPG Architectural Coatings Canada Ltd, 2015 BCCA 472 is a leading case. This appellate decision from British Columbia provides commentary on the regulatory regime in that province, the status of pre-legislation comfort letters and due diligence by the defendants, the operation of limitation periods on environmental damage, and the scope of reasonably incurred remediation costs.

In general, indemnities and other contractual arrangements can be used to transfer or apportion liability for environmental pollution or breaches of law. However, third parties – including regulators – are not likely to be bound by such agreements and are entitled to prosecute or seek compensation from the party who is liable at law. Polluters relying on such indemnities and contracts must then seek indemnification or compensation after the fact, which may involve filing a civil claim.

See 9.1 Environmental Insurance.

In Canada, most contaminated sites will be under the jurisdiction of provincial or territorial environmental authorities. In general, the federal government only has jurisdiction over federal lands (a small percentage of Canada’s total lands) or potentially in certain other areas connected to federal jurisdiction.

Contaminated sites are typically defined as areas of land where the soil, sediment, vapour or groundwater contains a prescribed substance in quantities or concentrations exceeding risk-based criteria, standards or conditions. Prescribed substances generally include hazardous substances such as sulphur, petroleum hydrocarbons, heavy metals and chlorofluorocarbons (CFCs).

As discussed in 6.3 Types of Liability and Key Defences, at a high level, Canadian law is based on the “polluter pays” principle and may impose liability both on former and current operators and owners of a site. In some jurisdictions, this is provided for in statute, which may class certain categories of individuals as being responsible for remediation and enable cost recovery for remediation among these classes. However, there is significant variation among Canadian jurisdictions on the specifics of these statutory schemes.

In general, regulatory authorities have the power to issue remediation orders to ensure remediation is carried out. This may occur if the contamination is severe or if the responsible person will not voluntarily carry out the remediation requirements. A person liable for remediating contaminated land can often seek recourse from the original polluter or former landowner. Such actions may be available in contract law, tort law, or through the above-mentioned statutory cause of action.

Often, liability for known and unknown contamination may be addressed in purchase and sale contracts. Parties seeking to rely on contractual terms to recover their costs or limit liability will need to seek a remedy through those mechanisms.

Environmental legislation in most provinces permits regulators to order current owners and operators, as well as those who formerly owned or controlled contaminated property, to carry out remediation measures. Those who are responsible for cleaning up the contaminated lands will generally engage qualified environmental professionals to oversee and carry out the remediation to ensure it meets all legal standards.

Liability is generally determined both according to the “polluter pays” principle and on a joint and several basis.

The “polluter pays” principle provides that those who pollute will generally be responsible for the costs associated with the pollution they cause. More than one person can be liable for remediation of contaminated land, with liability typically apportioned according to the degree of fault or contribution by the parties to the pollution.

In British Columbia, remediating parties may claim both litigation legal costs and legal costs incurred throughout the actual remediation of the contaminated site. However, based on the “joint and several” nature of liability, any individual defendant may be liable for the entirety of the remediation costs if they are the only extant or non-impecunious party. Particularly given the historical nature of many contaminated sites, this can practically mean that “polluter pays” gives way to a “last person standing” basis for liability.

Generally, proceedings can be brought against polluters, landowners or occupiers of land who are responsible for contamination. This can occur through statutory causes of action set out in the applicable environmental protection legislation or through common-law causes of action such as nuisance, negligence, trespass or loss of property value.

Investigations into environmental accidents are led by the responsible federal or provincial regulatory authority and will likely include site investigations, the collection of documentary evidence from those responsible, and interviews with relevant witnesses and stakeholders. Authorisation- and permit-holders generally have a duty to comply with such investigations and, where compliance is not forthcoming, many regulators also have powers to compel a person or company to provide documents or attend interviews.

Although a large part of the Canadian economy is resource-based, the country’s economy varies greatly from coast to coast (as do politics). As such, the strategies implemented to combat climate change have been highly varied. As it currently stands, a patchwork of different environmental policies are in effect across the country, with varying adherence to policies concerning carbon credits, renewable energy credits and emission standards.

Canada is a signatory to the major international climate change conventions. As a party to the Paris Agreement, Canada has committed to an economy-wide target to reduce greenhouse gas emissions by 40–45% below 2005 levels by 2030. The Canadian Net-Zero Emissions Accountability Act formalises Canada’s target to achieve net-zero emissions by 2050 and establishes a series of interim emissions reduction targets at five-year milestones towards that goal.

Although the federal government signed the Paris Agreement and has set emission targets, Canada is a federal system and both the federal and provincial levels of government have the jurisdiction to regulate matters concerning the environment. In recognition of the collaborative approach needed for progress on climate change, the federal and provincial Ministers of the Environment developed the Pan-Canadian Framework on Clean Growth and Climate Change, which was built on four pillars:

• pricing carbon pollution;
• complementary actions to reduce emissions;
• adaptation and climate resilience; and
• clean technology, innovation, and jobs.

The federal government subsequently issued a further climate plan in 2020: A Healthy Environment and a Healthy Economy. The plan builds on the efforts that are currently underway through the Pan-Canadian Framework. Furthermore, in March 2022, the federal government introduced Canada’s 2030 Emissions Reduction Plan, which provides a roadmap for the Canadian economy to achieve 40–45% emissions reductions below 2005 levels by 2030, building upon the actions outlined in Canada’s previous climate plans. In September 2022, the federal government released Canada’s Methane Strategy, which builds on the 2030 Emissions Reduction Plan by providing a pathway to achieve methane emissions reductions of 35% by 2030, compared to 2020 levels.

Canada also maintains a number of legal requirements with regard to energy efficiency. Regulations apply to a range of products, including appliances, light bulbs, heating and cooling systems, and vehicles. There are also many programmes to incentivise and support electrification, the construction of energy-efficient buildings and the development of energy-efficient industries and businesses.

In 2017, the federal government announced that provincial and territorial governments needed to implement their own carbon pricing system meeting minimum federal standards or the federal government would impose its own programme. This plan has since come into force and survived a court challenge to the Supreme Court of Canada: References re Greenhouse Gas Pollution Pricing Act, 2021 SCC 11. As a result, every jurisdiction in Canada has a price on carbon pollution, either through its own pricing system tailored to local needs or through the application of the federal pricing system. If a province or territory decides not to price pollution or proposes a system that does not meet the standards set by the federal government, the federal system or “backstop” is put in place.

In 2022, the federal government registered the Clean Fuel Regulations under the Canadian Environmental Protection Act 1999. These regulations are aimed at reducing greenhouse gas emissions in Canada by setting carbon intensity limits for fuels by fuel types and requiring fuel suppliers to lower the carbon intensity of the fuels they produce in accordance with those limits. Suppliers can maintain compliance with the established limits by participating in a credit market established by the Clean Fuel Regulations. Credits can be created by undertaking projects that reduce the carbon intensity of fuels, supplying low carbon fuels, or supplying fuel or energy to advanced vehicle technology (eg, electric or hydrogen vehicles). The carbon intensity reduction requirements under the Clean Fuel Regulations came into force on 1 July 2023.

In August 2023, the federal government released draft Clean Electricity Regulations, which – at a high level ‒ would impose an emissions cap on fossil-fuel generating units exporting to the grid. These regulations were put forward as part of the federal government’s emissions reduction plan and specifically aimed at increasing electrification and decarbonising the grid. In February 2024, the government released a “What We Heard” report and updated the draft regulations, seeking additional feedback. Final regulations are expected later in 2024.

Asbestos management in Canada is governed through both occupational health and safety legislation and environmental legislation. At the federal level, this includes statutes such as the Hazardous Products Act and the Canada Consumer Product Safety Act, as well as the Prohibition of Asbestos and Products Containing Asbestos Regulations. These regulations prohibit the import, sale and use of asbestos, as well as the manufacture, import, sale and use of products containing asbestos (with some exceptions).

The responsibility for removing or managing asbestos present in a building generally lies with the building owner. However, in some provinces, the occupier of a building (eg, a tenant or project developer) may also bear some responsibility.

In general, landowners or occupiers must conduct a pre-work assessment before commencing certain building work. Any asbestos found must be carefully managed prior to renovations or alterations. Legislation mandates that specific procedures are implemented during asbestos removal, including in relation to ventilation, waste containers and decontamination.

Asbestos was used frequently in Canadian insulation, fireproofing and construction until the 1980s. Canada was also an active producer of asbestos until 2011. As a result, Canadian exposure to asbestos has been relatively widespread and asbestos-related diseases continue to be one of the top causes of workplace death in Canada.

Despite this, asbestos litigation against employers is relatively uncommon. Canada has publicly funded healthcare and most provinces operate a mandatory workers’ compensation scheme, which means that the majority of workers injured by asbestos exposure will receive medical treatment and compensation without resorting to litigation. Where asbestos litigation has been undertaken, it has been initiated by workers’ compensation boards (the bodies responsible for administering the workers’ compensation schemes), and brought against manufacturers of asbestos products to recover the costs of paying out compensation to workers and their families.

To establish a claim for damages for asbestos exposure, a litigant must demonstrate actual physical harm or injury. However, the long latency period of asbestosis and mesothelioma means that the injury or harm may not be realised and litigation not commenced for decades. This has created challenges for Canadian courts. Litigants have often been exposed to asbestos from a variety of sources over a long period of time, making causation and the proper apportionment of liability a difficult issue.

Polychlorinated biphenyls (PCBs) refers to a group of synthetic chemicals. Owing to their persistent nature, low levels of PCBs are found in the environment and accumulate and remain in the human body for years. For several decades in the mid-20th century, PCBs were used widely as ingredients in many industrial materials. However, health concerns raised in the 1960s and 1970s and the 1988 fire and evacuation at Saint-Basile-le-Grand, Quebec eventually led to robust government regulation concerning the chemicals. PCB production in Canada has been banned since 1980; however, this ban does not include PCBs used in existing electrical applications.

The use of PCBs is governed by a complex scheme of federal and provincial legislation primarily aimed at storage, transportation and disposal. Overall, the federal PCB Regulations intend to prevent the release of PCBs into the environment and accelerate their phasing out. The regulations establish prohibitions on the release, manufacturing and use of PCBs, permitted activities involving PCBs, and end-of-use deadlines for equipment and products containing PCBs. The regulations also place limitations and prohibitions on the storage of PCBs and establish labelling and reporting requirements.

International and interprovincial PCB transportation is governed by the federal Cross-border Movement of Hazardous Waste and Hazardous Recyclable Material Regulations. These regulations reflect Canada’s commitments to international obligations, such as those arising from the Basel Convention of the Control of Transboundary Movements of Hazardous Wastes and Their Disposal. Similar regulations, such as the British Columbia Hazardous Waste Regulation, are in place at the provincial level to regulate intra-provincial storage and transportation.

One of the leading cases with regard to PCBs in Canada is R v Hydro-Quebec (1997) 3 SCR 213, 151 DLR (4th) 32. In this case, Hydro-Quebec was criminally charged for discharging PCBs into a nearby river over a certain period of time. Hydro-Quebec challenged the constitutional validly of the legislative provisions under which the charges were laid against them. The Supreme Court of Canada upheld the validity of the provisions. This decision set a meaningful precedent in Canada by clarifying the authority of the federal government to legislate and regulate toxic substances and the environment. The decision also marked an important moment in the acknowledgment and recognition of the dangerous and toxic nature of PCBs.

In Canada, the responsibility for managing and reducing waste is shared among federal, provincial, territorial and municipal governments. The federal government regulates the import and export of waste nationally, as well as the interprovincial movement of waste. The provinces and territories regulate the use and disposal of waste within their borders ‒ although, practically speaking, this power is often delegated to municipalities or districts. Both “extended producer responsibility” and “product stewardship” programmes are used to manage products at their end of life.

Whether or not a producer or consigner of waste retains liability for waste after it has been disposed of by a third party depends on the jurisdiction. In some provinces, the applicable legislation includes an automatic ownership transfer provision that is triggered once waste is accepted by an authorised waste management facility, thereby limiting the liability of producers or consigners.

In provinces where such a provision does not exist, any past or present owner or person that possessed, controlled or managed the waste may remain exposed to liability for waste after it has been disposed of – even if by a third party. However, generally speaking, some direct involvement in the release is necessary in order for the liability to crystallise. Under both schemes, producers or consigners remain liable for any damage caused while the waste was in their possession or in transport.

Producers in Canada are not generally required to take back, recycle or dispose of goods once they become waste (although there are some exceptions – for example, in British Columbia, sellers of ozone depleting substances are required to take back those substances). However, legislation across Canada is used to impose some or all of the costs of the recovery, recycling and disposal of goods on the producers of waste. These laws are intended to incentivise producers to design products that can be disposed of responsibly.

In June 2022, the federal government published the Single-Use Plastics Prohibition Regulations under the Canadian Environmental Protection Act 1999. Under these regulations, the manufacture, import, export and sale of six categories of single-use plastics will be banned by the end of 2025, including checkout bags, cutlery, and straws. The regulations adopt a staggered timeline for putting the ban into place, beginning with prohibitions on the manufacture and import of the identified plastics for sale in Canada in the initial stage (effective as of December 2022) and leading to a more total prohibition on manufacture, import, and export sales by the end of 2025. At the time of writing, this regulation is subject to an ongoing court challenge.

Waste operators are generally required to hold permits and authorisations for the waste they generate and are strictly regulated as to how they may dispose of such waste (both through their permits and authorisations, as well as through the applicable legislation). Consequences of breaching such obligations are discussed at 3.2 Breaching Protections and include:

• compliance orders;
• suspensions or revocations of permits and authorisations;
• administrative penalties;
• fines;
• and imprisonment.

There are requirements to self-report environmental incidents or damage to regulators in Canada. These requirements often apply to spills or releases of environmentally harmful substances such as oil, sewage and ozone-depleting substances, but can also apply to “near misses” where no harmful substance is actually spilled. Larger spills or releases may also need to be reported to the public at large. See also 5.2 Disclosure.

Canadian government agencies often publish environmental information on their websites. The public may also request government documents and information through access to information requests, which apply to nearly all public authorities and bodies and can compel production of a wide range of government documents.

The disclosure of environmental information in annual reports is still largely voluntary in Canada. However, under Canadian securities rules, reporting issuers (which are largely public companies) must disclose all material information, including material information about environmental and social issues. Reporting issuers may also have disclosure obligations under the policies of a particular stock exchange.

As noted in 7.5 ESG Requirements, environmental reporting is required for certain federally regulated banks and insurance institutions.

The regulation and enforcement of green finance in Canada is still in the early stages of development.

In May 2021, the government of Canada launched the Sustainable Finance Action Council (SFAC) to help lead the Canadian financial sector towards integrating sustainable finance into standard industry practice. The SFAC has a mandate to support the growth of a well-functioning sustainable finance market in Canada, in order to strengthen the mobilisation of private capital in support of Canada’s emissions reductions targets and climate adaptation and resilience goals.

On 3 March 2022, Canada’s Department of Finance released Canada’s Green Bond Framework, which was developed in accordance with the International Capital Market Association Green Bond Principles. The proceeds of green bonds issued are used to finance eligible green expenditures under categories such as clean transportation, energy efficiency, terrestrial and aquatic biodiversity, and renewable energy.

In March 2023, the SFAC issued a new taxonomy framework on transition finance and green finance, which contains ten recommendations addressing the merits, design and implementation of a green and transition finance taxonomy for Canada. The framework recommends publishing a complete and detailed taxonomy by the end of 2025.

Private green financing arrangements are also available in Canada and may be developed in accordance with various unlegislated standards.

Environmental due diligence is typically conducted on M&A, finance and property transactions in Canada. The level of due diligence required varies according to the level of risk a particular property and/or industry may present – for example, a property used as a gas station or dry cleaner generally poses a higher risk. The general trend is towards increasing environmental due diligence.

In a share sale, the assets and liabilities of the target company move to the purchaser – meaning that the purchaser will absorb any outstanding environmental liabilities for historic environmental damage or breaches of environmental law.

In an asset sale, the purchaser typically does not inherit the pre-acquisition environmental liabilities associated with the purchased assets. However, by law, the purchaser may inherit liability for the pre-existing environmental condition of the assets ‒ especially in the case of a contaminated site. A purchaser may also be liable where it takes over an ongoing situation of regulatory non-compliance.

Typically, a purchaser of Canadian shares or assets will request any of the relevant environmental studies, reports, permits and orders, key correspondence from regulatory authorities and other critical environmental documents from the vendor. A purchaser can also:

• search public registries for information regarding the target company’s environmental compliance;
• conduct interviews with senior environmental employees of the target company; and/or
• obtain an environmental audit or site assessment.

Private companies may provide Phase I and Phase II environmental site assessments, with Phase I assessments consisting of database and visual searches and Phase II assessments consisting of site inspection, sample collection and analysis, and recommendations regarding the site and potential remediation.

There are no “typical” environmental warranties, indemnities or similar provisions in a share or asset sale; the allocation of risk depends on the contract negotiated by the parties. It is common in Canadian business transactions to include representations, warranties and indemnities that will affect the allocation of environmental risk and liability. These provisions may address the state of the property, the absence of contamination, and the company’s environmental compliance status. Often, such warranties and indemnities will be time-limited.

As regards sales of real property, in some jurisdictions, provincial legislation requires that a vendor who knows or should know that the property has been used for an industrial or commercial purpose provides a site disclosure statement to a prospective purchaser. More commonly, the requirement to disclose environmental information to a purchaser is built into Canadian contracts. Robust representations and warranties regarding the property or the company’s environmental status will create liability on vendors where those statements prove untrue.

Assessing permitting is often a key issue in environmental due diligence. It is important for a purchaser to ensure that the entity being acquired has all required permits and authorisations for its operations and to understand the key terms of those permits, including any time-limited rights or obligations and expiry dates. Permitting due diligence in Canada is made more complicated by the four possible levels of government involved (federal, provincial or territorial, municipal, and – in certain cases – indigenous) – each of which may have multiple agencies issuing permits for one operation.

Permitting due diligence also requires examining the permit terms and the enabling legislation to determine if there are any transfer restrictions or requirements. These are common in Canadian law and must be adhered to for the transfer of permits to be valid.