Executive summary

The second largest country in the world by area, Canada endows vast natural resources and a great biological diversity. Natural-resource based activities such as mining, fossil fuel extraction, agricultural forestry and fisheries provide for an important share of national income and exports. Canadians generally enjoy a high level of well-being, although parts of the population, particularly Indigenous peoples, lack equal opportunities and access to essential services. While Canada has decoupled a number of environmental pressures from economic growth, it remains one of the most energy- and resource- intensive economies in the OECD. Canada is the fourth largest emitter of greenhouse gases in the OECD and emissions show no sign of falling yet. Fossil fuels remain the dominant energy source. The emission of local air pollutants decreased, but outdoor air pollution continues to harm Canadians. Waste is predominantly landfilled and recycling rates are low in most provinces and territories. Pressures on biodiversity and water bodies remain high in certain areas.

Green growth

Canada has strengthened its commitment to “clean growth” and begun to build a strong policy framework for its delivery. A Federal Sustainable Development Strategy, developed every three years and involving more than 30 federal departments and agencies, promises better integration of environmental considerations into sectoral policies. The 2016 Pan-Canadian Framework for Clean Growth and Climate Change (PCF) presents Canada’s first-ever overarching plan to grow the economy, while reducing emissions and building resilience. Developed in a co-ordinated approach among federal, provincial and territorial levels, the framework aims to introduce Canada-wide carbon pricing, accelerate innovation, support clean technology and create jobs. Most components are still being put into action.

Expanding carbon pricing and the focus on clean technology and major infrastructure investments will send important signals and promise to boost innovation and domestic demand for cleaner products and environmental services. Canada files far fewer environmental patents per capita than leading OECD member countries; and its share of the global clean technology market has fallen since 2005. Yet more remains to be done on the fiscal front. Canada’s use of environmentally related taxation is far below that of other OECD member countries. Petrol and diesel taxes for road use are among the lowest in the OECD, fossil fuels used for electricity and heating remain untaxed or taxed at low rates in most jurisdictions and the federal excise tax on fuel-inefficient vehicles is an ineffective incentive to purchase low-emission vehicles. There has also been little use of economic instruments to limit water use, waste generation, or air and water pollution. Fossil fuel support has been reduced by almost half since 2004, yet a number of support measures remain, notably at the provincial level.

Environmental governance

The current government has made it a priority to enhance the engagement of Indigenous peoples in environmental decision making and improve collaboration with provinces and territories. Being a federal country, many environmental responsibilities are shared with sub-national governments. Canada has improved the effectiveness of multi-level environmental governance in the area of climate change and air quality management, for example. Further efforts are needed to manage overlapping powers and promote consistent national progress in the areas of environmental assessment, biodiversity and waste management. Canada could strengthen its regulatory practices by adopting good international practices in environmental assessment and permitting, and by more rigorously applying strategic environmental assessment on sub-national levels.

Climate change mitigation

Canada has made continual progress in decoupling greenhouse gas emissions from economic growth. However, total emissions have fallen back only slightly compared with the 2005 level, and are almost 20% above the 1990 level. Canada reduced emissions from electricity generation by 38% since 2000, much driven by the phase-out of coal-fired electricity generation in Ontario. The country’s electricity mix is already among the least carbon-intensive in the OECD, with about 80% of electricity coming from non-emitting sources (mostly hydro and nuclear). Canada is becoming a leader in carbon capture and storage, running the world’s first commercial carbon capture application to a coal-fired power plant. At the same time, emissions from domestic transport and the oil sands industry have grown steadily, effectively offsetting reductions achieved in other sectors. Together, transport and oil and gas sectors now account for half of national emissions.

Following Canada’s withdrawal from the Kyoto Protocol, climate policy has been driven largely by provinces. Alberta, British Columbia, Ontario and Quebec – the four most populous provinces – have a carbon pricing mechanism in place. The PCF constitutes Canada’s first explicit nation-wide mitigation strategy to cut emissions. Its core feature is the introduction of a federal “benchmark” carbon price of CAD 10 per tonne of CO2 as of 2018. Provinces and territories can achieve the benchmark through a carbon tax, a permit-based system or a hybrid approach. Notwithstanding the flexibility of the new approach, it will be challenging to implement. A strong accountability mechanism will be needed to track and compare progress across provinces. Beyond carbon pricing, the PCF foresees to phase out coal-generated electricity, to develop a federal clean fuel standard and to regulate methane emissions from the oil and gas industry. The latter will be critical: without a drastic decrease in the emissions intensity of the oil sands industry, the projected increase in oil production may seriously risk the achievement of Canada’s climate mitigation targets.

Urban wastewater management

Effluent from urban wastewater systems represents one of the largest sources of pollution into Canadian waters by volume. The impact on water quality and ecosystems is, however, not well-known. New contaminants emerge as an issue of concern and may require more systematic action to build adequate monitoring and management capacity. Canadians generally benefit from reliable access to, and good performance of, wastewater treatment. The condition of urban waste- and rainwater infrastructure has improved significantly over the last two decades. Yet a relatively large share of the population still relies on primary wastewater treatment, including some large metropolitan centres and many Indigenous communities.

To improve performance, governments adopted a national strategy and the first-ever federal effluent quality standards (equivalent to secondary level of treatment). A long-term strategy is needed to secure funding for system upgrades and better adapt urban wastewater management to climate change. At current reinvestment levels, it would take about 100 years to renew existing infrastructure. Most municipalities charge for wastewater services, but rates are generally too low to recover costs. Some municipalities embark in innovative urban design, for example by connecting waste- or rainwater with resource management. These innovations depend on local initiatives and are not backed by federal policy. Access of Indigenous communities to modern wastewater treatment systems improved significantly thanks to sustained financial support from the federal government. Still, more than half of wastewater systems in these communities are considered medium overall risk.