Guide to Doing Business in Canada: Environmental protection

28 minute read
20 October 2023


View full guide »

Environmental protection

Canada is an expansive country with a substantial industrial base, plentiful natural resources, extensive bodies of water and significant coastal, Arctic, forested and agricultural regions. As such it faces a wide range of potential environmental issues.

Canada's Constitution Act, 1867 divides legislative power between the federal Parliament and the provincial legislatures.

While the Constitution Act, 1867 sets out many specific areas of jurisdiction, it does not explicitly dictate who has the power to create environmental laws. As a result, Canadian courts have decided that this power is shared between the two levels of government. In the last few years, this overlapping division of powers has led to provincial constitutional challenges of federal legislation.

A government is able to enact environmental law if it falls under one of the powers listed in the Constitution Act, 1867. For example, federal environmental laws are often enacted under the federal Parliament's jurisdiction to legislate criminal law, fisheries, and peace, order and good government. Provincial environmental laws are generally premised on the provincial power to legislate property and civil rights, and on matters of a purely local nature.

Canada's three federal territories, the Northwest Territories (including the Mackenzie Valley Region and the Inuvialuit Settlement Region), Yukon and Nunavut, derive their legislative powers from land claims agreements, federal legislation and, in the cases of Yukon and the Northwest Territories, powers devolved from the federal government. The environmental laws and regulatory systems in Canada's territories are based on the unique legal and cultural frameworks of the North.

Municipal governments also play a role in Canadian environmental law. Although municipal jurisdiction is not addressed in the Constitution Act, 1867, it is defined by each province governing statute for matters concerning local government.

In addition to government-created law, environmental obligations and liabilities may be incurred pursuant to contract, common law and civil law.

  1. Federal environmental laws
  2. Provincial environmental laws
  3. Municipal measures
  4. Common law and civil law

1. Federal environmental laws

a. Canadian Environmental Protection Act, 1999

The Canadian Environmental Protection Act, 1999 (CEPA) is Canada's primary environmental regulatory statute. It establishes the federal authority to regulate a broad range of environmental concerns, ranging from toxic substances to environmental emergencies.

  1. Toxic substances

    Any substance listed in Schedule 1 of CEPA is classified as toxic and is subject to a series of specific controls. In particular, requests for samples or information on the substance can be issued by the Minister of the Environment and Climate Change. CEPA also outlines procedures for substances that are newly introduced to Canada. It is prohibited to import or manufacture quantities of any substance not listed on the Domestic Substances List above a certain volume, until that substance can be properly assessed by Environment and Climate Change Canada and Health Canada. Additionally, CEPA imposes a duty to report and a duty to take remedial action on persons who own or are in control of a spilled toxic substance. Anyone who contributes to the release of a toxic substance may also be subject to the same duties. Under CEPA, the Minister of the Environment and Climate Change is given authority to issue orders in the case of an environmental emergency.
  2. Enforcement

    A variety of enforcement powers are provided for under CEPA. Any person in breach of CEPA's provisions may face monetary penalties or, in certain cases, imprisonment. Officers and directors may be subject to prosecution if they authorize, assent to or acquiesce in the commission of an offence, or if they fail to take all reasonable measures to ensure compliance. However, alternatives to the standard prosecution process may be available through Environmental Protection Alternative Measures agreements.

    Minimum and maximum fines are doubled for subsequent convictions. A conviction is deemed to be a subsequent conviction if the offender was previously convicted of a substantially similar offence under any federal or provincial environmental or wildlife protection act. Smaller corporations are subject to lower fines than large-revenue corporations.
  3. Emissions

    The National Pollutant Release Inventory (NPRI) - as authorized by CEPA - makes the reporting of emissions mandatory where the amount of emissions is equal to, or in excess of, the reporting threshold, and where one or more of the substances emitted is included in the NPRI Substances List. Any facility required to report its emissions must submit a detailed account to Environment and Climate Change Canada. This information is made accessible to the public.
  4. Climate Change / Greenhouse Gas Emissions

    The Greenhouse Gas Pollution Pricing Act (GGPPA) implements the federal carbon pollution pricing system with minimum standards that apply in any province or territory that does not have its own, sufficiently strict carbon pricing legislation. Part 1, administered by the Canada Revenue Agency (CRA), applies a fuel charge on certain types of fuel and combustible waste. Part 2, administered by Environment and Climate Change Canada, is an output-based pricing system (OBPS) for industrial facilities. The Supreme Court of Canada heard a challenge to the GGPPA and found the Act constitutional.

    There are also several regulations under CEPA that regulate greenhouse gas emissions in certain sectors, including the Clean Fuel Regulations, which require liquid fossil fuel (gasoline and diesel) suppliers to gradually reduce the carbon intensity of the fuels they produce and sell for use in Canada.

b. Impact Assessment Act

The federal Impact Assessment Act (IAA) applies to projects that are designated in the Physical Activities Regulations (Project List) or by the federal Minister of the Environment and Climate Change, such as large projects in the energy, mining and infrastructure sectors. The IAA also applies to certain non-designated projects on federal lands and outside Canada.

On October 13, 2023, the Supreme Court of Canada issued a decision (Reference re Impact Assessment Act (2023 SCC 23)) finding the majority of the IAA is outside the jurisdiction of Parliament and therefore unconstitutional. As the SCC decision was a reference, the SCC did not strike down any IAA provisions and the current IAA remains in effect for now. However, as a result of the SCC decision, the Minister has announced that the federal government will be proposing amendments to the IAA.

Under the current IAA, designated projects are major projects that may impact areas of federal jurisdiction. The Project List focuses federal impact assessments on projects that have the most potential for adverse environmental effects in areas of federal jurisdiction.

The IAA triggers impact assessment automatically for designated projects that require a decision by the Canadian Energy Regulator or the Canadian Nuclear Safety Commission. For other projects, the IAA triggers a screening process by the Impact Assessment Agency of Canada (the Agency) to determine whether an impact assessment is required. In certain cases a review panel may be appointed and public hearings held.

Some projects may be subject to boththe IAA and provincial environmental assessment legislation - as discussed later under "provincial environmental laws." If the federal Minister of the Environment and Climate Change is satisfied that the substantive requirements of the IAA can be accomplished through a provincial assessment process, he or she may substitute the provincial process for the IAA process. For major projects that engage both the IAA and provincial environmental assessment legislation, a joint federal-provincial review panel may be established.

The IAA seeks to compel proponents to design their projects to prevent significant adverse effects. Impact assessments consider sustainability, along with the positive and negative environmental, health, social and economic impacts of designated projects, and take into account a number of factors that include a consideration of Indigenous rights, knowledge and culture.

A project will be permitted to proceed only when the Minister, or other applicable decision-maker, is satisfied that the project is not likely to cause significant adverse environmental effects - or, if such effects are likely, the governor in council then determines that they are in the public interest. Once the decision is made, a decision statement is issued, which sets out the conditions with which the proponent must comply. Failure to comply with the conditions is an offence under the IAA and can result in fines or an injunction.

c. Fisheries Act

The Fisheries Act contains provisions to ensure the proper management and control of fisheries and the conservation and protection of fish and fish habitat, including by preventing pollution. It prohibits the deposit of deleterious substances into water frequented by fish. It also prohibits carrying out work that results in the death of fish harmful alteration, disruption or destruction of fish habitat, unless the work is authorized by a permit or the regulations.

Under the Fisheries Act, the federal government exercises certain regulatory authority over water pollution and water quality. There are a number of sector-specific regulations under the Fisheries Act that establish effluent standards and impose monitoring and reporting requirements. For example, there are separate regulations directed at the mining industry, the pulp and paper industry, and large wastewater systems.

d. Transportation of Dangerous Goods Act, 1992

The shipping, handling and transportation of dangerous goods are regulated by the Transportation of Dangerous Goods Act, 1992 (TDGA), as well as provincial statutes. The TDGA creates a complete and comprehensive system of regulation. All provinces have directly adopted an identical regime with respect to intra-provincial transportation.

Nine classes of "dangerous goods," ranging from organisms to explosives, are defined in a schedule to the TDGA. The TDGA also addresses issues such as labelling requirements and emergencies, and provides a full suite of enforcement measures. Additional specific and detailed requirements can be found in the Transportation of Dangerous Goods Regulations.

e. Other federal legislation

In Canada, special-purpose legislation applies to the approval of fertilizers, pesticides, and food and drugs. The sale, manufacture, distribution, import and export of substances may be prohibited if they are not otherwise approved under the applicable legislation.

2. Provincial environmental laws

Environmental laws and their enforcement vary from province to province. Matters under provincial jurisdiction notably include:

  • Air emissions
  • Water and wastewater treatment and discharges
  • Water withdrawals
  • Waste management
  • The release of contaminants, including issues relating to contaminated lands and brownfield redevelopment
  • Pesticide use
  • Underground and above-ground storage tanks
  • Hazardous materials and residual hazardous materials management
  • The transportation of dangerous substances

Provincial environmental laws prohibit the discharge of pollutants into the environment, but the definitions of a "pollutant," a "contaminant" and the "environment" vary across the provinces.

A new emission source or facility that may impact the environment typically requires an environmental approval, which may be subject to strict conditions. Existing sources of emissions may also be subject to further controls through the issuance of administrative orders.

Canada's three federal territories, the Northwest Territories (including the Mackenzie Valley Region and the Inuvialuit Settlement Region), Yukon and Nunavut, derive their legislative powers from land claims agreements, federal legislation and, in the cases of Yukon and the Northwest Territories, powers devolved from the federal government. The environmental laws and regulatory systems in Canada's territories are based on the unique legal and cultural frameworks of the North.

a. Environmental assessment

Several provinces also have environmental assessment laws, the details of which vary from province to province. In Ontario, environmental assessment legislation primarily applies to public sector undertakings. However, significant private sector undertakings may be required to undergo a comprehensive environmental assessment in order to identify and evaluate the need for the undertaking, the alternatives to the undertaking, and alternative methods of accomplishing the undertaking.

In Québec, environmental assessment processes have been applied in the north of the province since 1975 - with the James Bay and Northern Québec Agreement - and in the south since 1980. The Environment Quality Act (EQA) sets out a rigorous process to assess the impacts of major projects on communities and the environment. Different regimes apply depending on whether any part of the project takes place on territory subject to the James Bay and Northern Québec Agreement and the Northeastern Québec Agreement, and where the process involves an active participation of the Indigenous communities living there (e.g. Crees, Inuit and Naskapis). In southern Québec, the process also favours the participation and consultation of the public through an environmental public hearing board called the Bureau d'audiences publiques sur l'environnement (BAPE).

In March 2017, the Québec Parliament adopted the Act to amend the Environment Quality Act to modernize the environmental authorization scheme and to amend other legislative provisions, in particular to reform the governance of the Green Fund. The Green Fund was replaced by the "Fond d'électrification et de changements climatiques" on November 1st, 2020. The former provisions of the EQA which govern the environmental impact assessment and review procedure were notably modified by this amendment Act. Schedule 1 of the Regulation respecting the environmental impact assessment and review of certain project, adopted in March 2018, provides a list of projects that are subject to the Quebec environmental impact assessment and review procedure.

That said, most importantly, the EQA provides that, on an exceptional basis, the Government will be able to make a project subject to the procedure even though it is not subject to it under the Regulation respecting the environmental impact assessment and review of certain project, provided the Government is of the opinion that the project involves major environmental issues, such as climate change issues. The EQA also gives the public an opportunity to submit observations to the Minister as to the issues that should be addressed by an environmental impact assessment. Furthermore, if such an assessment is considered incomplete, the Minister may declare it to be inadmissible. In addition to conferring investigation and public hearing mandates on the BAPE, the Minister may mandate the latter to hold mediation sessions and targeted consultations. The notion of frivolousness with regard to a public consultation application made to the Minister is also clarified in this new EQA.

It should be noted that while many projects are not subject to the Quebec cumbersome environmental impact assessment and review procedure, a ministerial authorization issued by the Minister of Environment, the Fight against Climate Change, Wildlife and Parks (MEFCCWP) may still be required for the project to be implemented. Ministerial authorizations are issued by the MEFCCWP pursuant to Section 22 of the EQA and contain all obligations and conditions related to project (from construction and operation to project termination).

Under Alberta and British Columbia laws, environmental assessments for a wide range of public and private sector proposals are required. These laws tend to target larger infrastructure and natural resource projects exceeding prescribed operational or other criteria.

Given Canada's division of constitutional powers, many proposals will trigger both provincial environmental assessment and federal impact assessment requirements. This dual jurisdiction is commonly addressed by provincial and federal laws intended to harmonize assessments and, when possible, facilitate the substitution of a federal impact assessment for a provincial environmental assessment and vice versa.

A fundamental feature of both provincial environmental and federal impact assessments is the consideration of constitutionally entrenched Indigenous and treaty rights. These rights differ in many ways from those exercisable by the public at large. In many assessments, Indigenous groups rely on judicial principles governing consultation with Indigenous communities, Indigenous consent respecting lands subject to Indigenous rights (including land title), and criteria governing justifiable government infringement of such rights. In certain jurisdictions, specific environmental processes have been entrenched in constitutionally protected agreements negotiated between the federal and provincial governments, and Indigenous groups - such as the James Bay and Northern Québec Agreement.

b. Environmental enforcement

A breach of provincial environmental laws may be enforced through voluntary abatement measures, administrative orders, administrative fines or prosecutions. For example, in Ontario, a repeat corporate offender may face a fine of up to $10 million for each day the offence occurs or continues. A repeat individual offender may face up to $6 million per day, plus five years less a day in prison. There may also be a forfeiture of profits gained through non-compliance and liability for cleanup costs, as well as a series of other remedies. Similarly, other provincial regimes - such as those in Québec - can rely on strong enforcement measures to sanction non-compliance of environmental laws and regulations within their jurisdiction, which include specific provisions with respect to directors' and officers' liability. Under the EQA, the Minister's powers to issue orders and intervene in other ways are also adjusted. In that regard, the Minister or the Government, as applicable, is also granted the power to limit the exercise of an activity carried on in compliance with the law or to stop the activity or make it subject to new conditions in order to remedy a situation that, on the basis of new or additional information that has become available or new or additional scientific knowledge, is considered to present a serious risk for health or the environment.

c. Contaminated sites

For land development, property sales and other decisions, provincial laws governing contaminated sites tend to be central considerations. Most provinces apply site investigation and remediation guidelines developed through various inter-provincial efforts. British Columbia's Environmental Management Act differs from many other provinces in three respects:

  • Relying less on regulators' broad discretion to apply guidelines, the Act prescribes legally binding standards for contamination (in part per million terms), investigation methodologies and remediation.
  • Remediation approvals are informed largely by recommendations by private sector "approved professionals."
  • The Act further enhances plaintiff remediation cost recovery remedies by establishing a cause of action that supplements common law remedies (and thus is analogous to the United States' Superfund law).

In Québec, the land protection and rehabilitation regime, introduced by Bill 72, entered into force in 2003. It requires mandatory site characterization study and rehabilitation work for certain events or activities, such as a change in use of land in certain circumstances and the cessation of designated activities. The process promotes transparency by requiring the publication of contamination, decontamination and use restriction notices in the land register. Municipalities are also required to maintain a list of contaminated sites within their borders.

The regime in Québec relies on qualified professionals to sign the reports that are required under the Environment Quality Act. The Land Protection and Rehabilitation Regulation determines the limit values for a range of contaminants, and defines the types of activities contemplated by the regulation (industrial/commercial/intuitional/sensitive uses). It also establishes the conditions under which groundwater quality must be monitored downstream of the lands where some of those activities take place.

The information about the existence of contaminated sites is made public through various means. In Québec, the province publishes an inventory containing information on sites that have been contaminated by industrial and commercial activities, or accidental spills, and have been brought to the authorities' attention.

It should be noted that the EQA contains measures governing the cessation of certain industrial activities and the carrying out of certain projects on a former hazardous materials elimination site. The depollution attestation applicable to municipal water treatment or management works is modified, partly in order to replace the current renewal mechanism by a more flexible system of periodic review.

d. Climate change

Climate change is a significant and current law reform issue in most Canadian provinces. In addition to the federal framework set out above, some provinces have implemented their own climate change legislation.

British Columbia began legislating greenhouse gas (GHG) emissions in 2007 and in 2008 introduced a carbon tax, which applies to the purchase or use of fossil fuel in the province. This was followed by low-carbon fuel standards implemented in 2010, and legislation to manage GHG emissions in the liquefied natural gas industry. More recently, performance standards for select industrial facilities and sectors have come into force, including greenhouse gas emissions benchmarks for liquid natural gas facilities and coal-based electricity generation operations. Concurrently, new reporting regulations require industrial operations that emit over 10,000 carbon dioxide equivalent tonnes per year to report their GHG pollution each year. To support projects that help lower GHG emissions from large industrial operations, the CleanBC Industry Fund is available to industrial operations who have to report their GHG emissions. As part of the 2023 Budget, the British Columbia will transition to an output-based carbon pricing system by 2023 to incentivize industrial emitters to reduce their GHG emissions using a performance-based system. British Columbia has also recently established infrastructure and requirements for issuing emission offset units and funded units.

Regulations adopted in Québec established a cap-and-trade system to regulate GHG emissions and meet the Québec government's GHG reduction targets. On January 1, 2013, the regulatory regime added compliance obligations for certain Québec emitters to offset their reported GHG emissions with allowances. Allowances can be acquired at inter-jurisdictional auctions, government reserve sales and from other participants in cap-and-trade programs that have excess to allowances for sale. In the case of industrial emitters other than fuel distributors, allowances are also allocated by the government at no charge, but on a declining basis. Emissions can also be offset by credits from certain government-recognized GHG reduction projects that have been validated in accordance with the protocols set by the regulations. Cap-and-trade in Québec is harmonized with the California regime, and is intended to be linked with similar cap-and-trade regimes adopted by other Canadian and U.S. jurisdictions that are members of the Western Climate Initiative.

In 2016, Alberta developed a new strategy on climate change based on recommendations put forward by the Climate Change Advisory Panel. Pursuant to this strategy, Alberta has adopted a carbon levy which is applied to heating and transportation fuels such as diesel, gasoline, natural gas and propane. Alberta's Renewable Fuels Standard requires commercial fuel producers and importers to blend renewable products into their fuels. Further, while Alberta signaled its intent to phase out pollution from coal-fired electricity generation by 2030, the provincial government recently announced that Alberta will be fully transitioned away from coal-powered electricity by the end of 2023, seven years ahead of their goal. To accomplish this goal, Alberta primarily replaced its coal electricity generation with natural gas fired power plant. As part of Alberta's transition to an output-based allocation approach for carbon pricing, the province has implemented a $30/tonne carbon price for oil sands facilities, and has legislated a maximum emissions limit of 100Mt in any year, with provisions for cogeneration and new upgrading capacity. In 2018, Alberta introduced the Carbon Competitiveness Incentive Regulation to incentivize facilities that emitted 100,000 tonnes or more of greenhouse gases by rewarding those that emit fewer greenhouse gasses compared to their peers. Using a combination of regulatory requirements, market-based programs, and investments in technology, Alberta is also on track to meet its methane emissions reduction target of 45% by 2025.

3. Municipal measures

Municipalities may regulate activities through legislation, including sewer-use bylaws, noise bylaws and property-standards bylaws. In addition, municipalities in Ontario and Québec integrate environmental approvals with planning approvals.

Some municipalities require comprehensive environmental site investigations and public notification prior to issuing certain permits. For example, before issuing a planning approval or building permit, a municipality may require verification of contamination for the subject property, and may impose a remedial plan plus financial assurance as conditions of approval.

In Québec, a municipality cannot issue a construction permit or approve a subdivision of land where the land in question is listed in the municipal registry of contaminated lands - unless the project or subdivision is consistent with an approved rehabilitation plan.

4. Common law and civil law

Common law causes of action relating to environmental matters include the torts of nuisance, negligence, strict liability and trespass. Although judicial decisions may vary, the common law principles generally apply to every common law jurisdiction in Canada.

A particular challenge in contaminated lands torts is the issue of limitation periods, which only start to run when a claim is "discovered". In Crombie Property Holdings Ltd. v. McColl-Frontenac Inc. (Taxaco Canada Limited), 2017 ONCA 15, the Ontario Court of Appeal found that knowledge of possible contamination obtained in a Part I Environmental Site Assessment may be enough to put a plaintiff on inquiry and trigger due diligence, but it does not automatically amount to knowledge of actual contamination or discovery of a claim. Suspicion of contamination can give rise to a duty of inquiry and, if a reasonable person would have discovered the existence of a claim, the limitation period will be deemed to have begun. This is relevant for those who rely on environmental investigations as part of their due diligence in a land transaction.

In Québec, which is a civil law jurisdiction, contractual and extra-contractual disputes are governed by the Civil Code of Québec. Additional opportunities for litigation exist through class-action legislation in specific provinces and through specific provisions within certain provincial legislation.

Learn more about Gowling WLG services in environmental protection »

NOT LEGAL ADVICE. Information made available on this website in any form is for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. Gowling WLG professionals will be pleased to discuss resolutions to specific legal concerns you may have.