I had the privilege today of being asked to participate in a federal pre-budget consultation organized by Canada’s Public Policy Forum at the University of Toronto. Federal Finance Minister Bill Morneau gave a short speech but he was clearly there to listen to three expert panels on innovation, climate change, and infrastructure.
I was asked to respond to the panelists and pose a question to the Finance Minister. Here’s essentially what I said: how is the federal government going to ensure that the major infrastructure projects are not working at cross-purposes to the government’s ambitious emission reduction commitments? The Minister, likely in a wise move, abstained from responding and deferred to the panelists. I was happy to have panelists Louise Comeau, Executive Director of Climate Action Network Canada, and David Miller, CEO of WWF Canada, notionally agree with the importance of a climate test for infrastructure.
This climate test was used recently by U.S. President Obama on the Keystone XL pipeline when he rejected the project because it would significantly exacerbate the problem of carbon pollution. While it is questionable if this was the actual reason why he rejected the pipeline (the more plausible account is that he was worried of losing the environmentalist vote and his green reputation), he still used the climate test as his reason for deciding the pipeline was not in the national interest. On a related note, the company behind Keystone XL, TransCanada, has now decided to sue the United States for $15 billion in damages under Chapter 11 of NAFTA.
The Trudeau government should therefore move carefully when applying its own carbon tests. During the recent federal election campaign the Liberals pledged that new pipeline reviews would include considerations of the climate impacts from oil extraction. The problem with NAFTA and many other free trade agreements is that you can sue countries if they enact environmental legislation that makes your company less profitable. While the U.S. has a 100% record in fending off NAFTA Chapter 11 lawsuits, there is the real risk that U.S. companies could litigate Canada for having “unfair” environmental laws. In fact, this has already happened five times to Canada under NAFTA. Climate tests are, in my opinion, critically important for making strategic, coherent, and just government policy. However, they will need to be either NAFTA-proofed or trade agreements like NAFTA will need to be amended.
Beyond this, and what I failed to mention at the budget consultation this afternoon, any sort of climate test should be clear and implemented in a fair and transparent manner. Panelist and University of Ottawa Professor Nic Rivers was very skeptical that any sort of climate test for new infrastructure projects could be accurately and expeditiously calculated. I agree. Like the decision process for approval of foreign takeovers in Canada, which is anything but clear, the public interest determination process (which arguably can include a climate test) for agencies like the National Energy Board or the Canadian Environmental Assessment Agency needs to be as transparent as possible. Good thing that the Trudeau government will soon be rewriting the enabling legislation for both of these organizations.