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Overview (June 2009) - International Law Office

International Law Office

Environment & Climate Change - Canada

Overview (June 2009)

June 22 2009

Environmental Policy and its Enforcement
Environmental Permits
Contaminated Land
Powers of Regulators
Reporting and Disclosure Obligations
Emissions Trading and Climate Change
Environmental Insurance Liabilities
New Cases, Trends and Developments

Environmental Policy and its Enforcement

Basis and regulatory agencies
Canada is a parliamentary democracy with a federal government, 10 provinces and three territories. Territories differ from provinces in that territories have only those rights granted by the federal government and not inherent constitutional rights. A third level of government - municipalities - have no independent jurisdiction - all of their powers are granted by provincial statute. For the purposes of this Overview, the term 'province' will include territory unless otherwise noted.

The Canadian constitution dates back to Confederation in 1867 and assigns specific heads of power to either the federal government or the provincial governments. Environmental protection was never explicitly assigned and, as a consequence, today all three levels of government regulate in this area. Broadly speaking, the federal government has jurisdiction over:

  • federally owned land and undertakings;
  • fisheries and oceans;
  • shipping;
  • aviation (including airports);
  • railroads;
  • the manufacture, import and export of toxic substances;
  • interprovincial and international transportation and agreements; and
  • certain areas designated as being of national importance such as ports, security and nuclear power.

The provincial ambit of regulation extends to mining, forestry, power generation (except nuclear), natural resources and industrial emissions. Municipalities in most provinces have the delegated power to pass bylaws with respect to storm and sanitary sewer discharges, pesticide use, noxious weeds, noise and certain other nuisances. The Supreme Court of Canada has held that where more than one level of government has the authority to regulate, duplication is permissible as long as there is a possibility of dual compliance (ie, abiding by the stricter of applicable standards). In all other cases and generally speaking, federal law trumps over the others and provincial law will trump over municipal law.

The following principal federal agencies regulate environmental matters in Canada:

  • Environment Canada;
  • Department of Fisheries and Oceans;
  • Canadian Environmental Assessment Agency;
  • Transport Canada (transportation of hazardous goods, aviation and ports);
  • Natural Resources Canada (federally owned land and certain mining rights); and
  • Canadian Nuclear Safety Commission (power generation and isotope production).

Air emissions, effluent discharge, recycling and waste disposal are regulated by provincial and territorial ministries or departments of the environment. These agencies:

  • administer environmental impact assessments and issue approvals;
  • ensure compliance with provincial standards through a scheme of reporting obligations and inspections; and
  • prosecute infringements through a system of quasi-criminal prosecution.

Canada is a signatory to various multilateral environmental treaties in areas such as toxic substances, greenhouse gas emissions and species protection. Treaties entered into by the federal government become binding only if implemented by corresponding domestic legislation at the federal level. If they involve areas of strict provincial jurisdiction, an international obligation will also require ratification by each province or territory.

Enforcement approach
Enforcement of Canadian environmental law generally involves three stages:

  • voluntary abatement;
  • mandatory rectification; and
  • as a last resort, prosecution and penalties.

Both the applicable federal agencies and most provincial ministries have designated abatement and enforcement personnel. Written enforcement policies set out criteria with respect to how and when each of the three enforcement stages is to be applied. At the federal level, this is the Compliance and Enforcement Policy for the Canadian Environmental Protection Act 1999(1) and the Compliance and Enforcement Policy for the Habitat Protection and Pollution Prevention Provisions of the Fisheries Act. At provicial level, for example, in Ontario, it is the Compliance Policy - Applying Abatement and Enforcement Tools.(2) Not all provinces publish their policies online, but anyone can obtain a copy by writing to the local regulator.

Canadian regulators encourage a proactive and cooperative approach to environmental protection and it is possible in the right circumstances to obtain a grace period and present a compliance plan setting out designated plans of action and timeframes to achieve compliance. Where there is no such cooperation, environmental regulators are empowered to:

  • issue different types of mandatory administrative order (eg, cease and desist orders, clean-up orders or orders to stop a process);
  • implement specific changes to a process;
  • implement remedial or abatement measures; or
  • conduct further tests and studies.

While these orders can be appealed, they are not stayed for the duration of the appeal and immediate compliance is mandatory.

With respect to the prosecution of environmental infringements, the provinces and territories differ in their approaches. As the industrial and manufacturing centre of the country, Ontario is the most stringent. In 2005, in light of public perception that environmental laws were not properly enforced, the province increased the number of prosecutions by a factor of six, a level that has been sustained ever since. Around the same time, new legislation came into force expanding the maximum available fines and introducing minimum mandatory fines for corporations of C$25,000 per count for spills and exceedances of limits set in environmental permits. Fines of C$500,000 or more are being levied with increasing frequency. In addition, the Ontario Ministry of the Environment can issue on-the-spot administrative penalties for which no due diligence defence is available and the company bears a reverse onus of proof. Officers and directors, as well as anyone that caused or permitted the offence to occur, are liable to prosecution.

Municipalities enforce environmental bylaws through their general bylaw enforcement office.

Availability of information
Existing environmental laws and regulations are freely available on government websites. Newly proposed environmental laws and regulations are posted in draft and undergo a transparent process of stakeholder consultation, at which time any interested member of the public can submit comments. Environment Canada maintains the Canadian Environmental Protection Act Registry in which draft legislation, policy papers and other information are posted.(3)

Some provinces keep similar registries, such as the Ontario Environmental Registry.(4) Where no Internet registry exists, draft legislation and regulations are posted in a written gazette for comment. At municipal level, some municipalities post draft bylaws on their websites.

All three levels of government are subject to freedom of information legislation, pursuant to which anyone can make a written request for disclosure of government-held information. Most proposed projects are subject to an environmental assessment process, often involving extensive public and affected party consultation, including first nations consultation. In deciding whether to grant approval, regulatory officials must have regard for comments received and issues raised during this process.

An important aspect of environmental law in Canada is the constitutional duty of the federal government to consult with aboriginal communities in good faith prior to approval of certain projects. This duty of consultation is still undergoing significant jurisprudential development and courts have set aside approvals where the duty had not been adequately discharged. Although the duty officially is on government and not private proponents of a project, private proponents benefit by taking an active role in the process so as to avoid substantial delays.

Environmental Permits

Requirements and Transfers
Most provincial environmental statutes prohibit the release of any substance that can cause an 'adverse effect' upon the natural environment unless authorized by regulation or permit. As 'adverse effect' is very broadly defined and includes such things as dust, odour and noise, almost all industrial facilities require an environmental permit. A permit is also required for activities involving waste and for certain water-taking activities. Permits generally take the form of a site-wide or specific-source certificate of approvals issued by the provincial regulator, which sets maximum discharge quantities and imposes conditions and monitoring and reporting obligations. Permits for activities under federal jurisdiction (eg, nuclear power, the disturbance of fisheries waters, effluent discharge from specific industries or the import, export and inter-provincial transport of toxic substances) are issued by the federal regulators and are similarly structured and enforced.

Large undertakings involving provincial or federal land and/or government permits or financial support will typically trigger a requirement for a provincial and/or federal environmental assessment.

Permits are not on their face transferable. However, most regulators demonstrate a willingness to expedite the transfer process (such as might occur during an acquisition) instead of requiring a brand new application, as long as the responsible technical personnel and actual operations do not change. However, occasionally the regulator will require new permit applications upon a change of ownership or control, or will impose additional conditions on existing permits (including financial assurance ones).

Appeal rights
Appeal rights are contained in the various environmental statutes and vary in scope. In Ontario, the refusal to grant a permit can be appealed to the Environmental Review Tribunal, a designated quasi-judicial tribunal. In other provinces, appeals are made to the regulator, which may or may not refer the matter to a delegated tribunal. Regulators are generally shown some deference because of their technical expertise, although a number of appeals are generally successful.

Affected third parties are being granted increased rights of appeal in this area. These rights have been frequently invoked by those who oppose the granting of a permit, particularly local residents or environmental interest groups. In Ontario, for example, a statutory Environmental Bill of Rights can be used as the basis for third-party appeals.

Under certain conditions, aggrieved parties may also petition a court to review the regulator's decision. However, such an appeal is generally limited to mistakes of law, jurisdictional challenges (eg, a provincial regulator making a decision with respect to a federal undertaking) or a denial of procedural fairness.

Environmental audits
Both provincial and federal regulators may require an environmental assessment for a project to be granted an environmental permit.

Federal environmental assessments take place pursuant to the Canadian Environmental Assessment Act and can be triggered:

  • if a federal agency is the proponent of the project;
  • if a federal agency is providing any funding for the project; or
  • where the project involves access rights to or a sale of federal land.

In addition, any requirement for a federal permit can trigger a federal environmental assessment.

Some examples are permits with respect to national parks, migratory birds, aviation, inter-provincial transportation or transmission lines and navigable waters. Private projects usually only trigger a federal environmental assessment through the permit requirement. For example, a privately funded wind farm project on privately owned land could trigger the requirement if it lies within the path of a migratory bird species, even if there is otherwise no federal involvement in the project.

Each province has its own environmental assessment statute for provincial environmental assessments. In most provinces, these allow for either an expedited class environmental assessment or a full environmental assessment. A full environmental assessment involves:

  • extensive public consultation;
  • the development and publication for public review of terms of reference for the assessment; and
  • significant environmental studies on a wide range of topics (eg, geotechnical, endangered species, air dispersion and noise).

All these can delay a project for several years or stop it in its tracks.

Class environmental assessments are available for certain designated types of project for which the issues are always similar. For example, in Ontario, class environmental assessments are available for such projects as minor transmission lines, municipal developments and certain public transit projects.

The requirement for a federal environmental assessment does not obviate the need for a provincial one. However, there are a number of harmonization agreements between the federal and provincial governments allowing either the federal or provincial regulator to take the lead with respect to the conduct of an environmental assessment and avoid unnecessary duplication. Environmental audits are not required by law, but are voluntarily conducted by industries to determine non-compliance. They may be required by potential lenders and purchasers or by the regulator as part of an inspection. In order to encourage the use of audits, some regulators have policies in place that state that a voluntary environmental audit conducted by a polluter will not be used as evidence in a prosecution. The best way of protecting the results of such audits is to ensure that they are conducted under solicitor and client privilege.

Violation of permits
In addition to on-the-spot administrative control or stop orders, the laying of a quasi-criminal charge in connection with a breach of statute is available. Violation of the terms of a permit is an offence punishable by a significant fine or, in more exceptional cases, imprisonment for up to two years. Most environmental statutes stipulate a maximum possible fine, although these are reserved for the gravest offences. The maximum fine is higher for corporations than individuals, and higher for subsequent offences. A fine up to the maximum can be imposed for every day that the violation continues.

Generally, minimum mandatory fines for a corporation are in the range of C$25,000 per count for a first offence and C$50,000 per count for a subsequent offence. Directors and officers, together with anyone that caused or permitted the offence, are liable to prosecution. Also available to the regulator in some circumstances are cost recovery orders, which arise from taxpayer-funded clean-ups. These can be enforced in the same manner as a court judgment.


Definition and controls
'Waste' is defined in various federal and provincial statutes. For example, the Ontario Environmental Protection Act defines waste as the residue of any process including ashes, garbage, refuse, domestic waste, industrial waste, municipal refuse and other specifically designated waste such as hazardous and toxic waste.

Waste may be generated, handled, stored, processed and disposed of only pursuant to a permit and at an approved facility (which may be an on-site facility). Collection of residential waste is a matter of municipal responsibility.

Transportation and disposal of hazardous wastes in Canada is strictly regulated. Transport Canada regulates inter-provincial transport, as well as the import and export of hazardous waste. Provincial governments otherwise regulate the generation, transport, storage and disposal of hazardous waste.

All hazardous waste shipments require completion of a hazardous waste manifest and may be transported only by licensed carriers. Certain categories of hazardous waste, such as asbestos waste and polychlorinated biphenyl waste, are subject to special requirements.

Provincial governments are responsible for the regulation of waste diversion, deposit return and other recycling programmes under a variety of schemes, which increasingly shift the associated costs to the business that put the original item that generated the waste into the stream of commerce.

Waste can be disposed of only at an approved waste disposal site and this includes storage. There are threshold exemptions for waste amounts that can be stored on site. These are contained in provincial regulations and differ depending on the type of waste.

On-site storage of wastes exceeding threshold amounts requires notification or a specific permit.

There is a general duty on a waste generator to ensure that waste is transported and disposed of only by a licensed party pursuant to a properly issued waste manifest and that a follow-up is conducted to ensure that the waste has arrived at the designated disposal site.

Provided that this duty is discharged, there will be no residual liability to the generator for consequential damage beyond the point of the transfer of title to the shipper.

Recovery obligations
Vendor take-back programmes in Canada are still developing. Most provinces have only deposit return systems for alcoholic beverage containers. Some of the larger provinces are in the process of introducing e-waste and computer equipment programmes and Ontario is considering implementing a deposit return system for batteries and compact fluorescent light bulbs.

Most provinces provide for limited waste diversion programmes. Some provinces require employers over a certain size to provide waste separation facilities and prepare a waste reduction plan. Municipalities with over 5,000 inhabitants may also be required to implement a waste separation programme.


Breaches and available defences
A violation of environmental law can attract regulatory, criminal and civil liability. Regulatory liability is quasi-criminal liability that does not require a 'guilty mind' and is imposed pursuant to provincial environmental statutes. Prosecutors must prove beyond a reasonable doubt that an offence has occurred. To avoid conviction and in most offences, the party charged must prove on a balance of probabilities that it conducted itself with due diligence, meaning that it took all reasonable care to avoid the offence. The standard of due diligence is high and a large body of jurisprudence discusses it. It involves a proactive approach to prevention and risk management at all levels of the corporation, and includes:

  • regular training;
  • auditing and reporting within the corporation;
  • emergency response programmes;
  • compliance with internal protocols; and
  • appropriate disciplinary action.

Regulatory liability applies to individuals and companies, as well as corporate officers, directors, agents, suppliers and employees.

Ontario has recently introduced rather onerous on-the-spot administrative penalties of up to C$100,000 per day, to which there is no due diligence defence and in which the person charged must establish that the offence was not committed.

Express criminal penalties have recently become available where an employee of a company is grossly negligent and a senior officer (which includes anyone with direct responsibility and not just corporate officers) should have taken preventive steps. Since provincial environmental laws already allow for substantial penalties and imprisonment, the new Criminal Code section will likely be reserved for particularly grievous offences.

Civil environmental common law liability is available in cases of non-disclosure of environmental defects in land or property and where a party or property is harmed by someone else's sub-standard action through the law of negligence. Canadian common law also provides for strict liability (for which no breach of a duty of care must be proved) where a dangerous substance escapes from someone's property and causes harm to another (such liability arises pursuant to the English doctrine of Rylands v Fletcher), as well as through the law of nuisance, which protects the enjoyment of land or property. No rights of civil recovery (other than in limited cases to the regulator) are found in environmental statutes.

Liability with a permit
Environmental statutes prohibit and create liability for the discharge of pollutants that may cause an adverse effect. Generally, compliance with a permit is no defence against such liability.

However, both regulators and the courts will consider compliance with a permit in determining whether to prosecute and in imposing penalties. A party remains liable to conduct remedial action at the instance of the regulator even if all its activity took place in accordance with the terms of its permit.

Personal liability
Where a company has committed an offence, any director who "directed, authorized, assented to, acquiesced or participated in" the offence can be convicted independently. Similarly, administrative orders that can be issued against anyone who had "charge, management or control" of a pollutant can also be issued against directors and officers. While it is possible to obtain directors and officers liability insurance and corporations frequently avail themselves of such policies, the courts are increasingly refusing to give effect to their terms in cases of environmental harm. As a general matter, regulatory liability and negligence claims against directors and officers can be indemnified under these policies, but fines cannot.

Both the federal Canada Business Corporations Act and a number of provincial business statutes prohibit the indemnification of directors and officers for criminal or regulatory fines, unless the individual had reasonable grounds for believing that his or her conduct was lawful. The courts have also issued specific orders prohibiting indemnification of a director by the company in cases of environmental harm.

Share sale versus asset purchase
In a share transaction both civil and regulatory liabilities of the corporation survive closing. This includes the risk of prosecutions for past environmental violations - for example, a spill resulting in contamination, as well as any latent or known contamination.

In an asset transaction, liability of the corporation will not flow to the purchaser unless tied to the specific asset. If a purchaser acquires a piece of real estate that was contaminated prior to closing, the purchaser remains liable for remediation. However, it would not be exposed to the possibility of a prosecution with respect to the spill that caused the prior contamination.

Lenders liability
Lenders may assume environmental liability where they become involved in the financial management of a corporation, the day-to-day operational management thereof or if they become owners by way of foreclosure. Two provinces, Ontario and British Columbia, have statutory exemptions from liability for secured lenders, receivers and owners by foreclosure for certain designated actions. This protection can be set aside where these parties fail to disclose environmental non-compliance or harm or where they are grossly negligent in discharging environmental obligations. Similar protections and limitations thereon apply to receivers and bankruptcy trustees.

Contaminated Land

Liability for contamination
The 'polluter pays' principle is well entrenched in Canadian regulatory law. There have been a number of instances in which regulators have issued clean-up orders against companies (as owners or the cause of the pollution) for historical pollution of properties that had been sold off decades earlier. This is not to say that current property owners and those who have charge, management or control of a pollutant will not also be targeted by the regulator. Where such orders are not complied with, the regulator can arrange for the remediation and recover the costs incurred by way of a lien against the property or by way of a court order against the owner, past owners and/or the party that caused the contamination. As for civil common law liability, proof of harm and causation will first have to be proven before a specific historical party will be held liable (subject to limitation periods which are statutory and vary from province to province).

Clean-up standards for both soil and groundwater contamination are contained in guidelines which are updated from time to time and which set out permissible limits for a long list of substances (eg, metals, hydrocarbons and solvents). Clean-up levels are dependent on property type, property conditions, location, present and future use and the sensitivity of the surrounding environment.

Allocation of liability
Federal and provincial regulators are generally not concerned with allocation of liability. This is left to the parties to allocate through a civil suit. Under Canadian law, polluting parties are generally jointly and severally liable. Clean-up orders are frequently issued against the party that is most likely to comply with the order (eg, the company with the most funds), as regulators try to avoid having to fund remediation out of public funds. Parties against whom an order has been issued can seek indemnification in the civil courts or, in some provinces, appeal to the respective environmental tribunal. In the past parties with tenuous links to the contamination at issue have been exonerated from administrative orders.

Future regulatory liability
Regulators can require further or more extensive work even if a property has been remediated to the acceptable standards and the regulator approved the work when completed. The courts base this approach on the 'polluter pays' principle.

Some provinces encourage brownfield development and have implemented 'protective' programmes for old contaminated sites. A person with no connection with the historical contamination that cleans up the property to the approved standard can file a record of site condition with the regulator and will thereafter be shielded from future regulatory liability in respect of that contamination.

Transfer of liability
An owner can seek contribution in the civil courts from prior owners through contractual provisions, through the established common law causes of action and, in some provinces, also through specific provisions in environmental statutes. The principle of caveat emptor (buyer beware) applies to real estate transactions in Canada in the absence of contractual language to the contrary.

Vendors typically attempt to transfer property-related common law liability to purchasers by way of indemnities in agreements of purchase and sale. Some or all of the risk of such liability for contamination can be transferred in this way. However, regulatory liability cannot usually be transferred.

Public damage
Governments in Canada can recover monetary damages for physical harm to a public resource. Damages for aesthetic harm have not yet been addressed. It is possible that this type of harm might also be recovered under this head of damage.

Powers of Regulators

Federal and provincial Canadian statutes invest regulators with broad inspection and related search and seizure powers. Such rights allow regulators to:

  • enter property without a warrant or notice;
  • seize items and take samples;
  • conduct sub-surface investigations;
  • require, inspect and seize documents; and
  • make related inquiries.

As these rights do not extend to buildings, an inspector needs either a court-issued warrant or the consent of the owner or occupier to enter and conduct an inspection of or within a building. Failure to cooperate with an inspector is a separate offence punishable by a fine and/or imprisonment. This offence does not include a refusal to provide consent for an inspector to enter a building.

Canadian law draws a marked distinction between inspections and investigations. The purpose of inspections is to assess regulatory compliance. Accordingly, inspectors also have the power to issue administrative orders requiring a party to take steps to attain or maintain compliance. Investigations, on the other hand, are for gathering evidence of an offence and a possible prosecution. A defendant in an investigation has rights against self-incrimination and to legal counsel. It is unlawful for investigators to use the inspection powers effectively to conduct an investigation.

Reporting and Disclosure Obligations

Reporting pollution
Spills (generally defined as discharges out of the ordinary course of events) must be immediately reported to the regulator under most environmental statutes and municipal bylaws. Off-site migration of a contaminant may trigger a reporting obligation under certain circumstances. In the absence of an outstanding regulatory order or ongoing clean-up, there is no general obligation to report historic contamination, even if migrating offsite, although some provinces have reporting requirements for specific types of discharge, such as leaks from old storage tanks. Contamination regardless of characteristics may also have to be reported if it poses a serious risk to human heath under common law duty to warn principles.

Obligation to investigate land for contaminations
A spill of a contaminant triggers an immediate obligation to investigate and remediate, as well as to report. Regulators have the power to issue administrative orders requiring remedial or mitigative action and compelling a party to conduct tests or perform a site assessment to determine residual soil contamination or risk of migration and to fashion an appropriate clean-up programme.

Where a party intends to change the use of a brownfield from a less sensitive use (eg, industrial) to a more sensitive use (eg, residential), provincial brownfield legislation may also require intrusive site assessments (as well as remediation).

In cases where land use applications are required in the context of the development of a specific site, municipalities may also require that investigation be undertaken as part of their approval process.

Disclosure of environmental problems
Canadian law distinguishes between 'latent' (hidden) and 'patent' (readily observable through reasonable due diligence) defects in land. Where a vendor is aware of a latent defect, it must be disclosed to prospective purchasers prior to closing. There is no similar duty for patent defects on the basis of caveat emptor.

Canadian securities laws also require timely disclosure of material facts as part of any offering of securities. A material fact is any fact that could have a significant impact on the value of the underlying securities. Environmental issues are increasingly being assessed as material facts in this context.

As part of most transactional due diligence, purchasers request disclosure of all environmental records as a matter of course and may require appropriate indemnity language in the sale agreement as a result or in any case.


Limiting liability
It is possible to use contractual indemnities to limit or cap general environmental liability. However, it is not possible to limit or cap regulatory liability contractually. Making a payment to another person under an indemnity will discharge the indemnifier's common law liability for that matter. However, with respect to regulatory liability, where there are several parties potentially responsible for contamination, regulators will pursue the entities with the 'deepest pockets' without regard to contractual arrangements and will let the parties resolve disputes with respect to indemnification amongst themselves in the courts.

Sheltering environmental liabilities
Federal and provincial securities law requires timely disclosure of material facts. This disclosure obligation is continuous. Therefore, sheltering environmental liabilities off balance sheet likely constitutes a breach of securities law, thereby exposing the company to quasi-criminal penalties.

The dissolution of a company does not provide a shield against environmental liabilities. Administrative orders can be issued against a company, as well as anyone that had "charge, management or control", including directors and officers, regardless of the status of the corporation. Regulatory fines and criminal penalties against such parties similarly survive corporate dissolution. If at the time that a company was dissolved there was an outstanding environmental liability, shareholders would be liable to the extent that they received funds out of the dissolution.

Shareholder liability
Generally, shareholders in Canada are shielded from liability unless they actively participated in management or had charge, management or control of a contaminant, in which case they can attract liability in the same way as directors and officers. However, Canadian courts will pierce the corporate veil of a company and hold shareholders liable where the company is merely a sham or is being used for fraudulent purposes. Generally speaking, a corporate parent may be sued in its national courts (subject to local law) for pollution caused by a Canadian subsidiary or affiliate.

Protection of whistle-blowers
Federal and most provincial environmental statutes contain whistleblower protection clauses. Whistleblower protection is also extended under Canadian criminal law, which makes it an offence punishable with up to five years' imprisonment to threaten, harass or dismiss a whistleblower.

Class actions
Class actions as a whole have been available in Canada only since 1992. In order to proceed, a class action must be certified by the court based on several criteria, one of them being the availability of a 'representative plaintiff'. Several environmental class actions have been certified, but only with respect to diminution in property value claims and not with respect to health effects. Penal or exemplary damages are available in such claims, but are in general rarely awarded and are consistently modest in amount compared to other jurisdictions.

Emissions Trading and Climate Change

Canada plans to reduce greenhouse gas emissions to 20% below 2006 levels by 2020. The federal government has recently announced a plan that would require industry to reduce carbon dioxide emissions by 18% by the year 2010 for each unit of production, and a further 2% every year thereafter until 2020. Regulations have also recently been announced that will require energy producers to capture and store carbon dioxide. However, as yet, there is no well-developed emissions trading regime in Canada that would allow industry to use carbon credits to meet emissions targets. That said, the federal government recently announced its intention to allow certain environmental projects to sell carbon credits.


Asbestos litigation
It is unlikely that Canada will see asbestos litigation as has been seen in the United States. Friable asbestos was used in Canada until the mid-1980s and non-friable asbestos continues to be used in certain applications. However, Canada is not a major producer. The US defendants in asbestos litigation have primarily been asbestos mines, suppliers and employers. Under provincial employment law in Canada, employees are prevented from suing their employers with respect to personal injury sustained on the job. Instead, there is a government-operated workers' compensation programme that provides redress for injuries or health problems linked to the job. Furthermore, the use of punitive damages in Canada is significantly more limited than in the United States. Tort claim awards are often subject to court-imposed caps and there is a very restrictive jury award regime in place.

The duties of owners and occupiers with respect to asbestos on site are set out in provincial occupational health and safety statutes. There is generally no requirement to remove undisturbed asbestos, including friable asbestos. However, some provinces like Ontario require record-keeping with respect to the location of materials above certain thresholds and the implementation of risk management plans. Loose friable asbestos must be removed in all provinces. The precautions required for asbestos removal are extensive and are also set out in specific provincial regulations. Asbestos is also considered a hazardous waste and is subject to special disposal requirements.

Environmental Insurance Liabilities

Types of environmental insurance
Many umbrella liability policies or contractors' general liability policies contain absolute pollution exclusion clauses. However, a number of policies dealing with specific environmental risks are now underwritten in Canada. For soil remediation projects below a threshold clean-up cost, it is possible to obtain cost-cap policies contingent upon the provision of a detailed cost estimate and environmental report prior to underwriting. Environmental impairment liability policies are available to insure against the risk of third-party claims due to off-site migration. Policies are also available to insure against future pollution events on a property or as of yet undiscovered contamination. Contractors' pollution liability insurance is available to insure against pollution caused by specific operations. This provides a useful supplement to umbrella liability policies containing pollution exclusion clauses.

As the cost of performing environmental clean-ups to regulatory standards has increased substantially, the role of environmental insurance in Canada has expanded. While the market for environmental insurance is still developing, new products are being added in response to a variety of situations.

Environmental insurance will soon become a feature of most corporate transactions.

Environmental insurance claims
While environmental insurance policies are becoming specific regarding the risks that they address, no drastic claims increases or payouts have been experienced by the industry. Environmental insurance is generally handled by sophisticated foreign and local insurers providing specialty policies that price the attendant risk accordingly. Significant pay-outs such as those experienced in the wake of the US asbestos litigation are not expected.

New Cases, Trends and Developments

Climate change is an ongoing issue on the Canadian political agenda. The provinces of British Columbia, Manitoba, Ontario and Quebec, together with seven western US states, are members of the Western Climate Initiative (WCI), an organization created to identify, evaluate and implement collective and cooperative ways to reduce greenhouse gas emissions in the region, focusing on a market-based cap-and-trade system. In September 2008 the WCI announced the proposed design of a regional cap-and-trade programme commencing in 2012 and intended to reduce greenhouse gas emissions to 15% below 2005 levels by 2020. Member governments have committed to introduce legislation in their respective jurisdictions to implement the programme.

The government of British Columbia implemented a carbon tax on the use of fossil fuels effective July 1 2008. As such, British Columbia joins the province of Quebec, which implemented a tax payable by energy producers, distributors and refiners in 2007.

On April 1 2009 the province of Ontario implemented the first stage of its electronic waste diversion programme, which involves charging an upfront fee for electronic products to waste stewards (mainly producers and brand owners, not retailers). Different fees are levied for different categories of product. For each personal computer, the fee is C$13.44.

In February 2009 the Ontario legislature introduced a new Green Energy Act 2009 that will remove a number of regulatory hurdles for the development of renewable energy projects. The proposed legislation is before the legislature and has not been passed into law yet. If implemented, a new category of renewable energy approvals will replace several of the individual environmental permits currently required.

The availability of environmental class actions keeps expanding in Canada, particularly under the civil law system in the province of Quebec. On November 20 2008 in Ciment St Laurent v Barette the Supreme Court of Canada held that under the civil law system, nuisance and annoyance claims by neighbours of a facility can be brought as a class action, and that under Quebec law, a nuisance claim requires proof of only 'abnormal inconvenience', not fault.

For further information on this topic please contact Ralph Cuervo-Lorens or Sven Thorsten Hombach at Fraser Milner Casgrain LLP by telephone (+1 416 863 4511) or by fax 1 416 863 4592) or by email (ralph.cuervo-lorens@fmc-law.com or sven.hombach@fmc-law.com).


(1) http://www.ec.gc.ca/CEPAregistry/documents/policies/candepolicy/toc.cfm.

(2) http://www.ene.gov.on.ca/en/about/penalties/CompliancePolicy.pdf.

(3) www.ec.gc.ca/cepaRegistry/.

(4) www.ebr.gov.on.ca.

An earlier version of this overview appeared in International Comparative Legal Guide to Environmental Law 2009.

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