On December 16, 2021, the Prime Minister released the much-anticipated mandate letters outlining executive priorities and providing direction to cabinet ministers for the upcoming term. While customized for each of the 38 cabinet ministers, the letters contain some common priorities. These letters touched on many issues, including economic recovery and creating a more diverse and inclusive Canada. Two priorities emerged that are likely consistent with the strategic direction of companies in natural resources and other emissions-intensive industries: (i) accelerating efforts to address climate change and (ii) advancing Indigenous reconciliation.
As the cabinet ministers get busy tackling these significant undertakings, below we highlight what to watch for in 2022 in these two areas; some of which will be discussed further in an upcoming series of Bennett Jones insights.
1. Accelerating Efforts to Address Climate Change
Last year, Canada announced on the world stage that it was formally adjusting its greenhouse gas emissions target to a 40 to 45 percent reduction by 2030 from 2005 levels. Yesterday, the Minister of Environment and Climate Change released the 2030 Emissions Reduction Plan that addresses how this ambitious goal will be met.
In June 2021, the new Canadian Net-Zero Emissions Accountability Act received Royal Assent, enshrining in law this adjusted target as the first emissions reduction target codified in legislation. This year, we expect to see more climate change objectives codified in federal legislation including the right to a healthy environment which the Federal Government tabled just last month in Bill S-5, Strengthening Environmental Protection for a Healthier Canada, in the Senate.
We expect that methane emissions will be of particular focus. The letters speak to maintaining Canada's position as a leader in methane detection and elimination through the establishment of a global centre of excellence and requiring the oil and gas industry, through regulations, to reduce its methane emissions by at least 75 percent below 2012 levels by 2030.
The Prime Minister also directed the Minister of Environment and Climate Change to establish a Canada Water Agency and to implement a strengthened Freshwater Action Plan.
The mandate letters promote collaboration among federal, provincial and territorial governments. Specific to electricity, the Prime Minister wrote about establishing a Pan-Canadian Grid Council to promote infrastructure investments, smart grids, grid integration and electricity sector innovation to help achieve a 100 percent net-zero emitting electricity system by 2035.
We can expect that Canada will consider means to restrain imports from countries that do not have a carbon price or policies to reduce carbon emissions. The federal government will continue to consult on the development of a Border Carbon Adjustment (BCA) to and from such countries and possibly applying a BCA to emissions-intensive imports such as steel, cement and aluminum. The Department of Finance has already held a first round of consultations on the subject.
Emissions-intensive industries will be under heightened scrutiny and pressure. The letters referred to implementing new measures related to capping and cutting oil and gas sector emissions and a renewed objective to eliminate subsidies by 2023 which include phasing out public financing of the fossil fuel sector through federal Crown corporations and eliminating flow-through shares for oil, gas and coal projects.
Public companies can expect to see implementation of a standard for climate-related financial disclosures (CFDs) based on the Task Force on Climate Related Financial Disclosures framework. Federally regulated institutions in particular will see more integration of environment, social and governance (ESG) practices through CFDs, net-zero plans and integration of ESGs into federal procurement.
Finally, funding will increase towards clean technology and renewable energy projects and initiatives. The Prime Minister asked ministers to stimulate investment through a broad range of technologies, both market-ready and emerging, including introducing an investment tax credit for capital invested in carbon capture, utilization and storage projects. Moreover, in response to the role of minerals in the manufacturing of vital clean technologies, the federal government expects to double the mineral exploration tax credit.
2. Advancing Indigenous Reconciliation
Prime Minister Justin Trudeau directs ministers through the mandate letters to "implement the United Nations Declaration of Rights of Indigenous Peoples [(UNDRIP)] and to work in partnership with Indigenous Peoples to advance their rights." In 2022, the federal government will focus on consulting on the action plan that is required to implement UNDRIP under the United Nations Declaration on the Rights of Indigenous Peoples Act and increasing inter-departmental knowledge on the implications of the Act and UNDRIP on their mandates. The letters speak about supporting Indigenous-led processes for rebuilding and constituting nations and advancing self-determination, and working in partnership on implementing the spirit and intent of treaties, and claim and self-government agreements with appropriate oversight mechanisms to hold the federal government accountable.
In 2019, the Minister of Crown-Indigenous Relations was tasked in the mandate letters to, "[w]ork with the Minister of Finance and the Minister of Natural Resources to develop a new national benefits-sharing framework for major resource projects on Indigenous territory." In the new mandate letters, the Minister of Natural Resources is expected to keep working on this framework.
Finally, the Prime Minister spoke about advancing Indigenous-led conservation efforts to protect Canada's natural habitats and waters including supporting new Indigenous Guardians programs and establishing new Indigenous Guardians Networks, and supporting Indigenous communities to build capacity to establish more Indigenous Protected and Conserved Areas. Existing programs in Western Canada include the Coastal Stewardship Network, the Gitanyow Lax'yip Guardians and the Mikisew Cree First Nation Guardian project.
The government is continuing to pursue its ambitious agenda on climate and Indigenous reconciliation while supporting the COVID-19 recovery. Successful implementation of the government's priorities rely heavily on collaboration among the federal, provincial and territorial governments and Indigenous communities and nations. The specific measures to implement this agenda must be part of an ongoing and meaningful dialogue between all parties, including the public and private sectors. A shared vision to sustain and improve confidence and incentives to promote investment in Canada should be key success factors. Collaboration will be key to ensuring efficient use of public resources and preventing duplication of efforts.
Since the mandate letters were issued, the Omicron variant of COVID-19 swept through the country, domestic political protests disrupted our economic and trade infrastructure, and now, more critically, Russia has upended global geo-political, social and economic stability through its invasion of Ukraine. While the government will continue to pursue climate and Indigenous reconciliation, such pursuits should also consider the complementary goals of advancing energy security for Canada and its partners, including through the expansion of renewable energy sources and national security. The upcoming federal budget may provide an indication of how the government proposes to balance its priorities and implement an evolving agenda.
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