May 6, 2021

By Colleen Kaiser

It might not have been the splashiest of Budget 2021 items – but the importance of continued measures to advance the agility of Canada’s regulatory system cannot be overstated.

After years of reports^[1] pointing to Canada’s consistent innovation underperformance and seemingly being “stuck in a low innovation equilibrium”^[2], the federal government continued in Budget 2021 to squarely put innovation high on the government’s agenda, with a strong focus on eco-innovation. A critical aspect of driving this innovation is to ensure regulatory barriers to clean growth are addressed.

Regulator barriers to driving clean growth and economic competitiveness come in many flavours. Sometimes regulatory barriers can outright block innovative practices or products. In other instances, regulatory barriers are related to problems like incoherence and uncertainty. Regardless of the ‘flavour’, advancing agile regulation to promote clean innovation must be addressed for Canada to capitalize on the massive economic opportunities related to the clean growth economy. Federal efforts to deal with these issues in earnest were jumpstarted in 2017 and have continued since, including some new critical measures proposed in the 2021 Federal Budget, which are explored here:

First, the government has provided additional funding ($6 million over two years) to renew the External Advisory Committee on Regulatory Competitiveness and to continue targeted regulatory reviews.

The External Advisory Committee was established in 2018 to provide independent advice to the government to improve regulatory competitiveness and “modernize Canada’s regulatory system into one that further enables investment and catalyzes innovation”.^[3] A fundamental way this approach is operationalized is through targeted reviews of existing regulations and regulatory practices, which result in action plans called Regulatory Roadmaps. Importantly, clean technology (broadly defined) has been and continues to be a focus of this high-level effort.^[4]

Second, targeted efforts were announced in Budget 2021 to address specific issues of regulatory incoherence and uncertainty in the clean transportation sector.

Budget 2021 proposes some much-needed measures to address regulatory barriers to ZEV uptake, which aim to increase the economic efficiency of installing retail ZEV charging stations. The government announced a proposed $56.1 million over five years (starting in 2021-22 with $16.3 million in remaining amortization and $13 million per year ongoing) for Measurement Canada to develop and implement a set of codes and standards for retail ZEV fueling and charging stations. A lack of these standards and codes has resulted in regulatory uncertainty to providers of charging services, and has added to the ‘soft costs’ associated with ZEV charging stations which have been identified as massive cost drivers.^[5] Importantly, these rules will be developed in coordination with international partners, including the United States.

Regulatory certainty in the clean transportation space will also be enhanced by a proposed $67.4 million investment over seven years (starting in 2021-22) to Measurement Canada to ensure the accurate measurement of low-carbon fuels in commercial transactions. The introduction of these regulations for these novel fuels will help fill a regulatory vacuum (i.e. a lack of regulations), which remains a key industry concern. For example, a lack of government regulations, including around accurate hydrogen metering, was ranked amongst industries’ top concerns in the 2018 Canadian Hydrogen Fuel Cell Partnership survey.^[6]

Both measures address a key stakeholder concern identified in the Transportation Sector Regulatory Review Roadmap, i.e. “the need for more regulatory coordination between municipal, provincial, territorial and national jurisdictions; and …for international harmonization where appropriate”.^[7]

Third, Budget 2021 proposes key measures to enhance Canada’s regulatory and governance capacity directly.

Budget 2021 directly targets the enhancement of regulatory and governance capacity for climate and cleantech policy by proposing $94.4 million over five years to support the Clean Growth Hub and reporting requirements under the new Net Zero Emissions Accountability Act. The Clean Growth Hub is a federal institutional innovation that was established in 2018, which works in part as a kind of innovation office, helping cleantech producers and adopters advance their goals by connecting them with federal programs and services, in addition to enhancing program coordination and tracking.

Also, climate policy integration was advanced in the budget by proposing $36.2 million (over five years) for Environment and Climate Change Canada to develop a ‘climate lens’, to ensure that climate considerations are integrated into government decision-making. Significantly, these funds will help bolster economic and emissions modelling capacity, which is critical for ensuring the best information is available upon which decisions are made. While these measures are not technically direct efforts to enhance the agility of the regulatory system, they directly address climate policy integration and evidence-based decision-making, which underpin any efforts to increase agility and modernize Canada’s regulatory system.

To take an analogy from high school chemistry, the level of regulatory agility can be considered the ‘rate limiting step’ in the effort to both capture a significant part of the clean growth economy and spur an economic recovery from the COVID 19 pandemic. As such, it has never been more important to follow through on measures to increase the agility of Canada’s regulatory system.