December 2003

Purpose:

The purpose of this short paper is to provide a perspective on international regulatory cooperation as one element of a smart regulation approach to delivering Canada's environmental agenda.

Context:

Canada has much to gain from greater international cooperation on many fronts. Economically, we have made real progress in trade liberalisation, and international agreements such as the WTO and NAFTA have provided significant economic gains. International cooperation has occurred in the social and environmental areas as well. We have seen social milestones such as the International Land Mines treaty, as well as the development and implementation of several multilateral environmental agreements. Given the obvious gains from international cooperation in many areas, it is natural and inevitable to examine ways in which we can improve our regulatory systems via international regulatory cooperation.

Smart environmental regulation is about ensuring that we have the best possible system in place for protecting the environment. This should also be the focus of our efforts at international regulatory cooperation, particularly given the global and regional nature of many environmental problems. International cooperation can also help manage the economic and trade effects linked to our environmental efforts.

Canadian Values and Public Policy Goals:

Canada's economic, environmental and social objectives reflect the values of Canadian society. Canadian values are the bedrock for setting public policy goals. Smart regulation encompasses a broad range of approaches to meet these goals. One element of a smart regulation approach is examining opportunities for meeting Canadian goals through cooperation with other countries.

Where Canadian values and public policy objectives are similar to those of other nations, there are generally more opportunities for international regulatory cooperation. International cooperation can also be a way to understand better the values and objectives of other countries, to find common ground and mutual recognition, and to inform and influence approaches in other countries.

Canada has a long history of international cooperation across a broad range of public policy areas. Globalisation trends and a deepening understanding of the trans-boundary nature of environmental problems over the past few decades have increased international cooperation on economic and environmental issues. Canada has been a major part of this cooperation in a number of fora. With respect to environmental management, Canada has been a leader in multilateral fora and has a strong cooperative relationship with the US. All of this has been driven by a commitment to meet Canada's public policy objectives which derive from Canadian values through our democratic system of government.

Understanding Canadian values is a complex business. Professor Hart in his paper Risks and Rewards: New Frontiers in International Regulatory Cooperation (submitted to the External Advisory Committee on Smart Regulations (EACSR) in September 2003) argues that Canadians and Americans generally have shared values and this provides a strong basis for a much higher level of Canada-US regulatory cooperation. This view does not seem to factor in major differences with the US with respect to a myriad of values which affect Canadian policies on health care, climate change, regional development, same sex marriages, safe drug injection sites, etc. The EACSR's exploration of "the public interest" as a priority area for its work provides an opportunity for the committee to initiate a dialogue with Canadians on the values underpinning Canada's regulatory system.

Canadian Experience with Environmental Cooperation

International regulatory cooperation includes a continuum of cooperative approaches - from informal sharing of information to more formal harmonisation arrangements such as the adoption of common rules or standards. Canada has decades of experience with environmental regulatory cooperation across this broad continuum. Often regulatory cooperation starts with sharing of information and approaches, and as confidence builds and common objectives are identified, this can lead to the development of more formal cooperative arrangements.

Canada has an environmental regulatory system which many countries have recognized for its efficiency, effectiveness, transparency and innovation. A recent OECD regulatory review of Canada emphasises the many strengths of our system, recognizing that Canada has been a "consistent leader and innovator", and noting that in the area of environmental regulation, Canada is "actively testing new approaches".

In the global context, Canada has played a strong role in the development of multilateral environmental agreements, as well as information-sharing and exploration of common approaches to environmental management and sustainable development through fora such as the OECD. The 2002 World Summit on Sustainable Development (WSSD) was a major opportunity for Canada to work on a global scale to advance cooperation on a range of issues. In developing policies to achieve Canada's environmental objectives, Canadian regulators generally consider best practices in other countries and examine whether these can be of value in the Canadian context.

A good example of Canadian leadership internationally to meet Canadian public policy objectives is the path of international cooperation throughout the 1980s and 1990s leading up to the 2001 Stockholm Convention on Persistent Organic Pollutants (POPs). Canada's international leadership began with sparking an international dialogue on the science, followed by a series of bilateral and multi-lateral cooperative arrangements (i.e. Canada-US Binational Toxics Strategy, efforts under the NAFTA Commission on Environmental Cooperation, negotiation of the UN-ECE protocol in 1998) which essentially built support for common objectives and actions under the global Stockholm Convention. Canada's multilateral efforts were particularly important in influencing US positions and policies.

In the Canada-US context, there exists an extensive web of informal and formal cooperative arrangements on environmental management. This is driven by both the environmental and economic "space" we share with the US. Where we have shared public policy objectives, there has been more formal regulatory cooperation.

A good example of fairly extensive regulatory cooperation with the US is in the area of air pollution. At a general level, we have a Canada-US Air Quality Agreement driven by the need to manage the trans-boundary flow of air pollution between the two countries. This agreement provides for general information sharing and cooperation and includes specific actions for each country to reduce pollution, tailored to the conditions in each country. At the "regulatory program" level, there is harmonisation of environmental standards for vehicle emissions, driven by the shared concerns about the environmental and health risks associated with vehicle emissions and the highly integrated nature of the auto manufacturing industry. For the regulation of fuels, the increasing linkage to vehicle emission control system performance and the similarity in policy objectives have led to a general "convergence" with US fuel standards. Rather than adoption of US rules, a simpler, more cost-efficient regulatory system in Canada is in place which matches US performance levels. This "convergence" approach is being explored as an approach to managing air emissions from some industrial sectors. For example, federal and provincial regulators are working with refineries to explore facility emissions caps based on matching the emissions performance of US refineries. In most industrial sectors where there are strong competitiveness links with the US, Canadian regulators examine US rules and best practices in developing an approach which meets Canadian objectives.

Canada's air pollution agenda is not restricted only to cooperation with the US. Multi-lateral activities through the UN-ECE and the OECD have been important in identifying best practices, sharing information and in influencing the US to take stronger action to address Canada's trans-boundary air pollution concerns.

There are other areas of environmental management where Canadian values and policy objectives differ, and therefore regulatory cooperation in the form of adopting US rules or converging based on US performance does not make sense. In the area of chemicals management, the US and Canadian new chemical substance notification processes resemble each other but are designed to produce different results. Canada's approach is based on a policy of pollution prevention which reflects Canadian values with respect to environmental and health risks. The American approach is based on the doctrine of unreasonable risk. The US General Accounting Office (i.e. the US counterpart of the Canadian Auditor General) has criticised the American system as ineffective and suggested changes based on the Canadian approach.

While adopting or accepting the current US system would not meet Canadian public policy objectives, Canada recognises the importance of Canada-US cooperation in working towards achieving greater efficiencies in the introduction of new substances to the North marketplace, while continuing to protect human health and the environment. This cooperative relationship is embodied in the Four Corners Arrangement which involves Canadian and US federal regulators and chemical industries in both countries. Its objectives include increased understanding of each other's risk assessment and risk management policies and practices, identification of strategies for overcoming barriers to greater cooperation and identifying and taking appropriate action to ensure progress towards the long term goal of greater cooperation and alignment of Canadian and US new substances regulatory schemes.

An important lesson from Environment Canada's experience with international regulatory cooperation is that the extent and form of that cooperation must be determined on a case-by-case basis, and consideration of opportunities for cooperation must start with Canada's public policy objectives. If regulatory cooperation can help us to achieve those objectives in a more efficient, less costly way and can lever other benefits for Canadians, then these are opportunities which should be pursued.

Guiding Principles

Some general principles, drawn from Environment Canada's experience with international regulatory cooperation, may be useful in guiding ongoing decisions with respect to international regulatory cooperation.

Canadian Public Policy Objectives are the Driver: Canada's public policy objectives reflect Canadian values. They define the acceptable level of risk to the environment and human health from pollution. A range of approaches should be considered in determining "how" to manage these risks, including consideration of science, policy objectives and tools and measures used in other countries.

Exploring common values and objectives: In some cases, shared values will lead to the same public policy objectives and in other cases there will be differences. Where there are shared objectives, policy makers should expand their current efforts to maximise opportunities for cooperation.

Environmental and Economic Spaces: The boundaries and nature of shared environmental space (e.g. global for climate change, Canada-US for air pollution); this will help to define for policymakers which countries are most relevant for exploring cooperation opportunities. The shared economic space can also inform the opportunities for cooperation (e.g. promoting North American trade and environmental technology solutions).

Cooperation Continuum: There is a continuum of forms of cooperation ranging from informal to formal mechanisms. This continuum includes: sharing data and information; understanding alternative approaches; agreement on best practices; convergence or alignment of approaches based on environmental performance; mutual acceptance and recognition; adoption of common rules; joint decision-making etc. Type of cooperation needs to be determined on a case-by-case basis, and revisited where appropriate.

Areas of Opportunity

Environment Canada believes that there are areas of opportunity for increased international cooperation which can improve environmental performance and lever strategic economic benefits. It is important that these areas be examined on a case-by-case basis, driven by the need to meet Canadian environmental objectives and the opportunity to do so in a way which can stimulate innovation, enhance competitiveness and increase trade.

There are many areas where Environment Canada is currently examining opportunities for international regulatory cooperation. One example is the development of future global standards for vehicle emissions. While Canada has implemented and benefited from a policy of aligning its vehicle emission standards with those of the US, there has been a growing trend in the automotive industry towards globalisation of their operations. This has sparked greater interest in the development of international standards to reduce trade barriers and improve the level of safety and environmental performance.

In step with the growing trends in Canada-US economic integration and security cooperation over the past few years, Environment Canada has been exploring opportunities for convergence with the US - i.e. areas where Canada could improve environmental and economic performance by matching US levels of performance - rather than adopting US rules. In cooperation with other federal departments and external advisors from the business and environmental communities, Environment Canada developed a "convergence analytical framework" which can be used to identify opportunities where matching US performance can provide environmental benefits for Canada and lever strategic business and trade benefits. This framework is designed as a collaborative analytical tool to bring key interests together to explore convergence opportunities.

Environment Canada is currently working with provinces and stakeholders to explore convergence opportunities in a number of areas, including air emissions from petroleum refineries and emissions of volatile organic compounds (VOC) from consumer and commercial products. Environment Canada is also interested in undertaking "convergence case studies" to better understand convergence opportunities in areas such as the management of hazardous wastes and air emissions from major industrial sectors.