Chapter 1. Environmental performance: Trends and recent developments1

Canada’s economy has grown strongly over the past decade, supported by high commodity prices that boosted income from energy and agricultural exports. However, economic growth has increased energy and resource use, escalating environmental pressures. This chapter examines the country’s progress in decoupling economic activity from these environmental pressures, focusing on the period since 2000. It presents the key socio-economic developments and reviews Canada’s progress in moving towards an energy-efficient and low-carbon economy; resource efficiency in material consumption and waste management; and sustainable management of the natural asset base.


1. Introduction

With a territory of nearly 10 million square kilometres (km2), Canada is the second largest country in the world. It is an open economy that sources a significant share of its income and exports from natural-resource based activities such as mining, fossil fuel extraction, agriculture, forestry, fisheries and nature-related tourism. The commodity super-cycle of the mid-2000s helped the country quickly recover from the global financial crisis, even though the fall in oil prices has slowed growth and increased unemployment. Canadians generally enjoy a high quality of life. However, parts of the population, including remote Indigenous communities, lack equal access to essential services, and they are more vulnerable to environmental degradation and the effects of climate change. While Canada has decoupled several environmental pressures from economic growth, it still faces challenges associated with high energy and resource consumption, high greenhouse gas (GHG) emissions, and pressures on biodiversity and water resources.

This chapter provides an overview of Canada’s main environmental achievements, and its remaining challenges on the path towards green growth. Drawing on indicators from national and international sources, it reviews progress on national policy goals, and on international commitments and targets, focusing on the period since 2000. To the extent possible, it compares the state of the environment and key environmental trends with those of other OECD member countries. The chapter sketches out major policy developments in environmental sectors, including air, climate, waste, water and biodiversity.

2. Key economic and social developments

2.1. Economic performance and structure of the economy

Canada is the eleventh largest economy in the OECD. Real gross domestic product (GDP) increased by about 35% over 2000-16, compared with the OECD average of 32% (Figure 1.1). Between the turn of the century and the beginning of the global economic crises, the economy grew in line with the OECD average. It recovered from the crisis more strongly than most other OECD member countries (at 1.5% annually in 2008-15). The impressive rise in commodity prices (e.g. for oil, coal and iron ore) aided the quick recovery, boosting GDP in energy- and mining-dependent provinces. The recovery was also supported by a prudent banking system, supportive fiscal and monetary policies, and a comparatively strong recovery in the United States (Canada’s main trading partner, which took 76% of merchandise exports in 2015) (OECD, 2016a). The sharp drop in oil prices since mid-2014 has hit the economy. Growth picked up again in late 2015, however, and is expected increase to 2.2% in 2017/18 (OECD, 2016b).

Figure 1.1. Canada recovered from the financial crisis more strongly than most other OECD countries

Canada’s open and diversified economy is more reliant on natural resources than the economies of most other OECD member countries. Contribution of the services, industry and agricultural sectors to GDP is similar to the OECD average (see Basic Statistics). However, roughly one-quarter of industrial activity is linked to oil, gas, mineral and metal extraction. In total, primary industries account for roughly 10% of GDP and 40% of exports (Figure 1.2). Canada is one of the world’s top five producers of crude oil, natural gas, primary aluminum and copper. It is also a major exporter of pulp, paper and a number of agricultural commodities such as wheat, canola, soybeans and vegetables. According to Statistics Canada’s Natural Resources Satellite Account2, natural resources directly or indirectly accounted for an estimated 17% of GDP and employed 1.8 million people (nearly 10% of the workforce) in 2015; natural resource exports were valued at CAD 231 billion (NRCan, 2016).

Figure 1.2. Natural resources are a backbone of the economy

The rise in international oil prices has shifted the country’s industrial mix to become increasingly weighted towards oil and gas. Between 2000 and 2015, oil production increased by 76%, owing mainly to a threefold increase in unconventional production from oil sands in the province of Alberta (IEA, 2017a). GDP generated from Canada’s energy sector increased faster than the economy as a whole between the 2009 financial crises and the peak in oil prices in 2014. The sharp fall in oil prices since mid-2014 has, however, depressed business investment in the mining, and oil and gas sector, and heightened unemployment in oil-producing provinces. The economy is adjusting to lower prices, with activity shifting notably towards non-resource export-related sectors (e.g. finance and insurance, real estate, retail trade, transportation and warehousing). Exchange rate depreciation, flexible labour markets and accommodating monetary and fiscal policy are supporting economic adjustment. However, Canada’s growth outlook is constrained by low productivity levels, resulting from insufficient competition in network sectors, barriers to internal trade and low small business dynamism. Other factors affecting growth include vulnerabilities in the financial system deriving from low oil prices, as well as historically high house prices, housing investment and household debt (IMF, 2016; OECD, 2016a).

Efforts to consolidate the public budget both at the federal and provincial level narrowed the general government overall deficit from a post-recession peak of 4.7% of GDP in 2010 to 0.5% in 2014 (OECD, 2016a). However, the deficit rose to 1.7% of GDP in 2015, reflecting deteriorating public finances in oil-producing provinces. The federal government has adopted a moderately expansionary fiscal policy stance to boost growth. This included increased public investment in infrastructure and clean technology, as well as funding to substantially improve the sub-standard socio-economic conditions facing Indigenous peoples (Chapter 3). General public debt has increased to 98% of GDP, but remains below the OECD average (see Basic Statistics).

2.2. Population, well-being and environmental quality of life

As the world’s second largest country by area, Canada’s population density is only a tenth of the OECD average (see Basic Statistics). The country is highly urbanised, with most Canadians living in widely separated urban centres along the US border (about 80%), along the east coast in the Atlantic provinces and along the west coast in British Columbia. Only 0.3% of the population lives in Canada’s large northern territories, where climatic conditions are difficult, living costs are high and access to public services is lower. Regional disparities are therefore important.

Canada’s population has increased by 18% since 2000 (to reach 36 million in 2016), mostly as a result of international labour migration. Its population has diverse backgrounds: nearly 20% have immigrated to the country (one of the highest shares in the world). Indigenous peoples (including First Nations, Métis and Inuit) make up 4.3% of the population. Many indigenous communities face critical social problems: they are often poor and are more likely than other Canadians to live in sub-standard housing, to drop out of school, be unemployed, to suffer from health problems (OECD, 2016a). The federal government has made improving outcomes for Indigenous peoples a priority.

Canada performs better than the OECD average on all dimensions of well-being of the OECD’s Better Life Index (Figure 1.3). Per capita GDP increased by 13% over 2000-15 (in real terms) and is above the OECD average. The poverty rate has fallen slightly and is now close to the OECD average. The level of income inequality in Canada has been relatively stable since 2000, with the top 20% of the population earning about five times as much as the bottom 20% – slightly below the OECD average (OECD, 2016c). The average Canadian enjoys high quality education, good health care and good housing conditions. Employment has grown solidly since the global recession, although the unemployment rate has stalled its downward trend at around 7% in 2015, following layoffs in energy-producing provinces. Life expectancy at birth is 82 years, one year higher than the OECD average. Satisfaction about environmental quality seems generally high: 9 out of 10 Canadians are satisfied with air and water quality, though only 60% are satisfied with public transport (Gallup, 2016).

Figure 1.3. Canadians enjoy a high quality of life

3. Transition to an energy-efficient and low-carbon economy

3.1. Energy supply and demand

An energy mix dominated by fossil fuels

As in most OECD member countries, fossil fuels dominate the energy mix. Oil, natural gas and coal together accounted for 74% of total primary energy supply (TPES)3 in 2015, compared to 80% in the OECD as a whole. The share of fossil fuels in TPES has remained relatively stable since 2000, with a slight shift from coal to oil and natural gas. The share of renewables has remained under 20%, while that of nuclear energy increased from 7% to 10% (Figure 1.4).

Figure 1.4. The energy mix is dominated by fossil fuels, albeit power generation is low-carbon

Canada’s electricity mix is among the least carbon-intensive in the OECD. More than 81% of its electricity comes from non-emitting sources, mostly hydro (60%) and nuclear (17%). However, the electricity mix varies significantly across provinces and territories: British Columbia, Quebec, Manitoba, Newfoundland and Labrador, and Yukon primarily rely on hydropower to meet their electricity demand, while Alberta, Nova Scotia and Saskatchewan generate about half their electricity from coal, albeit natural gas has increasingly replaced coal in the two western provinces (see Chapter 4). Nationally, this shift led to decreased use of fossil fuels in electricity generation over 2000-15 from 27% to 18% (Figure 1.4), the sixth lowest share in the OECD. Meanwhile, the share of renewable sources has increased from 60% to 66%, owing mainly to an increase in wind and hydro power. Indeed, wind power has tripled in the past five years and now accounts for 5% of electricity generation. Solar power also increased, but its share remains small (at 0.4% of electricity generation) (IEA, 2017a).

Energy intensity remains high

Despite improvement, Canada remains one of the most energy-intense economies in the OECD, whether measured per unit of GDP or per capita. This reflects Canada’s vast energy reserves, energy-intensive extraction and processing for exports. It also reflects high living standards and the country’s geography and climate, which demand transport over large distances and more energy for heating (IEA, 2016a). Energy intensity (TPES per unit of GDP) has declined by 20% since 2000 (Figure 1.4), compared to 22% in the OECD as a whole. Canada has no quantified national target for improving energy intensity, but several provinces are implementing ambitious energy savings programmes (Chapter 4).

Total final energy consumption (TFC)4 increased by 5% over 2000-14, far less than economic activity (32%). Transport is the largest consuming sector, followed by industry and the residential sector (Figure 1.5). Energy demand from the transport sector (mostly road transport) has increased by 19% since 2000, more than offsetting energy savings in the industrial, commercial and public sectors. Energy demand from industry decreased thanks to efficiency improvements in several energy-intensive industries (including iron, steel, metals and pulp and paper), as well as the economic contraction during 2007-09. However, there remains significant energy-saving potential across the Canadian economy, notably in the mining and quarrying industry (including oil and gas extraction). The mining and quarrying industry has experienced high growth in energy consumption over the past decade, with practically no improvement in energy efficiency (IEA, 2016a). Energy industry own use (e.g. energy consumed in power plants or for oil and gas extraction) has more than doubled since 2000; it accounted for 18% of TPES in 2014, compared to 6% in the OECD as a whole (IEA, 2017a).

Electricity demand, driven by the residential sector, rose by 6% over 2000-14. Final household electricity prices are the third lowest in the OECD (excluding taxes), after Norway and Sweden, providing few incentives for savings. Low prices reflect Canada’s vast resource endowments for power generation, yet also weak electricity taxation and regulated prices that are kept at low levels to protect households and businesses (Chapter 3). Electricity production has increased slightly more than electricity consumption (+4% over 2000-15), reflecting greater exports to, and fewer imports from, the United States (IEA, 2017a).

Figure 1.5. Energy demand from transport has more than offset energy savings in the industrial, commercial and public sector

3.2. Transport

Transportation plays a large role in Canada, given the need to move people and goods over vast geographical distances across the North American market. Not surprisingly, transport is one of the most energy-consuming and GHG-emitting sectors. In international comparison, energy use and CO2 emissions from transport, on a per capita basis, are the third highest in the OECD (after Luxembourg and the United States) (IEA, 2017b). Transport-related energy use and CO2 emissions have continued to grow since 2000, although the latter at a slower pace since the mid-2000s. This is due, in part, to federal GHG emission regulations for on-road light- and heavy-duty vehicles that came into effect in 2011 and 2014, respectively, as well as provincial and federal fuel standards, and investments in public transit infrastructure (IEA, 2016a).

Road transport makes up 80% of energy consumption in transport (IEA, 2017b). Between 2000 and 2015, the total number of on-road vehicles in Canada increased by 34% (Statistics Canada, 2017a). Heavy-duty vehicles have the most significant increase (+72%). There has also been a shift to larger sport utility vehicles (SUVs) and trucks, and growing use of freight transportation (see also Chapters 3and 4). Canada is one of only a few countries that applies GHG emission standards for heavy-duty trucks.

Air transport plays an important part in the movement of people, time-sensitive cargo and goods to northern and remote regions. The weight of aviation in domestic transport is the fourth highest in the OECD, after Australia, the United States and Norway. In many cases, few alternatives exist, except over short distances. Rail transport is dominated by freight. Inter-modal competition exists over short distances (including competition from trucking), but over long distances there are few cost-effective alternatives. The absence of road pricing combined with the commercial structure of freight shipping (such that shippers are implicitly charged the full cost of rail infrastructure) may bias the freight transport system against rail in favour of trucking over these shorter distances (OECD, 2016a; also see Chapter 4).

3.3. Climate change mitigation and adaptation

Emissions profile

In 2014, Canada was the fourth largest emitter of GHG emissions in the OECD in absolute terms (excluding land use, land-use change and forestry, or LULUCF). Emissions have been relatively stable in the first half of the 2000s, dropped alongside economic activity during the 2008-09 global financial crisis, and increased over the following years (Figure 1.6). In 2014, emissions stood 1.5% below the 2000 level, which compares to a decrease of 4.7% in the OECD as a whole. Emissions have risen in Alberta, Saskatchewan, Newfoundland and Nunavut, while they have decreased in all other provinces and territories. Alberta, which accounts for nearly 40% of national emissions, saw its emissions increase by 18% over 2000-15. This was largely as a result of its dynamic oil and gas sector, particularly the development of oil sands.

Figure 1.6. GHG emissions are decoupled from economic growth, but show no sign of falling yet

Nationally, Canada achieved a decoupling of both economic growth and energy supply from domestic GHG emissions (Figure 1.6). GHG emission intensities therefore improved over 2000-15, both in terms of GDP (-27%) and per capita (-17%). Despite this improvement, Canadian emissions intensities are still among the highest in the OECD. This reflects the country’s geography, industrial structure (with energy extraction industries emitting large quantities of GHGs) and its carbon intensive-energy mix (Section 3.1). As in most OECD member countries, CO2 is the main contributor to GHG emissions, amounting for nearly 80% of total emissions (Chapter 4). Consumption-based CO2 emissions (i.e. excluding emissions embodied in Canada’s exports) have increased less rapidly than production-based emissions. On a per capita basis, Canadian consumption-based CO2 emissions are the third highest in the OECD (after the United States and Australia) and 50% above the OECD average.

The energy sector is responsible for the lion’s share (82%) of national GHG emissions (Figure 1.6). Within the energy sector, transport accounted for 30% of total emissions, energy industries for 26%, energy use in manufacturing industries and construction for 19%, and fugitive emissions for 10%.5 Unconventional oil production from oil sands is roughly four times as intensive per barrel as conventional crude produced in North America. Emissions from energy industries decreased considerably between 2000 and 2015. This reflects a shift from the use of coal to natural gas for the development of unconventional fossil fuels, including oil sands. However, much of this decline was offset by emissions from transport, and the manufacturing and construction sector (which comprises oils sands mining and extraction activities), which kept rising (Figure 1.6).

Climate targets appear hard to achieve

Under the Kyoto Protocol, Canada pledged to reduce GHG emissions to 6% below 1990 levels during the first commitment period 2008-12. It introduced a number of measures during the first half of the 2000s, but the government acknowledged in 2006 that it was not on track to meet its target (emissions then were 20% above 1990 levels). It formally withdrew from the protocol in 2011. Prior to its withdrawal, Canada signed the 2009 Copenhagen Protocol, which set a new target of reducing emissions by 17% from 2005 levels by 2020 (aligned with the US target). In its Nationally Determined Contribution (NDC) following the Paris Agreement, which Canada ratified on 5 October 2016, Canada set the target of reducing emissions by 30% from 2005 levels by 2030. In practice, the 2020 and 2030 targets postpone the mitigation target set under the Kyoto Protocol (Figure 1.6).

In 2015, emissions (excluding LULUCF) were 2.2% below 2005 levels. Achieving the 2030 target means an average annual reduction of 1.7%, considerably faster than what has been achieved since 2005 (OECD, 2016c). The federal government has stated it may rely on land use and international offsets to reach its 30% target. Taking this into account, Canada would need to reduce energy-related GHG emissions by 18% below 2005 (IEA, 2016b).

Canada has accelerated efforts to reduce emissions following the Paris Agreement. Before 2016, federal policy action on climate change operated primarily through a sector-based regulatory approach, including stringent regulations for coal-fired electricity generation, as well as progressively tightening standards for passenger vehicles, light trucks and heavy-duty vehicles (aligned with tighter standards introduced in the United States). In December 2016, Canadian First Ministers announced the Pan-Canadian Framework on Clean Growth and Climate Change (PCF), a comprehensive action framework based on carbon pricing, complementary regulations to reduce emissions, promotion of clean technology innovation and jobs, and support to adapt to climate change. The PCF sets a federal minimum carbon price of CAD 10 per tonne by 2018 (rising to CAD 50 per tonne by 2022). Provinces will need to meet that minimum, or exceed this price, by either a price-based system (e.g. a carbon tax) or a comparable emissions reduction through a cap-and-trade system (see Chapter 3). Without full implementation of the PCF, Canada will not meet its 2030 target (Chapter 4).

Provinces had already moved increasingly towards employing market-based instruments to address GHG emissions; Canada’s four most populous provinces already deployed or had introduced some kind of carbon price. British Columbia introduced a carbon tax in 2008. Quebec implemented a modest carbon levy on fuel from 2007 to 2014 and introduced a cap-and-trade system in 2013, which is now linked with California’s system under the Western Climate Initiative (WCI). Ontario launched a similar cap-and-trade system in January 2017 and intends to join Quebec and California under the WCI in 2018. Alberta uses a hybrid system with an economy-wide carbon price combined with a trading scheme for large emitters. In spite of these measures, the current price of carbon in Canada remains relatively low (see Chapter 3).

Climate change outlook and adaptation policy

Canada is more vulnerable to the impacts of climate change than many OECD member countries. The average temperature increased by 1.3 degrees between 1950 and 2010, a rate that is about twice the global average. In northern Canada (north of 60°N), the rate of warming has been roughly three times the global mean (ECCC, 2016b). Average precipitation has increased, while Arctic sea ice has declined and glaciers in western Canada and the Arctic have shrunken. Climate change is expected to continue to alter rainfall, snowfall, permafrost and ice conditions in Canada. This will likely increase the frequency and intensity of extreme weather events such as wind, ice and snow storms, heavy rains and flooding, but also heat waves and coastal erosion. Climate change adaptation measures are thus essential to face future challenges. At the same time, new economic opportunities may arise, in particular related to resources that become accessible in currently ice-covered regions in northern Canada.

Adaptation implementation in Canada is still in its early stages. The federal government introduced an investment programme of CAD 86 million for 2007-11 to encourage and support climate change action by provinces, territories and municipalities, followed by another CAD 149 million for 2011-16 (OECD, 2015a). Alongside this, a Federal Adaptation Policy Framework was initiated in 2011 to help mainstream climate change into federal decision making. Some individual adaptation measures have been implemented in northern communities. Yet the mainstreaming of climate resilience into decision making remains challenging (see Chapter 5 for examples on wastewater management). The PCF includes a pillar on climate resilience and the federal government announced a significant increase in funding through the establishment of a CAD 2 billion Disaster Mitigation and Adaptation Fund. It also announced the launch of a new Canadian Centre for Climate Services to provide data and information to support planning and decision making related to adaptation. There are considerable knowledge gaps on climate impacts and adaption options for industries and coastal areas, even though one-third of Canada’s coastline is moderately to highly vulnerable to sea-level rise (ECCC, 2016b).

3.4. Air emissions and air quality

Air emissions

Canada is among the OECD member countries with the highest emissions of air pollutants both per capita and per unit of GDP (OECD, 2017a). Since 2000, emissions of most air pollutants have decreased at close to the OECD average levels of reductions and with a steady decline in emissions from all sectors. However, emissions of particulate matter (PM10) have increased by 16% since 2000; emissions of fine particulate matter (PM2.5) have also slightly risen, following a decline in the first half of the 2000s (Figure 1.7).

Figure 1.7. Air pollution has been decoupled from economic growth, but intensities remain high

Industry (including industrial processes and combustion) and transport are the largest emitters of most pollutants (Figure 1.7). Together, these two sectors account for approximately 85% of NOx, 68% of SOx and 69% of PM2.5 emissions. Emissions from both sectors have decreased since 2000. This was mainly owing to the installation of new technology and processes at non-ferrous smelting and refining facilities and the closure of two smelters (which reduced industrial SOx emissions), as well as stricter trucks and vehicles regulations (which drove down NOx emissions in particular). The decline in NOx and SOx emissions also reflects the shift in electricity generation from coal to natural gas (Section 3.1). Meanwhile, the rise in PM10 emissions reflects increasing fossil fuel consumption in transport; particulate matter emissions from construction activities also increased noticeably.

Air quality

Air quality is generally good. In 2015, country-wide mean exposure to PM2.5 reached 7.7 micrograms per cubic metre (μg/m3), among the lowest values in the OECD and below the WHO guideline value of 10 μg/m3 (OECD, 2017b). Notwithstanding, outdoor air pollution is estimated to cause 7 768 deaths per year in Canada (IHME, 2016). Exposure to air pollution varies significantly across the country. Ambient levels of pollutants such as PM2.5 are typically higher in large urban centres close to the Canada-US border, notably in southern Ontario and southern Quebec (Figure 1.8). While exposure to PM2.5 in these areas has decreased over the 2000s, more than half of Ontario’s population was still exposed to PM2.5 levels above the WHO guideline value in 2015; and this share approaches nearly 100% in some urban areas, according to OECD data (OECD, 2017b). This reflects relatively large emissions from transport, residential wood heating and local industries, yet also pollutants from coal-fired electricity-generating stations in the American Midwest. Canadian authorities estimate that nationally approximately 30% of Canadians live in areas where outdoor levels of PM2.5 and/or ozone exceed national air quality standards. Trans-boundary air pollution is significant: ECCC estimates that nationwide annual PM2.5 concentrationsare strongly influenced by US sources, while pollution originating in East Asia affects PM2.5 and ozone concentrations in Canada’s west coast during the spring and summer season.

Figure 1.8. Air quality is significantly worse in urban centres along the US border

Source: OECD (2017), “Exposure to Air Pollution”, OECD Environment Statistics (database).

Main policies and measures

Prior to 2012, air emissions and quality were primarily managed by provincial governments, though joint work was done on elements such as Canada-wide ambient air quality standards for PM2.5 and ground-level ozone. In 2012, ministers of environment, except in Quebec,6 agreed to implement the Air Quality Management System (AQMS), a comprehensive air quality management programme with four major components: i) national ambient air quality standards; ii) a framework for managing air quality through local air zones and regional air sheds; iii) base-level industrial emission requirements; and iv) a collaborative mechanism to reduce emissions from mobile sources.

Several components of the AQMS have been implemented. Canada strengthened air quality standards for PM2.5 and ground-level ozone in 2013, announced a standard for SOx in late 2016 and is establishing one for NOx. Provinces and territories agreed to delineate and manage air zones within their jurisdictions with the goal of ensuring the air quality standards are not exceeded. At a regional level, six airsheds were established to facilitate co‐ordination of measures to reduce inter-provincial transboundary air pollution. Industrial emission requirements have been implemented through both regulatory and non-regulatory measures. The 2016 Multi-Sector Air Pollutants Regulations, for example, introduced the first national emission standards for industrial boilers, heaters and engines, and the cement sector. “Codes of Practice” have been published for the aluminium and the iron, steel and ilmenite sectors, and proposed for the pulp and paper industry (see also Chapter 2). Some other heavily-polluting sectors and activities (e.g. refineries, oils sands development) are not regulated to date. Governments agreed to work on mobile sources, focusing on electric vehicles and charging infrastructure, vehicle maintenance and inspection programmes, and options for addressing emissions from in-use diesel fleets. Continued efforts are also needed to manage non-point sources (including particulate matter emissions from construction operation and ammonia emissions from agriculture).

Provinces and territories have implemented additional regulations and other measures to reduce air pollutant emissions within their boundaries. Provinces such as Alberta and British Columbia developed air management strategies. Others, such as Prince Edward Island and Manitoba, primarily use their environmental permitting schemes as the main mechanism to control industrial air emissions. Few provinces use economic instruments to apply the polluter pays principle to air quality management. Ontario has pioneered a trading scheme for NOx and SOx emissions, but to date other provinces have not replicated this practice.

Access to information on air quality has improved. Under the AQMS, provinces and territories report annually on air quality and measures taken to implement AQMS in their jurisdictions. Local air zone reports will form the basis for an interactive website that will detail the state of national air quality. The government is partnering with provinces to expand the Air Quality Health Index (AQHI), which provides real-time information about local air quality (an hourly value and a two-day forecast), to all parts of the country.

4. Transition to a resource-efficient economy

4.1. Material use, waste management and circular economy

Material use

Canada is among the most material-intense economies in the OECD, both in terms of resources (measured by weight) consumed per capita and of resources needed to generate a unit of GDP (OECD, 2017c). This partly results from the extensive use of heavy materials in the Canadian economy, such as minerals and metals (Figure 1.9). Such use of heavy materials, in turn, reflects the country’s vast resource endowments and a strong mining and construction industry. Yet, even when compared to other OECD economies with high reliance on minerals and metals, Canada displays low material productivity (Figure 1.9). This hints at room for improvement, including for encouraging greater re-use and recycling of materials.

Figure 1.9. Canada is among the most material-intense economies in the OECD

Canada is the second largest extractor of material resources among OECD member countries after the United States. Alongside Australia and Norway, it is also one of the few net materials exporters. Canada exports nearly one-third of its extracted biomass, and nearly two-thirds of extracted fossil fuels. Fossil fuels accounted for nearly half of total material exports in 2012, followed by metals (31%) and biomass (25%). Total material exports decreased dramatically during the global financial crisis in 2008-09; they recovered in the following years, but remain below pre-crisis levels.

Waste generation and treatment

Canada generated approximately 34 million tonnes of non-hazardous waste in 2014, or about 950 kg per capita.7 Waste generation increased by about 11% between 2000 and 2014. It was driven entirely by residential waste, which increased faster than GDP and population (Figure 1.10). On a per capita basis, residential waste increased by 15% over 2002-14, compared to a general decrease in the OECD. Non-residential waste generation (including industrial, commercial, institutional and construction waste) rose during the first half of the 2000s, but has decreased since 2008. It accounted for 57% of total generated waste in 2014, while residential waste made up the remaining 43% (Statistics Canada, 2017b).

Figure 1.10. Recycling has increased, but remains low

More than two-thirds of produced waste is sent to landfill (Figure 1.10), a share much higher than the OECD average. The share of recovered material (e.g. recycled or composted) has increased from 21% to 25% over 2000-12, but it remains small and seems to improve less rapidly than in most other OECD member countries (although lack of comparable data hampers direct benchmarking). Larger composting of residential organic waste and, to a lesser extent, recycling of plastics and paper, drove the increase in waste diversion. No significant improvement has been made in the recycling of non-residential waste (Statistics Canada, 2017b). Recycling rates remain low in some major waste generation sectors such as construction and demolition waste. They are equally low for material streams for which recycling technologies and markets generally exist such as metals (Giroux, 2014).

Strengthening the policy framework

Canada has no national target on waste reduction and diversion, although several provinces have established quantified goals. Regulations and incentives for waste reduction and recovery vary widely across provinces, which is reflected in highly heterogeneous performance in waste management. For example, Nova Scotia, which features the highest waste recovery rate, has banned landfilling of material for which recovery infrastructure is in place. It has also installed a deposit-refund scheme for beverage containers. Some other provinces tax landfilled waste to encourage waste diversion. Northern communities face particular waste management challenges, including difficulties in segregation and storing of environmentally-harmful products, open burning and outdated disposal infrastructure.

A welcome step, the Canadian Council of Ministers of the Environment (CCME) adopted the Canada-wide Action Plan for Extended Producer Responsibility in 2009 with the aim to harmonise material recovery policies and programmes across jurisdictions. By 2014, the number of product categories covered by legislated extended producer responsibility programmes or requirements had almost tripled. It now covers half of categories identified in the 2009 action plan (CCME, 2014). These efforts should be continued, with a priority on major waste streams from the industrial, commercial and construction sectors. In 2014, federal, provincial and territorial environment ministers further adopted a shared vision and Action Plan for Waste under the auspices of the CCME. These could serve as a basis to identify, diffuse and scale-up good practices across the country, which will be necessary to improve national performance. Canada will also need to strengthen the availability and comparability of data. This will enable the country to monitor and track progress, as well as to improve assessment of the effectiveness of waste policies and instruments. Data gaps are particularly large for industrial and commercial waste.

4.2. Chemicals management

Canada was one of the first countries to systematically begin to address the risks of legacy chemicals. Building upon a priority-setting exercise that involved 23 000 chemicals and identified 4 300 substances for further review, Canada adopted the 2006 Chemicals Management Plan (CMP) with a commitment to review these substances by 2020. To date, approximately 70% of these priority substances have been assessed. Of these, it has found more than 350 substances to be harmful to human health and/or the environment; more than 80 risk management actions have been put in place. Meanwhile, about 5 000 new substances (used since 2006) have been reviewed. Future work until 2020 will focus on addressing the remaining 30% of priority substances identified in 2006, while continuing to manage substances identified previously. A new emphasis under this third phase is to address substances using “fit-for-purpose” assessment approaches, which aims to help focus efforts on substances of highest concern, and to ensure that engagement of stakeholders is strategic and targeted.

Under the CMP, Canada conducts a series of environmental monitoring programmes, including ecological assessments that measure specific chemicals in outdoor air, water, sediments, fish and birds, as well as in landfills and wastewater treatment plants. Further, human health bio-monitoring activities study citizens’ exposure to environmental chemicals such as lead, cadmium and mercury, including exposure of vulnerable populations such as pregnant women and Arctic populations. These assessments help establish trends in chemical pressures, inform the risk assessment and risk management activities under the CMP, and evaluate the impact of risk management activities.

4.3. Agricultural inputs and nutrient balance

The intensification of Canada’s large agricultural sector has increased pressures on ecosystems and biodiversity over the past two decades. Soil quality has improved, largely owing to better land management practices such as reduced tillage. However, wildlife habitat has declined in some areas and the risk to water quality has increased across Canada. The latter reflects a quite significant increase in the application of fertilisers and pesticides that reflects an intensification in production, a shift from livestock and to crop cultivation, and continued adoption of no-till and reduction of fallow management (which increased the annual crop land in production) (Clearwater et al., 2016). The consumption of nitrogen fertilisers has increased faster than in any other OECD member country; about twice as fast as total agricultural production since the early 2000s (Figure 1.11). Fertiliser intensity (application per hectare of agricultural land) has increased, compared to a decrease in the OECD as a whole (Figure 1.11). Pesticide use increased by about 40% over the past 5 years, while the share of organic agriculture remains small (at 1.5% of agricultural land in 2015) (FiBL, 2017). Provinces are increasingly mandating nutrient management plans and some require buffer strips around water courses and groundwater sources to limit nutrient leaching (OECD, 2015b). However, more needs to be done to reduce agriculture’s impact on water quality.

Figure 1.11. The use of agricultural chemicals grew more than agricultural output

Regulatory and management practices for pesticides were found to be insufficient to avoid risks to environment and health of Canadians (OAG, 2015). Canada has made extensive use of “conditional registrations” for pesticides whose risks and values are not fully known. Several products have stayed on the market even long after conditions for risk assessments were not met. The re-evaluation for pesticide introduced before 1995 has progressed only slowly, while cancellations of registrations for pesticides found to pose unacceptable risks tended to take a long time.

5. Managing the natural asset base

5.1. Physical context and land use

Canada is the world’s second largest country, covering nearly 10 million km2. Canada has more inland waters that any other country in the world; they cover some 9% of the country’s total surface area. Forests cover 38% of total land area; land used for agriculture has decreased slightly to about 7%; urban and industrial land cover about 1%. Geography, climate and land use varies widely across the country. A broad belt of coniferous forest (essentially boreal forest) crosses Canada from east to west; agriculture mainly concentrates in the south and southwest; and tundra and permanent ice dominate Canada’s far north (covering roughly a quarter of total land area).

5.2. Biodiversity and ecosystems

Canada harbours a great diversity of terrestrial and marine ecosystems. It hosts about 9% of the global forest area and one-quarter of remaining wetlands, as well as the world’s longest coastline. Canada’s territory comprises large tracts of undisturbed wilderness, as half of its landscape remains free from human infrastructure. Much of this is, however, in the remote north. Closer to human activity, Canada’s natural environment is pressured by habitat loss and fragmentation, invasive species and disease, exploitation of natural resources, pollution and climate change. Wetlands and grasslands continue to be lost, even if the rate of loss has slowed. The rate of deforestation is low at a national level, but significant in some areas. Coastal zones in developed areas are degrading from habitat modification, erosion and sea-level rise (CCRM, 2010).

Canada has advanced biodiversity-related policy and legislation. Key milestones include the 2006 Biodiversity Outcomes Framework, which describes desired long-term outcomes from national and sub-national biodiversity strategies and plans, and the 2020 Biodiversity Goals and Targets, adopted in 2015 in response to the UN Convention for Biological Diversity Strategic Plan for Biodiversity 2011-20.8 A federal-provincial-territorial action framework to develop policies (i.e. going beyond common objective setting) could help ensure that each jurisdiction contributes to the common goal. Canada has not signed the Nagoya Protocol on Access and Benefit Sharing (ABS). No comprehensive system governs access to genetic resources and associated traditional knowledge or facilitates the sharing of benefits arising from their use. However, some federal, provincial and territorial laws and regulations cover some elements of ABS, and work on a domestic implementation strategy for ABS is ongoing.

Protected areas

The terrestrial area under protection increased over 2000-16 from 8.1% to about 10% (Figure 1.12), the fourth lowest value among OECD member countries. Under the UN Convention for Biological Diversity, Canada is committed to conserve at least 17% of terrestrial areas and inland water by 2020 (one of the so-called Aichi targets). The country will need to considerably accelerate the pace of establishing protected areas or other effective area-based conservation measures to achieve this commitment. Nearly half (46%) of the protected area in Canada is under federal jurisdiction, with the remainder administered at provincial, territorial or local levels. The percentage of land under protection varies considerably across provinces, ranging from 3% in Prince Edward Island to 15% in British Columbia (Figure 1.12). Only New Brunswick and Alberta have increased its protected area by more than 1% in recent years. Several provinces are working on the establishment of new protected areas. For example, Quebec and Ontario have committed to protecting half of their northern regions, but progress to date has been slow. Alberta committed to the establishment of new protected areas that would expand its current protected areas network by 50%.

Figure 1.12. Protected area remains below the Aichi target

The representativeness of different ecosystems in Canada’s protected area network has improved, but gaps remain. For example, while the Rocky Mountains have some 15% of their area protected, eco-zones in southern Ontario and Quebec have less than 2% protected. Until 2017, Canada did not have a framework to guide the development and implementation of a terrestrial protected areas network, which would help strategically enhance ecosystem representativeness. It also lacks a nation-wide assessment. Almost three-quarters of protected areas are smaller than 10 km2, making it important to provide good ecological connectivity (e.g. through biodiversity corridors) and to integrate smaller protected areas into larger ones to safeguard species’ habitat needs and full functioning of ecosystem processes. In southern Canada, this will require extensive restoration work (CPAWS, 2015). There are encouraging examples of landscape-level management (such as Alberta’s new approach to land-use planning; see Chapter 2), but its application overall remains very limited and should be scaled up. A welcome step, Canada recently launched the federal-provincial-territorial initiative “Pathway to Canada Target 1” as a framework to guide the development and implementation of a terrestrial protected area network to meet the 2020 target. This provides an opportunity to strategically enhance ecosystem representativeness.

Nearly all protected areas report deficiencies in capacity and resources for site management and monitoring. Many protected areas operate without up-to-date management plans. Most government organisations for protected areas report on programme-related performance measures, but few assess effectiveness. This makes it difficult to determine whether protected areas achieve desired conservation objectives (ECCC, 2016c). Many protected areas have formal arrangements to engage organisations, Indigenous communities and the general public. Several habitat conservation and stewardship programmes support biodiversity conservation on private lands. For example, the Ecological Gifts Programme provides tax incentives for the donation of ecologically sensitive land. Stewardship activity is increasing, both in number and types of initiatives and in participation rates. However, their effectiveness in conserving and improving biodiversity and ecosystem health has not been fully assessed.

Marine protected areas covered approximately 0.9% of Canada’s marine and coastal areas in 2015. This was up from 0.4% in 2000, with some of the increase explained by better reporting. Most (80%) are administered at the federal level, with provincial protected areas making up the rest. In 2016, aligning with the Aichi target, the government committed to protecting 5% of Canada’s marine and coastal areas by 2017, and 10% by 2020. In 2011, federal and provincial governments agreed on a pan-Canadian framework for Canada’s network of marine protected areas. Quebec is the only province with a quantified target for marine protected areas.


There are about 80 000 known species in Canada and likely many more that have not yet been identified. The status of wildlife species is assessed every five years. In the latest assessment in 2015, nearly 30 000 species were assessed, of which nearly 1 700 species were listed as potentially at risk (CESCC, 2016). The total number of species assessed as extirpated or at risk is over 500. Recovery or management plans are in place for about 470 species. However, the population trends have improved for only one-third of species addressed by such a plan. Efforts to reverse long-term fisheries declines have been largely unsuccessful (CCRM, 2010).


With nearly 350 million ha, Canada has the third-largest forest area in the world, after the Russian Federation and Brazil. Forest cover per capita is among the highest in the world. The boreal forest that spans Canada is said to be the largest continuous forest ecosystem and the most intact forest remaining on Earth. Canada’s total forest area has remained relatively stable since 2000, at 38% of total land area (OECD, 2017d). Deforestation (the permanent loss of forest cover) is relatively low and has remained fairly stable since 2000 (averaging at around 45 000 ha or 0.01% of total forest area annually). Much of this land is being converted for agricultural use; oil and gas development accounted for one-quarter of deforested land in recent years.

Canada is internationally recognised for sound standards for sustainable forest management. By law, all forest harvested on public lands (94% of total forest area) must be regenerated. More than 80% of forest available for timber harvesting is certified as sustainably managed. About 0.5% of forest is harvested annually – less than the area burned by forest fires (1.2%) or damaged by insects (2.5%) (NRCan, 2014).

5.3. Management of water resources

Water resources

Canada is a water-abundant country, possessing about 7% of the world’s renewable resources. As a result, water stress, defined as the ratio of water consumption over total renewables resources, is among the lowest in the OECD (see Basic Statistics). However, water resources are unequally distributed. About 60% of freshwater supply flows northward, away from population centres. Several areas along the southern border have faced high threats to water availability, with abstraction exceeding 40% of available resources (compared to the national average of 1%) (ECCC, 2017). At the same time, higher-than-average rain- and snowfall has led to flooding of agricultural lands and overflows of water management systems in urban areas. Water availability challenges will intensify as population and the economy grow and the climate changes (Warren and Lemmen, 2014).

Canada is one of the largest water consumers in the OECD. Water use per capita is one of the highest in the OECD (Figure 1.13), and nearly 25% above the OECD average. This reflects low water prices and a “myth of water abundance” in Canada (also see Chapter 5), which results in relatively weak water conservation. Natural resource sectors, such as agriculture, oil and gas, mining and thermal power generation, account for three-quarters of national water consumption. Water consumption decreased by 9% between 2005 and 2013, driven mostly by reduction in thermal power generation and lower demand of the manufacturing sector. Residential water consumption has also dropped, driven by improved technology and water conservation programmes. The largest increase occurred in the mining and oil and gas industry (Figure 1.13).

Figure 1.13. Canada is among the largest water consumers in the OECD

Water quality

Water quality is generally fair to good in Canada. However, nearly one-fifth of monitored water sites register marginal or poor water quality (Figure 1.14). Major threats to freshwater quality include nutrient pollution from agricultural and urban wastewater sources, persistent toxic substances and emerging chemicals of concern from urban and industrial sources.

Figure 1.14. Water quality is unsatisfactory in more than half of monitored freshwater sites

Water management

Water allocation regimes vary widely across the country. Not all provinces have established clear principles for water allocation or priority uses in case of severe or prolonged water stress. Few jurisdictions have systems for effective water re-allocation in times of water stress. Some provinces charge for water abstraction, yet charges are often low and tied neither to water scarcity nor to the opportunity costs associated with proposed water uses (OECD, 2015c; Renzetti, 2017). Several provinces embarked on reform processes of their water allocation regimes. For example, Ontario and British Columbia have raised their fees for water permits; Alberta has provided permit holders with the limited ability to trade water withdraw rights. Canada should continue to review whether current allocation regimes are fit for the challenges of population and urban growth, expanding natural-resource based activities and the effects of climate change. Canada should also support the development of pollution charges in watersheds that endure point-source pollution.

Provinces regulate water quality separately from water allocation. Provincial governments have relied almost exclusively on setting quantitative limits on discharges to meet water quality objectives. This contrasts with a number of other jurisdictions in the OECD that have followed the polluter pays principle and adopted fees and charges to promote improved water quality. In an interesting pilot, Ontario is investigating the viability of a water quality trading programme to reduce phosphorous and nitrogen loadings in Lake Simcoe, a popular lake north of Toronto.

Public water and sanitation services

The majority of Canadians (about 75%) are connected to a municipal water supply and sewerage treatment systems. The remaining 25%, mostly in rural or remote areas, draw their water directly from a surface or groundwater source, or are served through a commercial water provider. The provision of safe drinking water in rural and remote communities, notably in First Nations reserves, remains a serious challenge. In 2015, 10% of households in Canada reported being notified of a “boil water” advisory due to water quality concerns (Statistics Canada, 2015). Significant investment helped increase the share of on-reserve First Nations drinking water systems with low risk ratings from 27% to 57% between 2009-11 and 2014-15. However, a non-negligible number of Canadian communities in Canada still lack access to safe and reliable drinking water (Renzetti and Dupont, 2017).

Even though residential water consumption has decreased in recent years, it remains one of the highest in the OECD, on a per capita basis. There is large regional variation, however. In 2009, residential water consumption reached nearly 400 litres/day/per capita in Newfoundland and Labrador (where most residents pay a flat charge). This is almost twice as much as the approximately 220 litres/day/per capita consumed in Manitoba and Alberta, for example (where consumers pay by volume) (Renzetti, 2017). Nationally, households paying by volume consume about an estimated 70% less water than those paying a flat charge (EC, 2011). In many municipalities, charges are too low below the cost of water and sewerage services to ensure long-run financial health of these systems. With the exception of Ontario, Canadian provinces lack regulation on full-cost accounting cost-recovery for municipal water supply and sanitation services (see also Chapter 5).

Recommendations on air, materials, water and biodiversity management

Air pollution

  • Develop standards for all heavily polluting sectors and activities (e.g. refineries and oils sands development) under the Air Quality Management System; continue to improve knowledge of the relative health impacts and associated costs of the individual components of PM2.5 pollution to allow for more effective mitigation actions; continue efforts to manage non-point sources; continue to pursue co-operation with the United States and other countries affected by, or contributing to, transboundary air pollution.

Materials, waste management and circular economy

  • Continue to develop extended producer responsibility schemes, prioritising key waste-generating sectors (e.g. from the industrial, commercial and construction sectors) and waste streams with large recycling potential (e.g. metals); ensure coherence and, where possible, harmonisation of schemes across jurisdictions, while strengthening the availability and comparability of data to monitor and track progress.

  • Encourage waste prevention and recovery of materials not covered under extended producer responsibility schemes (e.g. organic waste) by: i) expanding landfill charges; ii) making greater use of waste collection charges for household waste; iii) raising awareness among citizens and businesses; and iv) considering the possibility of incentives (e.g. fiscal incentives) for recycled products to support the development of recycling markets and infrastructure; facilitate the diffusion of best practices across jurisdictions, while paying particular attention to improving waste practices in northern communities.

Water management

  • Consider the introduction of water abstraction charges, in particular in watersheds where water is scarce or competition to access the resource intensifies; continue efforts to reform water allocation regimes, with a view to establish abstraction caps, define priority users and build mechanisms for effective water re-allocation in regions facing water scarcity.

Biodiversity management

  • Accelerate efforts and collaboration across jurisdictions to conserve at least 17% of terrestrial areas and inland water by 2020; expand protected areas in the southern part of the country; and substantially increase the total area of marine and wetland ecosystems under protection.

  • Develop and implement a national policy on access and benefit sharing of genetic resources to lay the ground for accession to the Nagoya Protocol.


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← 1. The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.

← 2. The Natural Resources Satellite Account measures the importance of natural resource activities in the Canadian economy. These are defined as products and services originating from naturally occurring assets used in economic activity. These assets comprise mineral and energy resources, water, natural timber, and aquatic and other natural biological resources. They do not include intensively cultivated biological resources, such as crops and aquaculture.

← 3. TPES is the total supply of energy that is consumed domestically, either in energy transformation (e.g. in oil refining) or in final consumption by end-users.

← 4. TFC is the final consumption by end-users (i.e. in the form of electricity, heat, gas, oil products, etc). TFC excludes fuels used for electricity or heat generation and other energy industries (transformations) such as refining.

← 5. Fugitive emissions are releases of gases and vapours emitted from pressurised equipment. Emissions can be either unintended (e.g. through leaks) or released from industrial activities. In Canada, more than half of fugitive emissions stem from the venting of natural gas; about 30% are unintended emissions from upstream oil and gas; 10% is from flaring of oil and gas.

← 6. Quebec did not sign-on to the AQMS, given that it has its own Clean Air Regulation, but did agree to collaborate with jurisdictions on developing other elements of the system.

← 7. The estimate for generated waste is the sum of waste disposed (i.e. landfilled or incinerated in plants with energy recovery) and waste diverted (i.e. treated in composting, anaerobic digestion, material recoveryand recycling facilities). Data include waste exported to other countries, but exclude waste managed by the waste generator on site.

← 8. The 2020 Biodiversity Goals and Targets were endorsed by all provinces and territories except one. Quebec has acknowledged, but not endorsed, 2020 Biodiversity Goals and Targets. It argues that it develops and implements its own instruments for biodiversity conservation and for achieving the international targets on its territory.